Did church nonprofit or federal income-tax-exempt status create a general California sales-tax exemption?

Plain-English summary

A church did not receive a blanket California sales or use tax exemption merely because it was nonprofit or exempt from federal income tax under Internal Revenue Code section 501(c)(3).

Retail sales of tangible personal property by the church were generally subject to sales tax, and retail sales to the church were also generally taxable. A transaction needed its own specific California statutory exemption to receive different treatment.

The source says the January 26, 1995 letter responds to correspondence dated November 5, 1995. That incoming-date statement is internally impossible, but it does not alter the dated opinion's substantive answer.

Common questions

Did section 501(c)(3) status control California sales tax?

No. Income-tax exemption did not itself create a sales-and-use-tax exemption.

Were both church sales and church purchases covered?

Yes. The letter said retail transactions both by and to the church were generally taxable.

Could a particular transaction still be exempt?

Yes, if a specific California sales-and-use-tax statute applied to that transaction.

Citations and references

• California Revenue and Taxation Code section 6051 — general sales-tax rule applied
• California Revenue and Taxation Code section 6007 — retail-sale definition applied
• California Civil Code section 1656.1 and Regulation 1700 — sales-tax reimbursement rules referenced

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/165-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/165-0010.pdf

Original ruling text

165.0010
STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

LEGAL DIVISION (MIC:82)
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
Telephone: (916) 324-2641
FAX: (916) 323-3387

DEAN ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego
BRAD SHERMAN
Fourth District, Los Angeles
KATHLEEN CONNELL
Controller, Sacramento

January 26, 1995

────────
BURTON W. OLIVER
Executive Director

REDACTED TEXT
Campbell, CA 95009
Re:

REDACTED TEXT

Dear Mr. Wright:
I am responding to your letter dated November 5, 1995. You ask whether a church which is exempt from income tax under section 501(c)(3) of the Internal Revenue Code “is required to pay state sales tax”. If so, whether “there is an exemption from this tax available.” A sales tax is imposed on all retailers measured by their gross receipts from retail sales of tangible personal property in this state unless the sales are specifically exempt by statute. (Rev. & Tax. Code § 6051.) A retail sale is a sale for any purpose other than resale in the regular course of business. (Rev. & Tax. Code § 6007.) Although sales tax is imposed on the retailer, the retailer may collect sales tax reimbursement from the purchaser if the contract of sale calls for such reimbursement (usually under the heading “sales tax”). (Civ. Code § 1656.1.) There are no sales tax exemptions for churches arising from their non-profit status or because they are exempt from income taxation under the Internal Revenue Code. Retail sales of tangible personal property by a non-profit organization in California are subject to sales tax. Retail sales of tangible personal property to a nonprofit organization in California are also subject to sales tax. Therefore, retail sales of tangible personal property to and by your church are generally subject to sales tax. A copy of Regulation 1700 which deals with reimbursement for sales tax is enclosed for your information.

Mr. REDACTED TEXT

-2-

If you have further questions, feel free to write again.
Very truly yours,
Victor G. Matl
Tax Counsel
VGM:cl
house.ltr

Enclosure:
cc:

Regulation 1700

San Jose District Administrator

January 26, 1995
165.0010