Does a Texas nonprofit that sells a few taxable items, like a museum selling a cookbook, have to pay the $25 annual sales tax permit fee?

Texas AG Opinion JM-973: Do Nonprofits Pay the Sales Tax Permit Fee?

Plain-English summary

A non-profit museum and historical society had produced a cookbook and was selling it. Being careful about the rules, the group collected sales tax on every copy it sold. Then it hit a question that a lot of small non-profits run into: it had to hold a Texas sales tax permit to make those sales, and permits carry a $25 annual fee. Did the Legislature really mean to charge a $25-a-year fee to a small charity that sells only a handful of items to support its work? The Comptroller passed the question to the Attorney General.

The answer was yes, the fee applies. The Attorney General's reasoning was straightforward. Texas sales tax law requires anyone who is a "seller" to hold a permit for each place of business. The law defines a "seller" broadly, and it specifically includes a person who makes more than two sales of taxable items in a 12-month period. A non-profit that regularly sells a cookbook fits that definition, so it needs a permit. And the statute that sets the permit fee makes no distinction between for-profit businesses and non-profits. A permit is good for one year, and renewing it costs the same $25 as getting it in the first place. There is no carve-out for charitable or educational organizations anywhere in the permit-fee provisions.

The Attorney General also looked at the history of the fee to double-check that reading. Before 1987, the Comptroller issued sales tax permits for free. That year, House Bill 61 changed the rule, taking away the Comptroller's authority to issue permits without charge and adding a $25 fee for the first permit and $25 for each yearly renewal. When the office reviewed the bill analysis for H.B. 61, it found nothing suggesting the Legislature wanted to exempt non-profits. In fact, the bill analysis did not single out these amendments at all. With no exception written into the statute and none hinted at in the history, the fee had to be applied as written.

One point the Attorney General was careful to clear up: there is a separate tax exemption that some religious, educational, and public-service organizations qualify for under section 151.310 of the Tax Code. But that exemption applies to items the organization buys, not to the taxable items it turns around and sells. So even a non-profit that qualifies for that exemption on its purchases still owes tax on the cookbooks it sells, and still has to hold and renew a sales tax permit to sell them. The purchase exemption does not answer the permit-fee question.

The bottom line: a non-profit that has properly been issued a sales tax permit because it sells taxable items must pay the $25 annual renewal fee, the same as any other permit holder.

Currency note

This opinion was issued in 1988. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Texas sales tax administration has changed since 1988. The Legislature later eliminated the fee for a sales tax permit, so permits and their renewals are now issued without charge, and the "seller" and permit provisions of chapter 151 of the Tax Code have been amended. Anyone dealing with sales tax permit requirements today should consult the current Tax Code and the Comptroller's current rules rather than the fee described in this opinion.

Who this opinion affected (as of 1988)

Non-profit organizations that sell things: The opinion told them they had to pay the $25 annual sales tax permit renewal fee if they made more than two sales of taxable items a year, regardless of their charitable status.

The Comptroller of Public Accounts: The opinion confirmed the agency should apply the renewal fee uniformly, without a non-profit exception.

Museums, historical societies, and similar groups: The opinion made clear that selling items like cookbooks to raise money triggers both sales tax collection and the permit-fee obligation.

Common questions

Does a Texas nonprofit have to pay the sales tax permit fee?
As of this 1988 opinion, yes. If the nonprofit sells taxable items often enough to be a "seller," it must hold a sales tax permit and pay the $25 annual renewal fee, with no exception for nonprofits.

What makes a nonprofit a "seller" that needs a permit?
Under section 151.008(b)(2) of the Tax Code, making more than two sales of taxable items during a 12-month period makes a person a "seller" who must hold a permit.

Doesn't a charity's tax exemption cover this?
No. The exemption under section 151.310 applies to items the organization purchases, not to the taxable items it sells. It does not excuse the organization from holding and renewing a sales tax permit.

Was there any exception in the law for small nonprofits?
No. The Attorney General found no exception in the permit-fee statutes and none in the legislative history of the 1987 bill that created the fee.

Background and statutory framework

The Limited Sales, Excise, and Use Tax is codified in chapter 151 of the Tax Code. Section 151.201 governs issuance of sales tax permits and directs the comptroller to issue a permit for each place of business to a qualifying applicant who pays the permit fee. A permit holder must display the permit, and a permit is valid only for the person and place of business to which it applies. Section 151.202 requires a person desiring to be a seller to apply for a permit for each place of business. "Seller" or "retailer" is defined in section 151.008 to mean a person engaged in the business of making sales of taxable items, and it expressly includes a person who makes more than two sales of taxable items during a 12-month period (section 151.008(b)(2)). The opinion assumed the non-profit organization fell within that definition and was therefore a "seller."

Section 151.2021 governs renewal permits. A permit is valid for one year from issuance or renewal, and an application for renewal must be filed not later than the 30th day before expiration, with late renewal allowed on a showing of good cause. Subsection (b) provides that the fee for renewal of a permit is the same as for an initial permit under section 151.201(d). Neither section 151.201 nor section 151.2021 contains any language indicating a legislative intent to create an exception to the renewal fee, and there is no such indication in the legislative history of the bill that first added the fee provisions (Government Code section 311.023 authorizes examining legislative history to determine legislative intent even when the statute is not ambiguous).

Before 1987, section 151.201 required the comptroller to issue a sales tax permit without charge to each qualifying applicant. House Bill 61, enacted at the Second Called Session of the 70th Legislature, amended section 151.201 and added section 151.2021 (Acts 1987, 70th Leg., 2nd C.S., ch. 5, art. 1, Pt. 5). Together the amendments removed the comptroller's authority to issue permits without charge and imposed a $25 fee for the initial permit and a $25 fee for each annual renewal. The bill analysis for House Bill 61 shows no intent to create any exception to the renewal fee, and in fact does not mention these specific amendments (Bill Analysis, Tex. H.B. 61, 70th Leg., 2nd C.S. (1987)).

The opinion also addressed the section 151.310 exemption. That provision exempts from the tax certain qualifying religious, educational, or public-service organizations when they purchase items that would otherwise be taxable, but the exemption does not reach taxable items that such an organization itself sells, except as provided in section 151.310. So even if the organizations in question fell within section 151.310, that fact would not be dispositive of the permit-fee question. Accordingly, where a non-profit organization has properly been issued a sales tax permit because its activities fall within the section 151.008(b)(2) definition of "seller," it must pay the $25 renewal fee prescribed by section 151.2021.

Citations

Statutory authority:

• Section 151.008, Tax Code (definition of "seller" or "retailer," including more than two sales in a 12-month period)
• Section 151.201, Tax Code (issuance of sales tax permits and the permit fee)
• Section 151.202, Tax Code (application for a permit)
• Section 151.2021, Tax Code (renewal permits; renewal fee same as initial fee)
• Section 151.310, Tax Code (exemption for certain organizations' purchases)
• Section 311.023, Government Code (use of legislative history)

Cases: none cited.

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-973
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1988/jm0973.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor OCR errors may remain; the linked PDF is authoritative.

October 27, 1988

Honorable Bob Bullock
Comptroller of Public Accounts
L.B.J. State Office Building
Austin, Texas 78774

Opinion No. JM-973

Re: Whether a non-profit organization that sells taxable items must pay the $25 annual fee for a sales tax permit (RQ-1503)

Dear Mr. Bullock:

You present the following information and ask the following question:

A non-profit museum and historical society has produced and is selling a cookbook. While they have been properly collecting sales tax on the sales of the cookbook, they have asked if the Legislature intended to require organizations such as theirs to pay the $25 annual sales tax permit fee.

Since there are numerous non-profit organizations who are involved in selling a very limited number of items to support their activities, I hereby request your official opinion as to whether non-profit organizations are required to pay the $25 annual sales tax fee.

You indicate in your request letter that the non-profit organization properly has been collecting the sales tax on the items that it sells. [Footnote 1] You ask whether a non-profit organization must pay the prescribed $25 sales tax permit renewal fee in an instance in which it has been issued a sales tax permit properly in the first instance and it sells items that are taxable. We understand you to refer to an organization that falls within subsection (a) of section 151.310, Tax Code, subdivisions (1) or (2), that are not selling items pursuant to an auction, as permitted by subsections (c) and (d). We conclude that a non-profit organization that sells taxable items is required to pay the annual $25 fee for a renewal of its sales tax permit.

The Limited Sales, Excise, and Use Tax is codified at chapter 151 of the Tax Code. Section 151.201 of the Tax Code governs the issuance of sales tax permits and provides:

(a) The comptroller shall issue to an applicant who qualifies under Section 151.202 of this code and under Subchapter G of this chapter [sections 151.251 - 151.262, governing sellers and retailers providing security for the payment of the taxes imposed by the chapter] and who pays to the comptroller the permit fee in the amount provided by this section a separate permit for each place of business in this state.

(b) The holder of a permit shall display it conspicuously in the place of business to which it applies.

(c) A permit is valid only for the person and the place of business to which it applies and is nonassignable.

(d) The fee imposed by this section does not apply to the issuance of a temporary permit under Section 151.252 of this code. (Emphasis added.)

Section 151.202 of the Tax Code governs the application for a permit; subsection (a) provides:

A person desiring to be a seller in this state shall file with the comptroller an application for a permit for each place of business. (Emphasis added.)

"Seller" is defined for purposes of the chapter at section 151.008, which provides:

(a) 'Seller' or 'retailer' means a person engaged in the business of making sales of taxable items of a kind the receipts from the sale of which are included in the measure of the sales or use tax imposed by this chapter.

(b) 'Seller' and 'retailer' include:

(1) a person in the business of making sales at auction of tangible personal property owned by the person or by another;

(2) a person who makes more than two sales of taxable items during a 12-month period, including sales made in the capacity of an assignee for the benefit of creditors or receiver or trustee in bankruptcy; and

(3) a person regarded by the comptroller as a seller or retailer under Section 151.024 of this code. (Emphasis added.)

We assume that the non-profit organization about which you inquire falls within the underscored language of (b)(2) and is a "seller" for purposes of this chapter.

Section 151.2021 of the code governs the issuance of renewal permits and provides:

(a) A permit issued under this subchapter is valid for one year from the date of issuance or renewal. An application for the renewal of a permit must be filed with the comptroller not later than the 30th day before the expiration date. The comptroller on a showing of good cause by the holder may permit the late renewal of a permit.

(b) The fee for the renewal of a permit is the same as for an initial permit as provided by Section 151.201(d) of this code.

(c) For purposes of this section, a permit is issued on the date the permit is issued under Section 151.201 of this code or reissued under Section 151.204, whichever is later. The date a temporary permit is issued is not considered to be the date the permit is issued.

(d) A permit in effect on the date this section becomes effective must be renewed under this section before the first anniversary of the date on which the permit was issued that occurs after the end of the month in which the section becomes effective. If the date the permit was issued cannot be determined, January 1, 1988, is considered to be the anniversary date on which the permit must be renewed under this subsection. This subsection expires January 1, 1990. (Emphasis added.)

There is no language in either section 151.201 or 151.2021 of the Tax Code to indicate that the legislature intended that there be any exception to the payment of a renewal fee for a sales tax permit. Nor is there any indication of such legislative intent in the legislative history of the bill that added the fee provisions for the first time. See Gov't Code, section 311.023 (authorizing an examination of legislative history in order to determine the legislative intent, even in an instance in which the statute is not ambiguous).

Prior to 1987, section 151.201 of the code required the comptroller to issue without charge a sales tax permit to each qualifying applicant for each place of business. House Bill No. 61, which was enacted at the Second Called Session of the 70th Legislature, amended, inter alia, section 151.201 of the code and added section 151.2021. Acts 1987, 70th Leg., 2nd C.S., ch. 5, art. 1, Pt. 5, sections 1, 2, at 22. Taken together, the amendments removed from the comptroller the authority to issue sales tax permits without charge and imposed a fee of $25 for the issuance of the initial permit and a fee of $25 for each annual permit renewal. The "Bill Analysis" prepared for the House Committee on Ways and Means on House Bill No. 61 and for the committee substitute for House Bill No. 61 does not indicate any intention on the part of the legislature that there be any exception to the permit renewal fee. Indeed the "Bill Analysis" does not mention these specific amendments. Bill Analysis, Tex. H.B. 61, 70th Leg., 2nd C.S. (1987).

Accordingly, we conclude that the renewal fee provisions should be construed as written, and that, in an instance in which a non-profit organization properly has been issued a sales tax permit because its activities fall within the section 151.008(b)(2) definition of "seller," the organization must pay the $25 renewal fee prescribed by section 151.2021 of the Tax Code.

SUMMARY

In an instance in which a non-profit organization properly has been issued a sales tax permit because its activities fall within the section 151.008(b)(2) definition of "seller," the organization must pay the $25 renewal fee prescribed by section 151.2021 of the Tax Code.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Jim Moellinger
Assistant Attorney General

[Footnote 1] While section 151.310 of the Tax Code does exempt from the reach of the tax certain qualifying religious, educational, or public service organizations when they purchase items that would otherwise be taxable, the exemption does not reach taxable items that such organization itself sells, except only as provided by section 151.310. Thus, even if the organizations about which you inquire fell within section 151.310, that fact would not be dispositive of your question.