RD341 - 2007 - 2011 Virginia Retail Sales and Use Tax Expenditure Study, Volume 1, Number 5


Executive Summary:
Pursuant to Code of Va. § 58.1-609.12, the Department of Taxation (Department) 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 fifth and final report of the 2007-2011 series and includes a detailed analysis of exemptions that pertain to:

Artificial or propane gas, firewood, coal or home heating oil used for domestic consumption. (Code of Va. § 58.1-609.10(1)).

An occasional sale, as defined in § 58.1-602. (Code of Va. § 58.1-609.10(2)).

Tangible personal property for future use by a person for taxable lease or rental as an established business or part of an established business, or incidental or germane to such business, including a simultaneous purchase and taxable lease. (Code of Va. § 58.1-609.10(3)).

Tangible personal property delivered outside the Commonwealth for use or consumption outside of the Commonwealth. (Code of Va. § 58.1-609.10(4)).

Tangible personal property purchased for use or consumption in the performance of maintenance and repair services at Nuclear Regulatory Commission-licensed nuclear power plants located outside the Commonwealth. (Code of Va. § 58.1-609.10(6)).

Multifuel heating stoves used for heating an individual purchaser’s residence. (Code of Va. § 58.1-609.10(18)).

Fabrication of animal meat, grains, vegetables, or other foodstuffs when the purchaser (i) supplies the foodstuffs and they are consumed by the purchaser or his family (ii) is an organization exempt from taxation under § 501 (c)(3) or (c)(4) of the Internal Revenue Code, or (iii) donates the foodstuffs to an organization exempt from taxation under § 501 (c)(3) or (c)(4) of the Internal Revenue Code. (Code of Va. § 58.1-609.10(19)).

This report includes detailed information on the policy and fiscal impacts of these seven 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.

In addition, this report provides the annual fiscal impact of the sales and use tax exemptions for nonprofit entities, as mandated by Chapters 757 and 758, 2003 Acts of Assembly (House Bill 2525 and Senate Bill 743). Legislation enacted during the 2009 General Assembly authorized the Department to combine its Nonprofit Exemption Report with its yearly Retail Sales and Use Tax Expenditure Study. This is the third year the Department has combined these studies.