Bulletin Number
VTB 86-8
Tax Type
Motor Vehicle Fuel Sales Tax
Retail Sales and Use Tax
Watercraft Sales and Use Tax
Description
1986 Legislative Changes: Sales and Use Tax
Topic
Exemptions
Date Issued
06-01-1986
Virginia Tax Bulletin
Virginia Department of Taxation
86-8
Date: June 1, 1986 Subject: Sales and Use Tax: 1986 Legislative Changes
The 1986 General Assembly enacted several laws which have an impact upon the retail sales and use tax, watercraft sales and use tax and the motor vehicle fuel sales tax. Brief summaries of the enacted legislation are provided below:
ALL TAXES
Interest on Erroneous Refunds
House Bill 725 (Chapter 39), amends 58.1-1812 of the Virginia Code to prohibit the Department of Taxation from assessing penalty and interest on the recovery of certain erroneous refunds, effective July 1, 1986. An "erroneous refund" is defined as any refund of tax resulting solely from an error by the Department of Taxation which results in the taxpayer receiving a refund to which the taxpayer is not entitled. Therefore, refunds issued by the Department which are erroneous due to taxpayer error, as for example, by transposing numbers, incorrectly transferring information from returns, or using the wrong tax form, would not be included in the definition of "erroneous refund".
RETAIL SALES AND USE TAX
The following bills enact or expand various exemptions from the Virginia Retail Sales and Use Tax granted under Virginia Code § 58.1-608. The applicable subsection will be noted for the bills that expand an existing exemption.
Exemptions for Nonprofit Organizations
1. Donations from Inventory
House Bill 26 (Chapter 311) exempts tangible personal property withdrawn from inventory for donation to a nonprofit organization or for donation to the State, its political subdivisions, or any school, agency or instrumentality of a political subdivision effective July 1, 1986.
2. Parent Teacher Associations
House Bill 149 (Chapter 391) exempts tangible personal property purchased by or sold at retail by Parent Teacher Associations and other groups associated with nonprofit elementary and secondary schools in connection with certain fund raising activities effective July 1, 1986. The net proceeds (gross receipts less direct expenses) from such sales must be contributed directly to a nonprofit elementary or secondary school or used by such groups to purchase "certified" school equipment for contribution to the school. "Certified" school equipment means any equipment for which a PTA or similar group has received certification from a school that it will accept a donation of the equipment. It also exempts the purchase of the certified school equipment by such groups for donation to nonprofit elementary and secondary schools.
3. Christmas Organizations
House Bill 26 (Chapter 311) exempts all purchases of tangible personal property by certain charitable nonprofit organizations engaged, in the distribution of food, toys, and clothing to the needy during the Christmas season effective July 1, 1986. This exemption only applies to those organizations, which themselves, purchase and distribute food, toys, and clothing during the Christmas season.
4. Youth Shelters
House Bill 248 (Chapter 336) and House Bill 765 (Chapter 545) exempt tangible personal property purchased by residential youth shelter organizations, provided that the organizations are nonprofit organizations and are operated exclusively for the care of abused children effective July 1, 1986.
5. American Indian Organizations
Senate Bill 40 (Chapter 107) exempts tangible personal property purchased for charitable or educational purposes by certain nonprofit American Indian organizations effective July 1, 1986. To qualify for this exemption the organization must be organized exclusively to: 1) Care for the spiritual needs of American Indians, 2) Communicate to non-Indians the values, customs, philosophy, and special needs of the American Indian, 3) Meet the needs of American Indians through nationwide charitable distribution programs and 4) Encourage awareness of American Indian arts, crafts and customs. The property must be distributed by the organization through its nationwide charitable distribution program.
6. Churches
Senate Hill 192 (Chapter 605) amends § 58.1-608.38 of the Virginia Code to expand the exemption for nonprofit churches to include purchases of baptistries, certain printed materials used in carrying out the work of the church and gifts for use outside church buildings effective July 1, 1986. This expanded exemption will include baptistries installed by contractors or by the church which become part of real estate; bulletins, programs, newspapers and newsletters that contain no paid advertising and which are used in carrying out the work of the church; and gifts for distribution outside of the public church building.
7. Law Enforcement Foundations
House Bill 765 (Chapter 545) and Senate Bill 192 (Chapter 605) exempt all tangible personal property purchased by or leased to nonprofit foundations that exclusively provide training and education for employees of governmental law-enforcement and corrections agencies or that provide education to the public in citizen cooperation with public authorities in crime prevention and solution effective July 1, 1986.
Other Exemptions
1. Food Stamps and WIC Drafts
House Bill 765 (Chapter 545) and Senate Bill 192 (Chapter 605) exempt tangible personal property purchased with food coupons issued under the Food Stamp Program or with drafts issued through the Virginia Supplemental Food Program for Women, Infants and Children (WIC) from both the retail sales and use tax and the local meals tax effective October 1, 1986.
2. High Speed Electrostatic Duplicators
Senate Bill 164 (Chapter 412) exempts high speed electrostatic duplicators and other duplicators which have a printing capacity of 4,000 impressions or more per hour, when used by persons engaged primarily in the printing or photocopying products for sale or resale effective July 1, 1986. This act exempts the duplicators used in "quick copy centers" and other photocopy businesses which have not qualified under the manufacturing exemption extended to copiers used by a printer in the place of a printing press.
3. Commercial Watermen
Senate Bill 192 (Chapter 605) amends § 58.1-608.28 of the Virginia Code to expand the present exemption for commercial watermen to include equipment and materials used in extracting fish, bivalves, and crustaceans from waters effective July 1, 1986. This equipment and materials includes the paint used on the hulls of boats used by watermen.
4. Computer Software
House Bill 245 (Chapter 22) amends § 58.1-602 of the Virginia Code to exclude from the definition of "sales price", separately stated charges for labor or service charges in connection with the modification of prewritten computer software. It also excludes "custom" computer software. "Custom" programs or software means a computer program which is specifically designed and developed only for one customer. The combining of two or more prewritten programs does not constitute "custom" software. The Department of Taxation is in the process of adopting regulations on this legislative change. A Notice of Intended Regulatory Action was published May 12, 1986.
WATERCRAFT SALES AND USE TAX
Sea Rescue Squads
House Bill 765 (Chapter 545) amends § 58.1-1404 of the Virginia Code to exempt from the Watercraft Sales and Use Tax, watercraft purchased by nonprofit sea rescue squads effective July 1, 1986. As this act applies to "sea" rescue squads specifically, it will not apply to most volunteer rescue squads that purchase watercraft. Even though this act is not effective until July 1, 1986, it is applicable to such watercraft purchased after July 1, 1985.
MOTOR VEHICLE FUEL SALES TAX
Transportation Districts
House Bill 802 (Chapter 435) amends §§ 58.1-1720 and 58.1-1724 of the Virginia Code to allow any jurisdiction within a metropolitan area contiguous to the Northern Virginia Transportation District which becomes a member of a transportation district established on or after July 1, 1986, to levy a tax of two percent of the retail price of all motor fuel and special fuel sold in such jurisdiction.
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