Tax Type
Retail Sales and Use Tax
Description
Gifts given for contributions; Nonprofit organization
Topic
Property Subject to Tax
Date Issued
04-07-1992
April 7, 1992
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear*********************
This will reply to your letter in which you seek correction of a retail sales and use tax assessment against**************** (the "Taxpayer").
FACTS
The Taxpayer is a nonprofit organization which solicits contributions from the general public through direct appeals and sales of medallions and various coins and other items. An audit for the period September 1983 through January 1988 produced an assessment for various expenses incurred by the Taxpayer. The Taxpayer contests the assessment of tax on certain items, contending that 1) amounts paid to media consultants represent exempt services; 2) numerous purchases were made for items that never came into Virginia; 3) various coins and medallions were sold to the public for delivery outside of Virginia; and 4) several additional items which were previously discussed with the auditor have not been removed.
DETERMINATION
I will separately address below the issues raised by the Taxpayer:
Media Consultants. Legislation effective July 1, 1986 provided an exemption from the sales and use tax for media advertising services. Based upon information provided by the Taxpayer, the services provided by the two media consultants would represent exempt advertising services under this law change. Accordingly, any amounts included in the audit for advertising services provided after July 1, 1986 will be removed from the audit report.
Items Never Entering Virginia. The Taxpayer contends that items purchased from 16 different vendors never came into Virginia, and therefore, cannot be subject to the tax. Alternatively, the Taxpayer contends that several of these items would be exempt under Va. Code §58.1-608(A)(6)(c) as advertising supplements and other printed material distributed with a nontaxable publication.
The Taxpayer has provided information on several items which support its claim that the items in question were not delivered to the Taxpayer, but mailed directly to customers by the vendors. Therefore, the audit will be revised to remove those items purchased from ********** which were mailed directly to out-of-state customers.
Additionally, those items purchased for inclusion in the *********or other publications will be removed from the audit if the Taxpayer can provide documentation to support its claim that the publications are nontaxable and that those items purchased from*************** were distributed with the publications. I would note that purchases from the ********** were not included in the final audit report and thus no adjustments are necessary for these items.
The Taxpayer has failed to provide convincing evidence that the remaining items were delivered outside Virginia, thus I see no basis for removing them from the audit assessment.
Coins and Medallions. The auditors concluded that certain coins and medallions were given to the public by the Taxpayer in connection with various solicitations for contributions. The Taxpayer contends that these coins and medallions were held for resale to the public, were in fact sold to the public, and that the sales were almost entirely to individuals outside of Virginia.
Based upon the information provided, the Taxpayer made sales of certain items, including coins and medallions. However, the Taxpayer also gave items away free to persons who made contributions. The Taxpayer advertised the items as "free gifts" for persons who donated or pledged money and in these instances, the coins were not sold, but given to contributors as gifts. As such, the Taxpayer is considered the user and consumer of such items and the tax applies. However, in those instances where the Taxpayer sold the items outright, the tax applies to the total selling price of items sold to persons in Virginia.
While the auditors included coins and medallions purchased after April 1, 1987 and sold to customers in the sales measure, it does not appear that a distinction was made between those items actually sold to customers and those given away free prior to that date. Therefore, I am asking the department's Technical Services Section to review this area to see if any adjustments are necessary.
Additional Items. The Taxpayer contends that several areas which were previously discussed with the auditor have not been removed from the assessment. It is my understanding that all of the proposed adjustments, except one item relating to postage charges by ***** were resolved in the final audit report. The invoice provided to the auditors for purchases from ********did not separately list postage and the Taxpayer has not provided documentation regarding the correct amount of postage charges. Therefore this item will not be removed from the audit unless documentation supporting the amount of postage charges is provided to the department. The sum of ********has not been reconciled and thus an audit adjustment will be made for this amount.
The audit will be revised in accordance with the determination set forth above. Any supporting documentation necessary for a further revision of the assessment as requested in this letter should be directed to the department's Office Services Division, Technical Services Section, P. O. Box 6-L, Richmond, Virginia 23282 within sixty days.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/3898D
Rulings of the Tax Commissioner