Multistate Tax Commission/Association of Fund-Raising Distributors & Suppliers   Texas

Agency: State Comptroller's Office
Contact Person / Department: Robin Corrigan and Stefanie Medack/Tax Policy
Tel. No.: (512) 463-1810 and (512) 463- 4622
Fax No.: (512) 475-0900
E-mail: robin.corrigan@cpa.state.tx.us   stefanie.medack@cpa.state.tx.us

  1. If your State exempts fundraising sales by certain groups from sales or use taxes, please indicate which of the following are exempt in your State.

    Public Schools (K-12) – exempt (See footnotes 1 and 4)

    Private Schools (K-12) – exempt (See footnotes 1, 3, and 4)

    School Groups (e.g., clubs, bands, teams) - exempt (See footnotes 1, 3, and 4)

    PTAs – exempt (See footnotes 1, 3, and 4)

    PTOs – exempt (See footnotes 1, 3, and 4)

    Other parent groups - exempt (See footnotes 1, 3, and 4)

    Church Groups - exempt (See footnotes 1, 3, and 4)

    Youth Sports League - not exempt (See footnote 2)

    501 (c)(3) organizations - exempt (See footnotes 1, 3, and 4)

    501 (c)(6) organizations – not exempt

    Other (specify: Senior Citizens Groups) - Nonprofit senior citizens groups made up of persons aged 65 years and older are not required to collect or remit sales tax on the items they make and sell if there are not more than four sales per year and the total duration of the four sales does not exceed twenty days per year.

    Other (specify: College or University Student Organizations) - College or university student organizations affiliated with an institution of higher education can hold a one-day, tax-free sale each month. The organization must have a primary purpose other than engaging in business or performing an activity designed to make a profit, and the purpose of the sale must be to raise funds for the organization. The exemption does not apply to items sold for more than $5,000 unless the item is manufactured by the organization, or the item is donated to the organization and not sold back to the donor.

    Footnotes

    (1) Each chapter of an organization qualifying for sales tax exemption under the religious, educational or charitable category, as well as organizations exempted from sales tax based on their IRC Section 501 (c)(3), (4), (8), (10) or (19) status, can hold two one-day, tax-free sales or auctions each calendar year. During each one-day sale, the organization does not need to collect sales tax. For purposes of the exemption, one day is counted as 24 consecutive hours. The exemption does not apply to items sold for more than $5,000 unless the item is manufactured by the organization, or the item is donated to the organization and not sold back to the donor.

    (2) The sales tax statute does not provide for youth athletic organizations, volunteer fire departments and chambers of commerce to hold the tax-free sales.  Exemption from collecting tax, however, is possible if these organizations are also otherwise exempted from sales tax based on another qualifying exemption.  For example, a youth athletic organization may have a federal exemption under IRC Section 501(c)(3) or a nonprofit volunteer fire department may have a federal exemption under IRC Section 501(c)(4).  In that case, the youth athletic organization and the nonprofit volunteer fire department can hold the two one-day tax-free sales.

    (3) These organizations must apply to the Comptroller of Public Accounts for exempt status.  Nonprofit organizations, including churches, nonprofit private schools, PTAs and PTOs, and 501 (c) (3), (4), (8), (10) and (c) (19) entities do not automatically qualify for exemption from Texas sales and use tax.

    (4) In determining the responsibility for collecting sales tax on fund-raising activities, it is important to distinguish who is the actual seller of the taxable items.  In many instances, the exempt nonprofit fund-raising entity, such as a PTA or school, enters into contracts with private entities to sell taxable items.  The exempt nonprofit fund-raising entity takes orders and collects the money on the sales.  After the exempt nonprofit fund-raising entity retains the agreed upon commission, the exempt nonprofit fund-raising entity forwards the sales proceeds to the actual seller of the goods.  Under this type of agreement, the exempt nonprofit fund-raising entity is merely acting as a sales agent or representative for the seller, and sales tax must be collected.  This is often the case for items such as school pictures, books, gift-wrap, etc.  In these situations, the for profit retailer is responsible for collecting and remitting the tax.  The exempt nonprofit fund-raising entity is not the seller, and the tax-free sale provisions do not apply.  Sales tax is due from the purchaser, is collected by the exempt nonprofit fund-raising entity (agent), forwarded to the retailer (seller), and the retailer (seller) reports these sales on its sales tax return and remits the tax to the Comptroller. 
    Here are some guidelines to determine when the exempt organization is the seller and not merely acting as an agent for a seller:

    • The exempt organization is the seller when it purchases sales inventory from a retailer for a certain price (first transaction) and then resells the taxable items at its own profit or loss for a price the exempt organization determines (second transaction). The exempt organization assumes all responsibility and risk.
    • The exempt organization is the seller when it does not share or split the proceeds with the retailer/distributor or retain a "commission."

1a Are local sales and use taxes in your State applied to these groups in the same manner as State sales and use taxes are applied to these groups?

Yes.

1b Please set forth any comments including a list of groups not listed above whose fundraising activities are exempt from sales and use taxation in your State.

    See response to question 1/footnote 1.

  1. If your State exempts fundraising sales of certain products from sales and use tax, please indicate which of the following products are exempt.

    Please note that the following is answered presuming that the meat and cheeses were not sold for immediate consumption and that the bakery items were sold without plates or eating utensils.

    Candies and Confections - Exempt for fundraising purposes (See footnotes 1, 4, 5, and 6)

    Cookies and Other Baked Goods - Exempt if sold without plates or eating utensils.

    Cheese Products - Exempt

    Meat Products - Exempt

    Nuts, popcorn and other snack food - Exempt

    Other edible items (please identify) - Exempt for fundraising purposes (See footnotes 1,4,5, 6, and 7)

    Magazine subscriptions - Exempt (See footnote 10)

    Paper products (e.g., calendars, cards, stationery, books, gift wrap) - Exempt for fundraising purposes (See footnotes 1, 4, and 5)

    Decorative tins, baskets, other containers - Exempt for fundraising purposes (See footnotes 1, 4, and 5)

    Decorative novelties (mugs, ornaments) - Exempt for fundraising purposes (See footnotes 1, 4, and 5)

    Sundry items (please specify item below) - Exempt for fundraising purposes (See footnote 1, 4, and 5)

    Clothing and accessories - Exempt for fundraising purposes (See footnotes 1, 4, 5 and 8)

    Jewelry - Exempt for fundraising purposes (See footnote 1, 4, and 5)

    Plant and seeds - Exempt for fundraising purposes (See footnote 9)

    Other hard good items - Exempt for fundraising purposes (See footnote (See footnotes 1, 4, and 5)

    5- Any sale not otherwise exempt may still fall under the tax free sale day if sold by a qualifying organization (see also footnotes 1 and 4).

    6- However, sales tax does not need to be collected on meals and food products (including candy and soft drinks but not including alcoholic beverages) if: sold by churches or at church functions conducted under authority of a particular church; sold or served by a public or private school, school district, student organization, or Parent-Teacher Association in an elementary or secondary school during the regular school day by agreement with proper school authorities; or sold by a person under 19 years of age who is a member of a nonprofit organization devoted exclusively to education or to physical or religious training or by a group associated with private or public elementary and secondary schools, as part of a fund-raising drive sponsored by the organization, when all net proceeds from the sale go to the organization for its exclusive use.

    7- All volunteer, nonprofit organizations may hold a tax-free annual banquet or other food sale provided the affair is not professionally catered, not held in a restaurant, hotel, or similar place of business, not in competition with a retailer required to collect tax, and the food is prepared, served, and sold by members of the organization. This exemption from the requirement to collect sales tax does not extend to the sale of alcoholic beverages.

    8- Certain clothing items and backpacks for use by elementary and secondary students sold from 12:01 am the third Friday of August until 12:00 pm the following Sunday that are less than $100 are not taxable.

    9- Tax is not due on seeds and annual plants that produce food for human or animal consumption.

    10- Magazines subscriptions sold for a semiannual or longer period and entered as second class mail are not taxable.

2a Are local sales and use taxes in your State applied to these products in the same manner as State sales and use taxes are applied to these products?

Yes

2b Please set forth any comments including a list of products not listed above that are exempt from sales and use taxation for fundraising purposes in your State.

    None

  1. If some or all fundraising groups or products qualify for exemption from sales and use tax in your State, please indicate any exceptions to or limitations on such exemptions.

    Limits on number of fundraiser events per year

    Limits on duration of fundraisers

    Limits on dollar amount of each item

    Limits on total amounts raised per year

    See response 1 and footnotes 1, 3, 7, and 8

  2. If some or all fundraising groups qualify for exemption from sales and use tax in your State, please set forth the procedure through which a group may establish its qualification for the exemption. Attach relevant statutes, regulations, procedures, etc.

    An organization must apply to the Comptroller's office asking for exempt status from the limited sales, excise, and use tax.  Information about Texas tax exemptions and applications for exemption are available online at: http://window.state.tx.us/taxinfo/exempt/index.html.  See also Texas Tax Code Section 151.310(c), Sales Tax Rule 3.322, and Publication 96-122. You may access the statute, rules and publications through our Web site.

  3. If some or all fundraising products qualify for exemption from sales and use tax in your State, please set forth the procedure for establishing a product’s qualification for the exemption. Attach relevant statutes, regulations, procedures, etc.

    While some tangible personal property and services are not subject to sales tax, there is no specific exemption for a particular item based on it being sold for fundraising purposes.

  4. In instances where a fundraising product or group is not exempt from sales or use tax, please indicate who bears the responsibility for collecting and remitting the tax.

    When the exempt organization is acting as an agent for the seller and is not purchasing items to resell, the company is responsible for reporting taxes. Examples of this may be a school photography company, band instrument sales, and book fairs.
    However, when the exempt organization purchases the items for resale, the organization, and not the distributor is held responsible for the sales to the end consumers.

  5. In instances where a fundraising product or group is not exempt from sales or use tax, what is the basis for calculating the sales/use tax?

    The price paid by the consumer to the fundraising group.  In Texas, the tax rate is 6.25 percent state sales tax plus up to an additional 2 percent of local sales and use tax.

  6. Would your State consider adopting a uniform application procedure for fundraising organizations seeking tax exempt status?

    Yes

  7. Provide any additional information regarding the sales and use tax treatment of fundraising transactions and/or groups in your State. Also set forth any statements, disclosures, disclaimers, etc., to be provided as part of the clearinghouse regarding your state’s practices and procedures. Attach additional sheets if necessary.

    Complete information about Exempt Organizations and Texas taxes, including forms, FAQs, and publications can be found online at:  http://window.state.tx.us/taxinfo/exempt/index.html.