Did Virginia sales tax apply to an association's fee for reserving a pavilion or lodge when no property or other services came with it?

Plain-English summary

Virginia treated the association's facility-only reservation fee as exempt from retail sales and use tax. Members and leaseholders in good standing paid to reserve a beach pavilion or lodge for meetings, parties, and other community events.

The reservation applications showed that no tangible personal property or other services were leased or sold with the facility use. Under Virginia's general rule exempting service charges, the fee therefore was not taxable.

The ruling distinguished arrangements that include tangible property. If property is furnished with a facility fee, Virginia can tax the total charge rather than only the property's stated portion.

Common questions

Q: Are all event-space charges exempt in Virginia?
A: No. This ruling covered a facility-only fee with no tangible personal property or other services included.

Q: What if the association includes property with the rental?
A: The ruling says furnishing tangible personal property can make the total charge taxable.

Citations and references

• Va. Code §§ 58.1-602 and 58.1-603(4).
• 23 VAC 10-210-4040(A).
• Virginia Public Documents 87-69, 98-85, and 02-38.

Subject

Fee to members and leaseholders to reserve certain facilities is exempt from the tax VAC 10-210-4040 A.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 12-82

Original ruling text

May 11, 2012

Re: Ruling Request: Retail Sales and Use Tax

Dear *:

This is in response to your letter in which you request a ruling on the application of the retail sales and use tax to charges by * (the "Taxpayer") for the rental of certain facilities. I apologize for the delay in responding to your letter.

FACTS

The Taxpayer is a property owners association. The Taxpayer inquires whether the sales tax applies to the fee charged members in good standing for the exclusive use of the facilities. The Taxpayer contends it is not engaged in the lease and rental of tangible personal property and requests a ruling on whether the usage fee for the facilities is subject to the sales and use tax.

RULING

Virginia Code § 58.1-603 4 imposes the sales tax on "the gross proceeds derived from the sale or charges for rooms, lodgings or accommodations furnished to transients as set out in the definition of "retail sale" in Va. Code § 58.1-602." The definition of "retail sale" in Va. Cade § 58.1-602 states that a "sale at retail" shall include the sale or charges for any room or rooms furnished to transients by any place in which rooms, lodging, space or accommodations are regularly furnished to transients for a consideration. Virginia Code § 58.1-602 defines "gross proceeds" as the charges made or voluntarily contributions received for the lease or rental of tangible personal property or for furnishing services.

Title 23 of the Virginia Administrative Code (VAC) 10-210-4040 A states, "Charges for services generally are exempt from the retail sales and use tax. However, services provided in connection with sales of tangible personal property are taxable . . . ."

In Public Document (P.D.) 87-69 (2/27/89), the Tax Commissioner determined that fees charged for the use of certain facilities were not taxable provided that no tangible personal property was included in the fees charged to customers.

In P.D. 98-85 (5/7/98), the taxpayer rented out its meeting hall for special events and offered a wine service, where for a fee, wines are served during the event. The Tax Commissioner ruled that only in those instances where no tangible personal property is provided by the taxpayer in connection with the fee will the charge be exempt from the tax. Otherwise, the tax would be collected upon the total charge for the facility inclusive of any charges for wine.

In P.D. 02-38 (4/1/02), the taxpayer rented a meeting hall to various businesses and individuals for parties, reunions, business meetings and similar events. The Tax Commissioner determined that the rental of the meeting hall that did not involve the leasing or furnishing of tangible personal property was not subject to the tax.

In this instance, the Taxpayer charges a fee to members and leaseholders in good standing to reserve certain facilities (Beach Pavilion or Lodge) for meetings, parties, and other community-oriented events. Based on a review of the reservation applications provided by the Taxpayer, no tangible personal property or services are leased or sold in conjunction with the charge for the use of the facilities. As such, the fee charged the members or leaseholders for the use of the facilities is exempt from the tax pursuant to VAC 10-210-4040 A.

This response is based on the facts provided as summarized above. Any change in the facts or the introduction of new facts may lead to a different result.

The Code of Virginia section, regulation and public documents cited are available online at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this response, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-4711805665.T