Could a charitable organization buy Bible literature without sales tax when it distributed the literature free of charge?

Plain-English summary

The organization was the consumer of Bible literature it distributed without charge. Under historical Ruling 40, its purchases from vendors were therefore taxable retail sales even if the organization's own qualifying charitable sales would have been exempt.

Calling the free distribution relief of mental poverty and distress did not authorize tax-free purchases. The letter said creating such an exemption was a legislative policy question.

The letter referred the organization to historical Ruling 50 for periodical publications. The official annotation later notes that newspaper and periodical sales received statutory relief effective July 15, 1991, so publication classification and current law must be checked separately.

Common questions

Did giving the literature away make the purchase a resale?

No. The organization was not a retailer of the donated articles and consumed them.

Did charitable purpose exempt the vendor's sale?

No under the letter. The vendor's sale to the organization remained taxable.

Did the letter decide the periodical issue?

No. It referred to a separate ruling, while the official annotation supplies a later statutory note.

Citations and references

• Historical Sales and Use Tax Ruling 40 — charitable organization treated as consumer of donated literature
• Historical Sales and Use Tax Ruling 50 — periodical-publication rules referenced
• Official Annotation 165.0040 — later newspaper and periodical note

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/165-0040.pdf

Original ruling text

165.0040
STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

April 1, 1953
REDACTED TEXT
Attention:

REDACTED TEXT

Gentlemen:
Your letter of February 27 indicates that you do not have a correct understanding of the application of Ruling 40. You enclosed a copy of this ruling with a notation thereon that you are an organization relieving mental poverty and mental distress by the Bible literature which you distribute without charge. If you will again refer to the ruling, you will note that organizations engaged in relief of poverty and distress and making sales as a matter of assistance to purchasers, although not liable for sales tax on their receipts from sales, are not exempt with respect to sales made by other vendors to the charitable organization. The fact that you donate your Bible literature places you in the same position as a charitable organization selling merchandise as a matter of assistance to purchasers. They, under Ruling 40, are the consumers of the merchandise and, to the extent it is purchased by the organization, the tax applies with respect to that purchase. Not the following language in Paragraph 2 of Ruling 40: “Tax applies to all sales of tangible personal property to charitable organizations not considered to be retailers”. As a donor you are not considered a retailer, but the sale of the donated articles to you is a retail sale and subject to tax. We cannot authorize sales to you of material to be given away to be made without payment of sales tax. Such an authorization would be contrary to law. Whether or not the law should contain an exemption with respect to such sales is a matter of policy for determination by the State Legislature. Very truly yours, E. H. Stetson Tax Counsel EHS:ph P.S. See Ruling 50, enclosed, regarding periodical publications.