23 Va. Admin. Code § 10-210-310

Current through Register Vol. 41, No. 4, October 8, 2024

Section 23VAC10-210-310 - Churches

A. Definitions.

The following words and terms when used in this section shall have the following meanings unless the context clearly indicates otherwise:

"Carrying out the work of the church and its related ministries" means engaging in activities that communicate or spread the religious teachings and practices of a church.

"Church" means a nonprofit religious organization, regardless of faith, that would be considered a church under the standards promulgated by the Internal Revenue Service for federal income tax purposes (i) that has been specifically recognized by the Internal Revenue Service as being exempt from taxation under § 501(c)(3) of the Internal Revenue Code or (ii) whose real property is exempt from local real property taxation under § 58.1-3606 of the Code of Virginia. The term "church" includes any departments, regular schools of religious education, and other activities of a church that are not separate legal or business entities, including kindergartens, elementary and secondary schools, preschools, nurseries, and day care centers. The term "church" does not include broadcasting television organizations, such as evangelical television and radio ministries, missionaries, political action committees (PACs), affiliated entities separately incorporated from a nonprofit religious organization, and camps and conference centers. However, a limited exemption is available to camps and conference centers as set forth in subsection F of this section.

"Church department" means any administrative division of a church used in carrying out the work and related ministries of the church. This term includes, but is not limited to, boards; committees; councils; men's, women's or youth ministries; and outreach ministries of the church.

"Public church building" means a building, the primary purpose of which is to house the regularly scheduled worship services of the church and those adjacent offices and buildings at a single location in which activities are conducted to carry out the work of the church and its related ministries.

"Regular school of religious education" means any program instituted by a church to provide regularly scheduled classes on the teaching of the church and includes, but is not limited to, Sunday school, catechism, Hebrew school, vacation Bible school, and Bible study classes.

"Religious worship service" means regularly scheduled church services and includes, but is not limited to, weddings, bar mitzvahs, bat mitzvahs, baptisms, christenings, funerals, and special services conducted during religious holidays, when conducted at the public church building.

B. Overview. This section addresses the sales and use tax exemption provided to churches pursuant to § 58.1-609.10 of the Code of Virginia using Form ST-13A, Certificate of Exemption. In general, a church is entitled to an exemption from the sales and use tax on certain purchases of tangible personal property for use in:

1. Religious worship services by a congregation or church membership while meeting together in a single location;

2. Libraries, offices, meeting or counseling rooms, kitchens, or other rooms in the public church buildings used in carrying out the work of the church and its related ministries, including kindergarten, elementary and secondary schools, preschools, nurseries, and day care centers;

3. Recording and reproducing church services; and

4. Caring for or maintaining property owned by the church.

Churches also have the option of using the general nonprofit entity sales tax exemption provided for under § 58.1-609.11 of the Code of Virginia. In order to obtain the general nonprofit entity exemption, the church must apply to the Department of Taxation and receive a Retail Sales and Use Tax Certificate of Exemption. This section is applicable only to the self-issued exemption for churches pursuant to subdivision 16 of § 58.1-609.10 of the Code of Virginia using Form ST-13, Certificate of Exemption. It does not apply to the general nonprofit entity sales tax exemption provided for under § 58.1-609.11 of the Code of Virginia.

C. Exercising the exemption. In order to qualify for exemption, tangible personal property must be purchased by, invoiced to, and paid for directly by the church. If a minister, church member, or other church worker purchases tangible personal property on behalf of the church using his personal funds, the purchase is taxable even if reimbursed to the person by the church. A personal check is payment made by an individual and not by the church. Cash payment provides no proof that the church makes direct payment to the dealer of the merchandise. If a supplier fails to collect the tax on any taxable purchase, the church must report and pay the use tax on Form ST-7, Consumer's Use Tax Return.

When purchasing an item qualifying for exemption, a church must furnish to the supplier a properly completed Form ST-13A, Certificate of Exemption. This self-issued certificate of exemption is limited to tangible personal property specified in § 58.1-609.10 of the Code of Virginia.

D. Exempt purchases.

1. Purchases for use in religious worship services and in public church buildings in carrying out the work of the church and its related ministries. The following tangible personal property may be purchased exempt from the tax when purchased by the church for use in religious worship services by a congregation or church membership while meeting together in a single location and for use in public church buildings in carrying out the work of the church and its related ministries. The list is exemplary and not all inclusive.

a. Acolyte robes;

b. Administrative supplies (letterheads, envelopes, office supplies, etc.);

c. Altar cushions and cloths;

d. Baptism, marriage, and membership certificates;

e. Baptismal font;

f. Baptistries;

g. Bibles and Bible stands;

h. Bulletins, programs, newspapers, and newsletters that do not contain paid advertising (including paper and ink used to print these);

i. Candles and candelabra;

j. Choir robes;

k. Communion supplies and tables;

l. Curtains and flags;

m. Flowers and plants, live or artificial, and accessories thereto;

n. Fuel oil;

o. Funeral pall;

p. Gifts, including food, for distribution outside the public church building;

q. Hymnals and hymnal racks;

r. Kitchen equipment that is not incorporated into realty;

s. Musical instruments (e.g., organ, piano, hand bells, drums, brass instruments, woodwind instruments, etc.);

t. Name tags for ushers and guests, and attendance records;

u. Offering envelopes;

v. Office machinery and equipment;

w. Pews, cushions, chairs, and other seating systems;

x. Portable heaters, and fans and window air conditioners used at the location of the worship service;

y. Prayer books;

z. Pulpit, lectern, pulpit lamp;

aa. Rosaries, crosses, crucifixes;

bb. Rugs and carpeting not affixed to the realty;

cc. Sheet music;

dd. Systems to assist persons who are hearing-impaired

ee. Tallithim;

ff. Torahs;

gg. Vestments for ecclesiastical celebrants;

hh. Wafers, bread, wine, grape juice used in communion service; and

ii. Yarmulkes.

2. Purchases for recording and reproducing church services. Equipment, tools, supplies, or other tangible personal property used in any form of recording or reproducing of church services can be purchased exempt of the retail sales and use tax. Recording and reproduction items shall include, but are not limited to, the following:

a. Amplifiers, microphones, speakers, and wires;

b. Audiovisual recording devices;

c. Tools and testing equipment;

d. Tape or disk duplicating devices;

e. Audiovisual cameras;

f. Television broadcasting cameras;

g. Radio and television transmitting devices; and

h. Photographic cameras, film, developing supplies.

3. Property used in caring for or maintaining property owned by the church.

a. Tangible personal property that is purchased for use in caring for or maintaining property owned by the church is exempt from the retail sales and use tax. Such property shall include, but not be limited to, the following:

(1) Mowing equipment including but not limited to, lawn mowers, baggers, weed-eaters, edgers, and replacement parts (lawn mower blades, tires, wheels, lights, spark plugs, filters, other mechanical components, etc.);

(2) Ladders;

(3) Vacuums;

(4) Mops;

(5) Buckets;

(6) Janitorial supplies;

(7) Pressure washers;

(8) Rakes;

(9) Brooms;

(10) Cleaning equipment and supplies;

(11) Light bulbs

(12) Leaf blowers;

(13) Tools (hammers, drills, saws, screwdrivers, knives, paint brushes, nails, screws, etc.);

(14) Property used in maintenance of church grounds including, but not limited to, grass seed, trees, shrubs, and fertilizer; and

(15) Repair parts, accessories, oil, and similar items for use in motor vehicles owned by the church, even if such motor vehicles are not used exclusively for church-related activities.

b. Certain building materials. Building materials that are installed in the public church buildings that are used in carrying out the work of the church and its related ministries may be purchased by the church exempt of the retail sales and use tax, provided such equipment is installed by the church and the church does not contract with a person or entity to have such property installed. Building materials shall include, but not be limited to, the following:

(1) Wood products (lumber, plywood, moldings, etc.);

(2) Drywall;

(3) Flooring (hardwood floors, laminate, vinyl, tile, carpet, etc.);

(4) Paint;

(5) Kitchen and bathroom sinks;

(6) Toilets;

(7) Electrical materials (wires, receptacles, light switches, etc.);

(8) Telephone wires;

(9) Cable television wires;

(10) Roofing materials (shingles or other types of roofing, gutters, roofing nails, etc.);

(11) Siding (aluminum, wood, vinyl, stone, brick, stucco, etc.);

(12) Masonry materials (cinderblocks, bricks or stones, concrete mix, etc.);

(13) Insulation;

(14) Windows;

(15) Doors, door handles, and door locks;

(16) Plumbing materials (pipes, septic systems, garbage disposals, etc.); and

(17) Cabinets, counters, and countertops.

E. Taxable purchases.

1. Generally. Tangible personal property purchased by a church is generally taxable when it is (i) not used in religious worship services by a congregation or church membership while meeting in a single location; (ii) not used in sanctuaries, libraries, offices, meeting or counseling rooms, or other rooms in the public church buildings used in carrying out the work of the church and its related ministries; or (iii) used by separate legal or business entities that may be associated with the church.

2. Construction and building materials furnished to contractors.

a. If building materials, kitchen equipment, heating and air conditioning equipment, tool sheds, and picnic shelters are furnished by the church to a contractor for incorporation in real estate, and the church did not pay the tax on the materials, the contractor, as the user and consumer of the materials, must pay the use tax directly to the department based on the fair market value of the materials used, irrespective of whether or not any right, title, or interest in the materials become vested in the contractor.

b. A baptistry that will be incorporated into real estate at the public church building and used in the religious services of a church is exempt from the tax whether purchased by the church or the contractor.

3. Examples of other taxable purchases. Other taxable purchases are described in the following list, which is exemplary and not all inclusive.

a. Any property used on church trips, picnics, or similar outings outside a public church building; or

b. Bulletins, programs, newspapers, and newsletters that contain paid advertising (including paper and ink used in printing).

F. Camps and conference centers.

1. Church-related activities.

a. Purchases. The tax does not apply to purchases of food and beverages, disposable serving items (such as paper plates, cups, napkins, plastic forks, spoons, and knives), cleaning supplies, and teaching materials used and consumed in operating camps or conference centers by a church or an organization composed of churches that are exempt from the sales and use tax and that are used in carrying out the work of the church and its related ministries. The purchase may be made exempt of the tax by the church or the camp or conference center using Form ST-13A, Certificate of Exemption.

Example 1: A church organization that is composed of a number of church congregations allows one of its church affiliates to hold a youth camp at its conference facilities located in Virginia in order to educate the participants in the church's religious teachings. The church organization purchases food, disposable serving items, and teaching materials that will be given to the participants in the youth camp. In addition, cleaning supplies are purchased for maintaining the facilities. The purchase of food, disposable serving items, teaching materials, and cleaning supplies provided by the church organization would be exempt from the tax.

b. Sales.

(1) Rooms, lodgings, and accommodations. When a church or organization composed of churches operates a camp or conference center and makes separate charges for room rentals, lodging, and accommodations, the charges are taxable as provided in 23VAC10-210-730. The church or organization must register as a dealer, collect the tax on the amount of the charge, and remit the tax to the department. Tangible personal property used and consumed in providing rooms, lodging, and accommodations is taxable at the time of purchase.

(2) Meals. When a church or organization composed of churches operates a camp or conference center and sells meals to participants, the sales price of meals are taxable as provided in 23VAC10-210-930. The church or organization must register as a dealer, collect the tax on the amount of the charge, and remit the tax to the department. However, the food provided in the meals, as well as paper placemats, plastic silverware, and similar items furnished with the meals and disposed of after the use by only one person, may be purchased exempt of tax under a resale exemption certificate.

(3) Camp fees. When a church or organization composed of churches operates a camp and charges the participants a camp fee that covers expenses incurred to provide meals, lodging, and camp activities, the camp fee is tax exempt. Further, the church or organization carrying out the work of the ministry may purchase the items described in subdivision 1 a of this subsection exempt from the tax.

Example 2: A nonprofit organization composed of nonprofit churches operates a retreat facility. The churches that comprise this nonprofit organization may purchase food items for the consumption of participants at the retreat facility exempt from the tax. Any church associated with the nonprofit organization may also purchase food exempt for resale, but the subsequent sale of that food to participants is taxable. A church that is not associated with the nonprofit organization and that purchases food items for consumption while using the retreat facility must pay retail sales and use tax.

2. Nonchurch-related activities. When food, disposable serving items, teaching materials, or cleaning supplies are purchased by a church or organization of churches for use in camps and conference centers for nonchurch-related activities, they are subject to the sales and use tax in the same manner of other providers of meals and accommodations. Nonchurch-related activities would include, but are not limited to, the renting of the facility for conferences, retreats, etc., by businesses, business groups, governmental organizations, and civic groups.

G. Donations of tangible personal property to churches. A church is exempt from the use tax on donations of tangible personal property that it receives from individuals, businesses, and other organizations. Persons making such donations are liable for the tax not previously paid on the cost price of the donated items unless those items are withdrawn from inventory, as provided in subdivision 15 of § 58.1-609.10 of the Code of Virginia or otherwise exempt from the tax.

H. Affiliated organizations.

1. Generally. Tangible personal property purchased by affiliated religious associations or corporations, such as political action committees (PACs) and separately organized broadcasting ministries, is taxable.

2. Separate legal and business entities. Kindergartens, primary schools, secondary schools, preschools, nurseries, day care centers, and similar activities held in the public church buildings that carry out the work and ministry of the church and that are not separate legal or business entities are generally exempt from the tax on the purchases of tangible personal property. Tangible personal property purchased for an activity that is a separate legal or business entity is taxable. Although not all inclusive, the following factors considered as a whole are used to determine that an activity is a separate legal or business entity from the church that would not qualify for the exemption:

a. The activity is a separate corporation from the church;

b. The federal identification number of the activity is different from the church;

c. Payroll and other expenses of the activity are paid out of separate bank accounts;

d. Activities are located at a different location from the public church building; and

e. Activities are not subject to the authority or control of the church.

However, preschools, primary schools, and secondary schools that are separate legal and business entities from the church may qualify for a sales and use tax exemption pursuant to § 58.1-609.11 of the Code of Virginia.

Example 3: As part of its education ministry to inner city youth, a church operates a child day care center out of its public church buildings. The center's federal identification number is the same as the church, pays its expenses out of the church's checking account, and functions under the authority and control of the church. Tangible personal property purchased by the center would qualify for the church exemption since the center is not considered a separate legal or business entity from the church.

Example 4: Facts are the same as Example 3, except that the center has a separate federal identification number and pays is expenses out of a separate checking account. Tangible personal property purchased by the center would continue to be exempt.

Example 5: Facts are the same as Example 3, except that the center is a separate nonprofit corporation that is still affiliated with the church, has a separate federal identification number, and pays its expenses out of a separate checking account. Even though the center is located in the public church building, tangible personal property purchased by the center is taxable since the center is a separate legal entity from the church.

Example 6: Facts are the same as Example 3, except that the center is located five miles from the public church buildings. Tangible personal property purchased by the center would be taxable since the center is not located in the public church buildings.

I. Sales.

1. Generally. Churches that make retail sales of tangible personal property are required to register as dealers, collect the tax from customers (who may include church members, visitors, or other persons outside the church membership) and remit the tax to the department.

2. Food. If a church makes sales of food for which a profit is realized, the church should collect tax from the customers and remit the tax to the department. In these instances, the church may purchase the food exempt from the tax using a resale exemption certificate. For purposes of this subdivision only, if the sales price charged for food is completely offset by the cost of the food, and the church realizes no profit, then the church is not required to charge the tax to its customers on the sales price of the food. Instead, the church must pay the tax to its vendors on the purchase price of the food purchased. As long as the church pays tax on the purchase price of the food that it sells at cost, the church is not required to register as a dealer while conducting this activity or charge tax to customers.

3. Other sales. If a church makes sales of cassette tapes, audiovisual tapes, books, photo directories, and jewelry or makes sales of tangible personal property in yard sales or bazaars, the church should register as a dealer, collect the tax from its customers and remit the tax to the department.

4. Occasional sales. Except as provided in subdivision 2 of this subsection of this regulation, the church must collect the tax on all sales and remit the amount to the department unless the sales meet the criteria for occasional sales as provided in subdivision 2 of § 58.1-609.10 of the Code of Virginia and 23VAC10-210-1080. Yard sales and bazaars qualify as occasional sales under subdivision 2 of § 58.1-609.10 of the Code of Virginia and 23VAC10-210-1080.

Example 7: A church holds yard sales to raise money to support ministries and other church-related activities. The yard sales are held in the church facility or on church grounds, and consist of the sales of tangible personal property donated by church members. Although numerous items of tangible personal property are sold at each yard sale, each day's yard sale is considered to be one sale for purposes of the occasional sale rule. As long as the church does not hold more than three yard sales in a calendar year, the church is not required to register as a dealer and collect and remit sales tax.

Example 8: Facts are the same as in Example 7, except that the church rents a booth or space for one day from a flea market organizer who is registered as a dealer. The primary business of the flea market is to rent a booth or space to sell tangible personal property. As the church yard sale takes place as part of a regular ongoing business (the flea market) that takes place more than three times a year, the yard sale would not qualify as an occasional sale. The flea market organizer is held responsible for the collection of sales tax for any property sold using its facilities and must collect sales tax from the church based on the sales price of property sold or allow the church to collect the tax and remit it to the Department of Taxation.

23 Va. Admin. Code § 10-210-310

Derived from VR630-10-22.1; revised July 1984; amended, eff. January 1, 1985; Virginia Register Volume 25, Issue 22, eff. September 19, 2009.

Statutory Authority

§ 58.1-203 of the Code of Virginia.