Virginia Administrative Code › Title 23 - TAXATION › Agency 10 - DEPARTMENT OF TAXATION › Chapter 210 - RETAIL SALES AND USE TAX › Section 23VAC10-210-1070 - Nonprofit organizations; criteria for exemption

Current through Register Vol. 40, No. 24, July 15, 2024
A. The Tax Commissioner has no authority to
				grant an exemption from the retail sales and use tax to a nonprofit
				organization. Only the General Assembly can enact legislation which will grant
				exemption from the tax.
The General Assembly has not enacted a general exemption
				  from the retail sales and use tax for nonprofit organizations. The only
				  nonprofit organizations exempt from the tax are those specifically set forth in
				  §§ 58.1-608.1 and 58.1-609.1 through 58.1-609.13 of the Code of
				  Virginia. These organizations are typically exempt from federal and state
				  income taxes and serve educational, medical, civic, religious, charitable or
				  cultural purposes. However, the vast majority of nonprofit organizations which
				  are exempt from federal and state income taxes are not exempt from the Virginia
				  retail sales and use tax because they do not qualify for a sales and use tax
				  exemption set out in the Code of Virginia.
If a nonprofit organization is not exempt by Virginia
				  statute from tax on the purchase of tangible personal property or taxable
				  services, it must pay tax on those purchases used or consumed in its
				  operations. If a supplier of the nonprofit organization is not registered to
				  collect the tax or if the supplier is a registered dealer who fails to collect
				  the tax, the nonprofit organization must report and pay the use tax on a
				  Consumer's Use Tax Return, Form ST-7.
If a nonprofit organization regularly engages in selling
				  tangible personal property, it is required to register as a dealer and collect
				  and remit to the department the tax on retail sales unless it is specifically
				  exempt by statute from collecting the tax.
B. Strict construction of the exemption. As
				indicated in
				23VAC10-210-540, when determining
				which organizations qualify for exemption from the tax, the department is bound
				by court decisions to strictly construe laws granting the tax exemption. This
				means that a nonprofit organization must meet all of the requirements specified
				in the law in order to qualify for an exemption. For example, subdivision 15 of
				§ 58.1-609.4 of the Code of Virginia exempts:
From July 1, 1991, through June 30, 1996, tangible personal
				  property purchased for use or consumption by a nonprofit organization exempt
				  from taxation under § 501(c)(3) of the Internal Revenue Code and organized
				  exclusively to combat illiteracy by tutoring and training adults and by
				  increasing community awareness of the illiteracy problem within the
				  metropolitan Richmond area.
Under strict construction of the statute, to meet the
				  criteria established for this exemption, an organization must (i) purchase
				  tangible personal property during the period July 1, 1991, to June 30, 1996,
				  (ii) have a § 501 (c)(3) designation from the Internal Revenue Service,
				  (iii) be organized for the sole purpose of combating illiteracy in adults, and
				  (iv) conduct operations in the metropolitan Richmond area. Organizations that
				  provide programs to combat illiteracy as part of a larger operation do not
				  qualify for this exemption. In addition, similar organizations created solely
				  to combat illiteracy, but operating outside the metropolitan Richmond area,
				  would not qualify for this exemption. Lastly, when an exemption "sunsets," it
				  typically applies to a specific period and expires after a certain date.
				  Purchases before or after that period are taxable. Therefore, in the example
				  above, purchases made before July 1, 1991, or after June 30, 1996, would be
				  taxable.
Statutory Authority: §
											58.1-203 of the Code of Virginia.