Was a school-district fundraising foundation equivalent to a PTA for California sales-tax purposes?

Plain-English summary

Counsel for an unidentified nonprofit education foundation asked California to reconsider a November 10, 1992 Legal Division opinion that the foundation was not equivalent to a PTA. The source dates the follow-up letter December 30, 1993 even though the response is dated February 11, 1993; it does not resolve that impossible chronology.

The foundation consisted entirely of volunteers, and all but one board member were parents of children in supported schools. It supported every school in the district and disbursed funds in response to teacher, administrator, and PTA requests. Although not chartered by a particular school, it said schools, the district, school board, and superintendent supported and endorsed it.

Section 6370 and Regulation 1597(e) treated PTAs and equivalent organizations providing the same service as consumers rather than retailers when profits exclusively furthered organization objectives. Their fundraising sales were not taxed, although tax could apply to their purchases.

PTA equivalency did not require identical objectives, but purposes and services had to be similar. Quoted California PTA bylaws addressed child and youth welfare, home life, protective laws, home-school cooperation, broad physical, mental, social and spiritual educational advantages, coordinated programs and projects, noncommercial and nonpartisan policies, and school-policy participation.

California said an equivalent organization's functions should include coordinated educational programs or projects involving parents, students, school authorities, and the public and extend beyond fundraising. Counsel corrected the earlier assumption that the client was likely a professional fundraiser. Still, its only described service was raising and distributing money, existing PTAs performed broader functions, and the foundation did not appear chartered by the district or its schools.

The foundation therefore was not a PTA equivalent, and gross receipts from tangible property at its impending auction were taxable.

Because the taxpayer was not identified, the letter gave only general comments on hypothetical facts and did not provide section 6596 written-advice reliance.

Source and live-annotation limits

The official PDF does not include the November 10, 1992 opinion; the letter printed as December 30, 1993; other correspondence or call records; taxpayer or foundation identity; permit or entity records; charter, bylaws or endorsement documents; parent or board-member records; school or district records; teacher, administrator or PTA funding requests; California PTA bylaws source; programs, projects or funding distributions; auction items or records; contracts, prices, invoices, sales or uses, gross receipts, profits or their use, returns, exemption documentation, tax calculations or payments, audit, assessment, claim, appeal, or later outcome. The client, foundation, volunteers, parents, schools, recipients, purchasers, transactions, quantities, prices, gross receipts, and tax amounts are redacted or unidentified.

The source prints the impossible December 30, 1993 request date, P.T.A'S, promoted though an educational program, and fund- raising. The original-text section preserves those forms rather than silently correcting the date or wording.

The live annotation preserves the nonprofit education foundation, all-school fundraising purpose, Regulation 1597(e), date, non-equivalency result, and too-narrow rationale. It omits the request and counsel, impossible chronology, prior opinion and communications, unidentified taxpayer and section 6596 limit, volunteer and parent board, funding-request process and endorsements, absence of chartering, section 6370 consumer treatment, quoted PTA bylaws and broader functions, corrected professional-fundraiser assumption, existing PTAs, impending auction and taxable receipts, missing records, redactions, source forms, and absent outcome.

What this means for you

Education foundations, PTAs, schools, and tax professionals

Preserve governing documents, chartering and endorsements, board and parent membership, every educational program and project, parent/student/school/public coordination, funding requests and distributions, fundraising and auction records, item purchases, contracts, invoices and sales, profit use, returns, written-advice requests and responses, tax calculations, and payments. Fundraising support alone did not establish equivalency here.

Common questions

Was having parent board members enough to make the foundation PTA-equivalent?

No.

Why did the foundation fail the equivalency test?

Its described purpose and services did not go beyond fundraising.

Were its auction gross receipts taxable?

Yes, under the opinion's stated facts.

Did counsel keep the earlier professional-fundraiser assumption?

No. Counsel corrected it after learning the board was almost entirely parents, but still found the foundation's function too narrow.

Why could the client not rely on section 6596?

The taxpayer was never identified, so the response was only hypothetical general guidance.

Was the impending auction documented?

No.

Citations and references

• California Revenue and Taxation Code §§ 6370 and 6596
• California Code of Regulations, title 18, § 1597(e)
• California PTA Bylaws articles II and III
• November 10, 1992 prior letter; letter printed as December 30, 1993; other correspondence and calls; foundation, school, funding, auction, sales, profit-use, tax records, and outcome — described or quoted in part but not documented

Verbatim support

From the official Tax Counsel opinion:

Its functions should include some coordinated promotion of educational programs or projects among parents, students, school authorities and the general public and go beyond mere fund-raising.

We stand corrected in our assumption that your client was likely a professional fund-raising organization as you indicate that your client's board members are, with one exception, parents of children who go to schools in the district.

Accordingly, we conclude that your client is not a P.T.A. "equivalent organization" within the meaning of Regulation 1597(e) with the result that its gross receipts from its sales of tangible personal property at its impending auction will be subject to tax.

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/390-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/390-0055.pdf

Original ruling text

390.0055

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-3828

MEMBER
First District
BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego

February 11, 1993

MATTHEW K. FONG
Fourth District, Los Angeles
GRAY DAVIS
Controller, Sacramento

Mr. G--- M. B--G---, B---, & H--XXXX --- Way, --- Floor
--- --- ---, California XXXXX

BURTON W. OLIVER
Executive Director

Re:

[No Permit Number]
School Fund-Raisers

Dear Mr. B---:
I am answering your letter to me of December 30, 1993, which followed up on our recent correspondence and telephone conversations. You ask me to reconsider the opinion of the Legal Division as expressed in my letter to you dated November 10, 1992, that your client, a non-profit education foundation, is not "equivalent" to a P.T.A. and so does not qualify for the partial exemption from sales tax provided by Regulation 1597(e). Once again, since you did not identify the taxpayer, this letter does not constitute specific written advice to the taxpayer under Revenue and Taxation Code Section 6596. Rather, it constitutes general comments regarding the applicability of California Sales and Use Tax Law to a set of hypothetical facts. I.

FACTUAL BACKGROUND.
You base your contention that your client is "equivalent" to a P.T.A. on the following

facts:
"The foundation is not a 'professional fund-raising organization,' but rather is comprised solely of volunteer members. With one exception, all board members are parents who have children that attend schools supported by the foundation. "The foundation provides support to all schools within the school district. The actual disbursement of funds is based on requests submitted by the teachers, administrators, and P.T.A's. Accordingly, the foundation is responsive to the needs of all students in the district. "While we admit that the foundation is not chartered by a particular school, it is supported and endorsed by the schools, the school district, the school board, and the superintendent...."

Mr. G--- M. B---

II.

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February 11, 1993
390.0055

OPINION

As I noted in my letter, Regulation 1597(e) interprets and implements Revenue and Taxation Code Section 6370 which provides that P.T.A'S and "equivalent organizations performing the same type of service" are the consumers and not the retailers of tangible personal property which they sell if the profits are used exclusively in furtherance of the objectives of the organization. This means that they do not pay tax on the sales they make to raise money for the organization but tax may apply to their purchases of the same property. We have previously determined that, in order, to determine whether a particular organization is equivalent to the P.T.A, and provides the same type of service to the school, we must compare objectives and services offered by the requesting organization to those offered by the P.T.A. Pertinent excerpts from the California P.T.A. by-laws follow: Article II, Section 1, lists the objectives of the P.T.A. as follows: "a. To promote the welfare of children and youth in home, school, church and community. "b. To raise the standards of home life. "c. To secure adequate laws for the care and protection of children and youth. "d. To bring into closer relation the home and school, that parents and teachers may cooperate intelligently in the education of children and youth. "e. To develop between educators and the general public such united efforts as will secure for all children and youth the highest advantages in physical, mental, social, and spiritual education." Article II, Section 2, indicates that these objectives will be promoted by the following: "The objects of the National PTA and the California State PTA are promoted though an educational program directed towards parents, teachers, and the general public, are developed through conferences, committees, projects and programs; and are governed and qualified by the basic policies set forth in Article III." Insofar as is pertinent here, Article III provides as follows: "a. The organization shall be noncommercial, nonsectarian, and nonpartisan.

Mr. G--- M. B---

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February 11, 1993
390.0055

"d. The organization shall work with the schools to provide quality education for all children and youth and shall seek to participate in the decision-making process establishing school policy, recognizing that the legal responsibility to make decisions has been delegated by the people to boards of education." As I noted in my previous letter, in our view it is not necessary that a particular organization have identical objectives and services as set forth in the P.T.A. charter. It should, however, be similar in objective and purpose. At the very least it should be concerned with the welfare of all students and include parents. Its functions should include some coordinated promotion of educational programs or projects among parents, students, school authorities and the general public and go beyond mere fund-raising. We stand corrected in our assumption that your client was likely a professional fundraising organization as you indicate that your client's board members are, with one exception, parents of children who go to schools in the district. However, the only service you indicate that it performs is to raise funds on behalf of the schools in the district. Indeed, you state that some of the funds are disbursed at the request of the P.T.A's. The fact that there are already P.T.A's in the district indicates that they perform the wider functions of a P.T.A., while your client does the fund-raising. You state that in the modern environment of funding cut-backs, P.T.A.'s are forced to concentrate on fund- raising. Be that as it may, the chartered purpose of a P.T.A. is much wider than fund-raising, and the P.T.A.'s still perform such purposes. We further note that your client does not appear to be chartered by either the district or its constituent schools. We thus remain of the opinion that your client's narrow purpose and objective (fund-raising for the schools in the district) are not sufficiently similar to the ongoing purposes and objectives of a P.T.A. which are broader than that. Accordingly, we conclude that your client is not a P.T.A. "equivalent organization" within the meaning of Regulation 1597(e) with the result that its gross receipts from its sales of tangible personal property at its impending auction will be subject to tax. I hope the above discussion has answered your question. If you need anything further, please do not hesitate to write again. Sincerely,

John L. Waid
Tax Counsel
JLW:es