TECHNICAL ASSISTANCE ADVISORY 88-003Re: Sales and Use Tax Consequences of Continuing Professional Education Courses This Technical Assistance Advisory, issued pursuant to W. Va. Code § 11-10-5r, is in response to a written request received by the State Tax Commissioner on July 10, 1987. Advice regarding sales tax consequences of providing continuing professional education courses has been sought by a professional nonprofit organization in which membership is limited to members of an occupation which is designated as a profession in Chapter 30 of the West Virginia Code. The primary purposes of this professional nonprofit organization are to enhance the profession, offer continuing professional education to members thereof, and improve the rendition of professional services by its members to the public. In pursuit, of its goals, the professional nonprofit organization has adopted a policy requiring each member, in order to maintain his or her membership status with that organization, to satisfy certain specified annual continuing professional education requirements. A committee on continuing professional education has been established to administer its continuing professional education program and offer continuing education courses to its membership. Each year, the professional nonprofit organization, through its continuing education committee, offers, at various locations throughout this State, numerous educational courses which meet the content requirements for continuing professional education requirements. As a general rule, these courses are taught by members of the profession, members of another profession, college professors, or similarly qualified persons having specialized knowledge of particularized subject matter. With each course, the professional nonprofit organization provides course material. In almost every instance, this course material is prepared by one or more individuals having specialized knowledge of a specific area of concern to the profession. Much of the course material is prepared by or for the national organization for the enhancement of the profession and made available to the West Virginia professional nonprofit organization. Additionally, the West Virginia organization provides course materials and self-study courses prepared by or for it to its membership. These course materials and self-study courses may be used to meet part or all of a member's annual continuing professional education requirement. Self-study courses may consist of written materials alone or be offered in conjunction with audio or video tapes. The professional nonprofit organization charges a fee for attending a continuing professional education course. The purpose of this fee is to cover the organization's cost of providing the continuing professional education course. This includes the cost of obtaining or maintaining course materials, paying instructors of the courses or reimbursing them for their reasonable and necessary expenses, renting meeting rooms in which the courses are offered, providing lunch to attendees as part of the program in the event a course runs a full day, and providing printed materials, such as books, manuals and outlines. If lunch is included as part of the program, the registration fee charged to the participant includes the cost of lunch. The professional nonprofit organization then pays the caterer of the lunch the cost thereof plus applicable consumers sales tax. No resale exemption from consumers sales tax is claimed by the organization. I. The West Virginia consumers sales tax is set forth in W. Va. Code § 11-15-1 et seq., and is imposed upon sales or leases of tangible personal property and the provision of selected services in this State. See W. Va. Code § 11-15-3. Section 11-15-8 provides that the consumers sales tax "shall apply not only to selling tangible personal property, but also to the furnishing of all services, except professional and personal services. . . ." Additionally, section 11-15-6 provides that "[t]o prevent evasion, it shall be presumed that all sales and services are subject to the tax until the contrary is clearly established." Similar rules are found in the West Virginia use tax law codified in W. Va. Code §
1115A1 et seq., which is complementary to the consumers sales tax, W. Va. Code § 11-15-1a. One of the enumerated exceptions from West Virginia consumers sales and use taxes is the provision of professional services. The term "professional services" is not defined in either tax law. Legislative regulations promulgated by this office, 110 C.S.R.
15, § 22.214.171.124 (1988), at pages 17-18, define "professional services" as follows: 126.96.36.199 "Professional services" shall mean and include those activities which were recognized as professional under common law, their natural and logical derivatives, and any expansion of the term made by the West Virginia Legislature. Professional services are rendered by physicians, dentists, lawyers, certified public accountants, public accountants, optometrists, architects, engineers, registered professional nurses, veterinarians and licensed real estate brokers. The determination as to whether other activities are "professional" in nature will be determined on a case-by-case basis through a Technical Assistance Advisory. The West Virginia Supreme Court of Appeals, in Wooddell v. Dailey, 160 W.Va. 65, 230 S.E.2d 466 (1976), found that the activities of an interior decorator were not "professional services" excepted from imposition of consumers sales tax. While the court did not define the term "professional services," the following language from its opinion at page 470 (S.E.2d) is insightful: A legislative enactment which uses an undefined term referring generally to professions or professional services will and should be considered as having been used in its broadest modern technical and general sense. We consider the expression "professional services" to have been so used in the taxing statute involved in this case [§
11-15-8]. Thus, we do not limit "professional services" merely to services performed in the practice of law, theology or medicine or in pursuit of occupations specifically recognized as profession by statute. Other professions are plainly contemplated by the taxing statute here involved. However, any such other profession must be clearly established as a profession by the one who asserts that services rendered by him in connection therewith are "exempt" or "excepted" and hence not taxable. It is the opinion of this office, that the furnishing of continuing professional education instruction to those persons or organizations that provide a professional service is a fortiori a professional service. Therefore, to the extent the educational courses qualify for continuing professional education credit the registration fee charged for attending such courses will be excepted from the consumers sales taxes as consideration paid for a professional service. Since this exception from tax turns on the nature of the service provided rather than on the nature of the organization providing the service, it follows that the providing of continuing professional education courses which qualify for continuing professional education credit is excepted from consumers sales and use taxes regardless of whether the service is provided by a nonprofit or a for profit entity. Meals or refreshments (such as coffee, tea, soft drinks and pastries) that are furnished as an incidental part of a continuing professional education course and for which a separately stated fee is not charged are addressed, by analogy, in 110 C.S.R. 15, § 36.1 which provides that the serving of meals, inter alia, by a hospital to its patients is os interrelated with the provision of professional services that such meals are not subject to consumers sales tax. Likewise, a lunch served between blocks of course instruction and coffee, tea or soft drinks and pastries or fruit furnished at "coffee breaks" during or between blocks of course instruction, when the cost thereof is included in the price of the registration fee and not separately billed or charged, are so interrelated with the provision of professional services so as to also be excepted from application of the consumers sales tax. A lunch will be treated in this manner even though there is no luncheon speaker. A dinner served between days of course instruction, the price of which is included in the registration fee and not separately billed or charged, is also excepted from consumers sales tax, whether or not there is a dinner speaker, provided the entity providing the continuing professional education pays consumers sales tax on the catering charges. A spouse or guest ticket to attend the dinner will be treated in the same manner, even though a separate charge is made for each spouse or guest's ticket, provided consumers sales tax is also paid on the catering charges for these dinners by the professional nonprofit organization. Books, manuals, outlines or other written materials provided to course registrants by the professional nonprofit organization which are required of all registrants for the course are likewise excepted, regardless of whether the charge for such materials is embodied in the registration fee or is separately stated in addition thereto. See 110 C.S.R. 15, § 100, which discusses the sale of textbooks to students receiving flight instruction, and provides that they are not taxable when provided in conjunction with a course of professional flight instruction, based upon the rationale that such materials are in fact part of the professional service. The sale of optional or supplemental materials which are not required for the course are sales of tangible personal property and are taxable like other sales of tangible personal property. Written self-study materials, including audio or video tapes sold therewith, which qualify for continuing professional education credits also constitute the provision of professional services and are excepted from consumers sales and use taxes when purchased from a person who offers continuing professional education courses by a person who will use such materials to qualify for continuing professional education credit. If written materials are purchased and no professional education credit is allowed, the sale is subject to consumers sales or use taxes, whichever is appropriate. If the mere purchase of written materials qualifies the purchaser for continuing professional education credit and if the written materials are of such nature that they will be purchased from the seller by persons seeking continuing professional education credit as well as by other persons, the sale is of tangible personal property and taxable. II. Meals, written educational materials and purchases of other tangible personal property used or consumed in providing the professional service are subject to the consumers sales and use taxes when purchased by organizations providing the professional service. There is a popular misconception that nonprofit organizations are exempt from paying consumers sales and use taxes on purchases of tangible personal property and taxable services. Such is not the case, however. There is no blanket exemption from payment of consumers sales and use taxes for 501(c)(3) organizations in W. Va. Code § 11-15-1 et seq. In contrast, see W. Va. Code §§ 11-23-7(b) (exemptions from business franchise tax) and 11-24-5(a) (exemptions from corporation net income tax). Moreover, there is no provision which exempts 501(c)(3) organizations which render professional services from payment of consumers sales and use taxes on its purchases for use in the activity of rendering professional services. Allowable exemptions from consumers sales tax are primarily found in W. Va. Code § 11-15-9. Unless a transaction clearly falls within the scope of one of the subsections of section 11-15-9, it is not exempt from imposition of consumers sales tax. Exemptions from use tax are found in W. Va. Code § 11-15A-3 and mirror the consumers sales tax exemptions. Therefore, if a transaction with a West Virginia vendor would be subject to consumers sales tax, that transaction, if with an outofstate vendor, would be subject to use tax. Conversely, if the transaction would be exempt from consumers sales tax, it would also be exempt from use tax. As a general rule, "persons," as defined in W. Va. Code §
11152(a), who render professional services, pay consumers sales tax on their purchases (including leases) of tangible personal property and taxable services. The only exceptions are purchases which are exempt from tax regardless of the status of the purchaser. Exemptions in this category include the per se exemptions, which are transactions in which the purchaser is not required to show proof of entitlement to the exemption, see 110 C.S.R. 15, § 9.2 (per se exemptions), and the refundable exemption for electronic data processing services, W. Va. Code § 11-15-9(z). Because the provision of professional services is not subject to consumers sales tax, the professional nonprofit organization is ineligible to claim the exemption in W. Va. Code § 11-15-9(i), which applies only to "persons" dispensing taxable services and to "persons" engaged in the commercial production of an agricultural product. The exemption provided in W. Va. Code § 11-15-9(e) for bona fide charitable organizations which make no charge for the services they render does not apply for two reasons. First, there is a charge for the "services" rendered by the professional nonprofit organization. Secondly, and more importantly, "services" as used in subsection 11-15-9(e) has the meaning ascribed to it in W. Va. Code § 11-15-2(i) which excludes professional services. (i) "Service" or "selected service" shall include all nonprofessional activities engaged in for other persons for a consideration, which involve the rendering of a service as distinguished from the sale of tangible personal property, but shall not include contracting, personal services or the services rendered by an employee to his employer or any service rendered for resale.Therefore, even if the professional nonprofit organization made no charge for the professional services it renders, this section 1115-9(e) exemption would not apply. The exemption provided in W. Va. Code § 11-15-9(f) applies only to certain 501(c)(3) or (4) organizations. This exemption may be claimed only by 501(c)(3) or (4) organizations who make no sales of tangible personal property or services or "who make casual and occasional sales [of tangible personal property] not conducted in a repeated manner or in the ordinary course of repetitive and successive transactions of like character. . . ." Administratively, the exemptions provided in W. Va. Code §
1115-9(e), (f), (i) and (q) are read together and applied as follows: 1. If a 501(c)(3) organization makes no charge for the taxable services it renders and makes no sales of tangible personal property, it is exempt from payment of consumers sales tax on its purchases as provided in W. Va. Code §
11159(e). 2. If a 501(c)(3) organization makes no charge for the taxable services it renders but makes casual and occasional sales not conducted in a repeated manner or in the ordinary course of repetitive and successive transactions of like character, it is exempt from payment of consumers sales tax on its purchases as provided in W. Va. Code § 11-15-9(f) and, its [c]asual and occasional sales of property or [taxable] services not conducted in a repeated manner or in the ordinary course of repetitive and successive transactions of like character. . ." are exempt from sales tax as provided in W.
Va. Code § 11-15-9(q). 3. If a 5019c)(3) organization makes no charge for the taxable services it renders but makes repetitive sales of tangible personal property, its purchases must be allocated as provided in W. Va. Code § 11-15-9e. Those purchases allocated to the providing of taxable services for which no charge is made are exempt under W. Va. Code § 11-15-9(e). Those purchases allocated to the repetitive selling of property are taxable except to the extent the item is purchased for resale for which exemption may be claimed under W. Va. Code §
11159(j). 4. If a 501(c)(3) organization charges for its taxable services, it must collect consumers sales tax from it s customers and may claim exemption from tax as provided in W.
Va. Code § 11-15-9(i), on most of its purchases for use as consumption in rendering the taxable services. If that organization also sells tangible personal property, its purchases for resale are exempt, as provided in W. Va. Code §
11-15-9(j), and its purchases for use in business must be apportioned between its service and sales activities, the former being exempt and the latter being taxable. See W. Va. Code § 11-15-9e. 5. If a 501(c)(3) organization provides personal or professional services, it must pay consumers sales tax on its purchases for use in business. If that organization also provides taxable services or sells tangible personal property, its purchases for use in business must be apportioned as provided in W. Va. Code § 11-15-9e and the exemptions provided in W. Va. Code § 11-15-9(i) and (j) applied. In no event may these exemptions be applied to purchases for use or consumption in providing personal or professional services.In summary: 1. A Professional nonprofit organization or other person providing continuing professional education courses to members of a recognized profession is itself engaged in the provision of professional services which are excepted from the consumers sales tax. However, the nonprofit professional organization rendering professional services must pay consumers sales tax on all sales to it of tangible personal property (including leases thereof or taxable services unless the transactions are exempt per se from tax as set forth in 110 C.S.R. 15, § 9.2. The exemption for electronic data processing services is a refundable exemption and is also available to these organizations. 2. Meals, food and beverages and written materials, provided as an incidental component of a course of continuing professional education the cost of which is included in the registration fee charged the participant or purchaser of the continuing professional education, are excepted from the consumers sales tax as an integral part of the professional services. 3. Written course materials, purchased separately from the professional nonprofit organization, which qualify for continuing professional education credits, also constitute the provision of professional services and are exempt from consumers sales tax when the purchaser obtains continuing professional educational credit in conjunction with such purchase through the use of such written materials. if written materials are purchased by a professional primarily for reference, and no professional education credit is provided, such sale of written materials is subject to consumers sales taxes. 4. If a sale of tangible personal property or taxable services by a West Virginia vendor is exempt from consumers sales tax, that sale is exempt from West Virginia use taxes when the sale is made by an out-of-state vendor. If the sale by a West Virginia vendor is taxable for consumers sales tax purposes, then the sale of the same or similar property or services by an out-of-state vendor will be subject to West Virginia use taxes, with credit being allowed for sales taxes lawfully paid on the transaction to another state. Whether the vendee pays use tax to the vendor or remits it directly to the Tax Commissioner depends on (a) whether the out-of-state vendor is authorized or required to collect West Virginia use taxes; (b) whether the exemption is a refundable exemption or one for which an exemption certificate may be given; and (c) whether the vendee uses its West Virginia direct pay permit number. This ruling is made applicable to those professions set forth in Chapter 30 of the West Virginia Code and applies to courses, as well as to self-study courses, leading to satisfactory fulfillment of continuing professional education requirements. Please refer to TAA 86-001, for the limitations of this Technical Assistance Advisory. Michael E. Caryl State Tax Commissioner Issued: May 16, 1988