New Tax Savings for Virginia’s Charitable Organizations

By Doug K. Nickerson, CPA, CGFM, CFE, CIA | Partner | Not-for-Profit Team

On May 2, 2016, the Virginia Department of Taxation issued Tax Bulletin 16-3 changing the current policy regarding the application of the Retail Sales and Use Tax to catering and other services related to purchases of food and meals by nonprofit organizations, nonprofit churches, and state and local government entities.

Effective April 22, 2016, these entities can make tax exempt purchases of food and meals and certain taxable services provided in connection with the provision of meals using their Retail Sales and Use Tax exemption certificates.

The Department is applying a new test to determine whether the purchases are made for the qualifying entity’s use or consumption.  The “use or consumption” test is satisfied if the following requirements are met:

1. The provision of the applicable prepared food, meals, or services furthers a function, mission, service or purpose of the governmental or nonprofit entity;
2. The charge for the food, meals or catering is billed to and paid for by the entity claiming tax exemption with payment coming from the entity’s account, rather than using cash or an individual’s account; and
3. The entity claiming the exemption determines to whom, when and how the meals or food are served and consumed.

The Bulletin provides some useful examples on the application of the test and can be read in its entirety at http://www.tax.virginia.gov/sites/tax.virginia.gov/files/TB_16_3_Nonprofit_Meals_Bulletin.pdf.

Question about sales and use tax compliance for your organization?  Please contact your Keiter Opportunity Advisor at 804.747.0000.