Tax Type
Retail Sales and Use Tax
Description
Nonprofit providing administrative support to political subdivision
Topic
Exemptions
Property Subject to Tax
Date Issued
08-02-1991
August 2, 1991
Re: Request for Ruling: Retail Sales and Use Tax
Dear********
This will reply to your letters in which you request a ruling on the application of the Virginia sales and use tax to purchases made by ********** (Taxpayer 1) and the (Taxpayer 2).
FACTS
Taxpayer 1 is a nonstock, nonprofit organization exempt from taxation under §501(C)(3) of the Internal Revenue Code, established to provide administrative duties for Taxpayer 2, a political subdivision of the Commonwealth. These duties include office, project construction and financial management services, intergovernmental and community relations services, fundraising, coordination of legal, engineering and other consultants and the negotiations of leases, franchises and agreements and acquisition of property for and on behalf of Taxpayer 2.
RULING
There is no general exemption from the Virginia Retail Sales and Use Tax for nonprofit organizations. While there are several exemptions set out in Va. Code §58.1-608 that apply to specific nonprofit museums and parks, the Virginia courts have consistently required strict construction of these exemptions, i.e., where there is any doubt as to the application of an exemption, the doubt is resolved against the one claiming exemption. See Golden Skillet Corporation v. Commonwealth, 214 Va. 276, 199 S.E.2d 511 (1973).
The operations and scope of the**********project are significantly more comprehensive than those of the museums and parks that have received specific exemptions, and as such those exemptions are inapplicable under the doctrine of strict construction. Further, the exemptions currently in effect apply to the museum and/or park itself as opposed to support organizations such as Taxpayer 1.
While I am mindful of the worthwhile purpose the Taxpayer serves, based upon the information you have provided, I find that Taxpayer 1 does not satisfy the necessary criteria for exemption under Va. Code §58.1-608. Therefore, Taxpayer 1 is required to pay the tax on all purchases of tangible personal property. If a retailer is not registered, Taxpayer 1 must remit the tax on the consumer use tax return, Form ST-7.
Nonetheless, Va. Code §10.1-1601 provides for the establishment and creation of Taxpayer 2 as a political subdivision of the Commonwealth. As such, Taxpayer 2 enjoys an exemption from the tax under Va. Code §58.1-608(1)(e) and Virginia Regulation (VR) 630-10-45 (copy enclosed). Form ST-12 (copy enclosed) must be presented to retailers to purchase items exempt of the tax. However, the exemption applies only to purchases made directly by Taxpayer 2 using public funds and does not extend to Taxpayer 1, as it is a private entity. This issue was addressed in a previous ruling (copy enclosed), in which an authority, as a political subdivision of the Commonwealth, could purchase exempt of the tax tangible personal property, while a private nonprofit corporation formed by the authority remained taxable.
If you have any further questions regarding this matter, please feel free to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner