Bulletin Number
VTB 87-4
Tax Type
Retail Sales and Use Tax
Description
1987 Legislative Changes: Sales and Use Tax
Topic
Reports
Date Issued
06-01-1987
Virginia Tax Bulletin
Virginia Department of Taxation
87-4
DATE: June 1, 1987
SUBJECT: Sales and Use Tax: 1987 Legislative Changes
The 1987 General Assembly enacted several laws which have an impact upon all taxes, the retail sales and use tax and the watercraft sales and use tax. Brief summaries of the enacted legislation are provided below:
ALL TAXES
Differential Interest Rates
Senate Bill 554 (Chapter 484) amended Va. Code § 58.1-15 to adopt the differential interest rates for overpayments (refunds) and underpayments (assessments) of taxes that are set forth in Internal Revenue Code § 6621(a)(1) and 6621(a)(2). Pursuant to these provisions, the interest rate on underpayments is one percentage point above that on overpayments. Effective Date: January 1, 1987.
RETAIL SALES AND USE TAX
The following bills enact or expand various exemptions from the Virginia Retail Sales and Use Tax granted under Va. Code § 58.1-608. The applicable subsection will be noted for the bills that expand an existing exemption.
Exemptions for Nonprofit Organizations
1. Free Health Clinics
House Bill 972 (Chapter 532) creates an exemption for all tangible personal property purchased for use or consumption by a nonprofit, nonstock corporation which is organized exclusively for the purpose of conducting a clinic for the furnishing of free health care services by licensed physicians and dentists. Effective Date: July 1, 1987.
2. Church Camps and Conference Centers
House Bill 1256 (Chapter 541) expands the existing exemption for nonprofit churches under Va. Code § 58.1-608(38) to provide an exemption for food, disposable serving items, cleaning supplies and teaching materials used by a nonprofit church or organization composed of several nonprofit churches such as a diocese, synod or conference, in the operation of camps or conference centers, provided such items are used in carrying out the work of the church(es). However, the exemption does not apply to purchases of food, disposable serving items, etc., used or consumed while the church camp or conference center is being utilized for non-church related functions, such as by business groups, governmental organizations, civic groups and other groups not affiliated with the church. Effective Date: July 1, 1987.
3. Community Health Centers
House Bill 1407 (Chapter 544) creates an exemption for all tangible personal property purchased for use or consumption by nonprofit community health centers established to provide health care services for areas of Virginia containing a "medically underserved population", as defined by 42 U.S.C. § 254 c(b)(3). "Medically underserved population" means "the population of an urban or rural area designated by the Secretary of Health and Human Services as an area with a shortage of personal health services or a population group designated by the Secretary as having a shortage of such services." Effective Date: July 1, 1987.
4. Health Maintenance Organizations
Senate Bill 382 (Chapter 515) reinstates the exemption for tangible personal property purchased for use or consumption by nonprofit health maintenance organizations licensed under Chapter 43 of Title 38.2 of the Virginia Code. This exemption was inadvertently omitted by the recodification of Title 58. Effective Date: Retroactive to January 1, 1985.
5. Foster Care Organizations
Senate Bill 587 (Chapter 524) creates an exemption for all tangible personal property purchased by nonprofit organizations organized exclusively to provide education, training, services and assistance in independent living to foster care children and youth without families. Effective Date: July 1, 1987.
6. Elementary or Secondary Schools
Senate Bill 587 (Chapter 524) expands the exemption for school fund raising materials under Va. Code § 58.1-608(63) to include tangible personal property purchased by nonprofit elementary or secondary schools for use in fund raising activities the net proceeds of which are contributed directly to the schools or used to purchase certified school equipment. The exemption includes sales of class rings, school photos and other fund raising programs from which nonprofit elementary or secondary schools receive a commission or the net proceeds after payment of vendors and other direct expenses. Under prior law the exemption applied only to purchases of fund raising materials by PTA's or similar groups. Schools which paid the tax on such fund raising items purchased between July 1, 1986 and July 1, 1987 may apply for a refund from the department within three years of the date upon which such tax became due and payable. Claims for refund may be filed with the Taxpayer Assistance Section at P.O. Box 6-L. Richmond, Virginia 23282. Effective Date: Retroactive to July 1, 1986.
Other Exemptions
1. Taxicab Operators
House Bill 1303 (Chapter 587) expands the existing exemption for taxicab operators under Va. Code § 58.1-608(54) to include an exemption for the sale or lease of meters and dispatch radios to taxicab operators, provided such items are used directly in the rendition of their taxicab service. Effective Date: July 1, 1987.
2. Veterinary Prescriptions
House Bill 1594 (Chapter 548) amends Va. Code § 58.1-608(21) to provide an exemption for sales of medicines or drugs purchased on the prescription or work order of licensed veterinarians. However, veterinarians are now deemed to be the taxable users and consumers of all such medicines or drugs. Therefore, veterinarians must pay the tax on the purchase of all medicines and drugs regardless of whether they are used or consumed in their practice or sold at retail. (For additional information on the application of the sales and use tax to veterinarians, see Virginia Tax Bulletins 86-4 and 87-9.) Effective Date: July 1, 1987.
WATERCRAFT SALES AND USE TAX
$1,000 LIMITATION
Senate Bill 391 (Chapter 516) amends Va. Code § 58.1-1402 to provide a $1,000 maximum tax limitation on the sale of watercraft subject to the Watercraft Sales and Use Tax. This maximum tax limitation affects watercraft with a sale price or market value in excess of $50,000. The limitation is set to expire on July 1, 1992. (For additional information, see Virginia Tax Bulletin 87-5.) Effective Date: July 1, 1987.
Tax Bulletins