Special Subcommittee Studying Sales and Use Tax Exemptions

August 6, 1998, Richmond

The special subcommittee held its first meeting to discuss the growing number of sales and use tax exemptions, particularly in the nonprofit civic and cultural areas. The subcommittee heard from the Department of Taxation and the Senate Finance Committee staff as well as from the subcommittee's own staff regarding the cost of exemptions and various policy options.

Senate Document No. 61 (1994)

Sales and use tax exemptions have proliferated despite efforts to limit such exemptions. The Virginia Retail Sales and Use Tax was enacted in 1966 with only 21 exemptions. As of July 1, 1998, there were 299 exemptions. Exemptions negatively impact not only state revenues but also local revenues and the Transportation Trust Fund.

Specific efforts were made to limit the increase in exemptions in 1989 and in 1994. A joint subcommittee of the Senate and House Finance Committees issued a report in 1994 that recommended certain actions in the form of SB 148, which passed during the 1994 General Assembly. This legislation amended the Code of Virginia to include standards and procedures for nonprofit organizations in receiving exemptions. While the 1994 legislation has been helpful, there continue to be large numbers of exemption requests.


The special subcommittee, which will meet again in early fall, discussed agenda topics for future meetings, including the development of a formula to determine benefit to the community as an exemption requirement, whether 501 (c)(3) status from the IRS should be required for all non-profit civic exemptions, and whether there should periodic filing requirements for exempt organizations.

The Honorable Jay W. DeBoer, Chairman
Legislative Services contact: Stephanie L. Hamlett