RD328 - 2007 Retail Sales and Use Tax Expenditure Report


Executive Summary:
Pursuant to Code of Va. § 58.1-609.12, the Department of Taxation (“TAX”) is charged with the responsibility of determining the fiscal, economic and policy impact of each of the Retail Sales and Use Tax exemptions provided for by Code of Va. §§ 58.1-609.10 and 58.1-609.11 and reporting such findings to the chairmen of the House and Senate Finance Committees no later than December 1 of each year. Each of these exemptions are to be reviewed in periodic cycles and reports issued on a rotating basis in accordance with a schedule determined by the Tax Commissioner. There are nineteen exemption categories scheduled to be studied during the 2007-2011 period, and every five-year period thereafter. This is the first volume of the 2007-2011 series and includes a detailed analysis of exemptions that pertain to:

Donations of tangible personal property withdrawn from inventory to any organization exempt from taxation under Internal Revenue Code (“IRC”) § 501(c)(3) or to the Commonwealth, any political subdivision of the Commonwealth, or any school, agency, or instrumentality thereof (Code of Va. § 58.1-609.10 (15)).

Purchases of tangible personal property by nonprofit churches (Code of Va. § 58.1-609.10 (16)).

Purchases of tangible personal property by nonprofit entities that have applied to TAX and received an exemption certificate pursuant to Code of Va. § 58.1-609.11 (Code of Va. § 58.1-609.11).

This report includes detailed information on the policy and fiscal impacts of these three exemptions, as well as the apparent rationale for these exemptions and their legislative history. This report also includes a comparison of the Virginia exemptions with the sales tax structures of other states, with particular emphasis placed on a comparison with the exemptions provided in contiguous states. The goal of the Sales and Use Tax Expenditure Study is to provide a more complete picture of the revenue impact and policy issues surrounding each of these exemptions.