Did a supplier's name and logo on fundraising materials make a PTA the supplier's sales agent?

Plain-English summary

A redacted business supplied merchandise primarily to PTAs for fundraising resale. Its described agreement said the PTA bought the property for resale on its own account. The supplier provided brochures and materials, an optional incentive program awarding prizes to participating students, and the products.

The supplier said it collected tax reimbursement on its program price to the PTA because the PTA was treated as consumer, while treating food-product sales as exempt. It historically used generic product brochures furnished by its own suppliers without its name. Its new plan placed a registered trade name and logo on sales brochures and at least the logo on student-member order forms, while listing the PTA prominently. The supplier wanted stronger identification and planned to encourage the PTA to say the supplier provided the products, but believed the PTA remained the seller.

Regulation 1597(h), quoted in the opinion, generally treated a nonprofit soliciting orders, collecting payments, and distributing property for a supplier as that supplier's agent. Documentation could establish own-account buying and selling. The regulation presumed own-account status when all four factors existed: the nonprofit solicited publicly in its own name, collected the sale price in its own name, was responsible for and paid the supplier, and had a contract clearly stating that it would purchase and resell to its customer.

An own-account nonprofit generally needed a permit and was the retailer unless the Board classified the supplier under section 6015 or the nonprofit fell within Regulation 1597(d), (e), or (f). A section 6015 supplier paid tax measured by the amount charged to the consumer, using suggested retail price when the actual price was unknown. When a PTA or equivalent organization qualified as consumer under subdivision (f), the supplier's measure was its selling price to the PTA. If the PTA instead acted as supplier agent, the supplier's measure was receipts from ultimate purchasers.

Senior Tax Counsel Ronald L. Dick concluded that the supplier's trade name and logo on brochures and logo on forms did not by themselves turn the PTA into its agent, provided the materials clearly showed that the PTA solicited customer orders and collected customer payments in its own name.

Source and live-annotation limits

The official PDF does not include the July 29 request, supplier or PTA agreement, incorporation or qualification records, registered trade name or logo, generic or branded brochures, order forms, sales materials, incentive terms, prizes, products, supplier invoices, food-product classifications, customer orders or payments, PTA payments or responsibility records, suggested or actual retail prices, tax-reimbursement records, seller permits, returns, exemption or resale documentation, tax calculations or payments, audit, assessment, claim, appeal, or later outcome. The supplier, PTAs, equivalent organizations, students, customers, upstream suppliers, merchandise, food, transactions, quantities, prices, reimbursements, and tax amounts are redacted or unidentified.

The source's reproduced regulation says customer If, sudivisions, and the singular acts an agent; the original-text section preserves those published forms rather than silently correcting them.

The live annotation preserves the supplier business, PTA program, resale agreement, brochures and materials, optional incentives and products, old generic materials, new registered branding, prominent PTA listing, Regulation 1597(f), own-account and agent tax measures, branding conclusion, and date. Its conclusion also expressly mentions the contract's own-account term. The supporting opinion's final sentence states only the brochure-and-form conditions, although its analysis rests on all supplied facts. The live annotation omits the request and counsel, tax-reimbursement and claimed food treatment, upstream brochure suppliers, supplier-identification encouragement, Regulation 1597(h)'s quoted agency rule and four-factor presumption, payment-responsibility factor, permit rule, section 6015 and suggested-price measure, subdivisions (d) and (e), Oakland copy, missing records, redactions, published-text quirks, and absent outcome.

What this means for you

Fundraising suppliers, PTAs, nonprofits, and tax professionals

Preserve the signed agreement, every brochure and order form, branding placement, customer-facing seller identity, who solicits and collects in whose name, responsibility for paying the supplier, merchandise and prize records, actual and suggested prices, permits, invoices, resale and exemption documents, returns, tax calculations, reimbursements, and payments. Branding alone is not the agency test; the entire documented relationship matters.

Common questions

Did the supplier's logo automatically make the PTA its agent?

No.

What had to be clear on the fundraising materials?

That the PTA solicited orders and collected customer payments in its own name.

Why did the own-account-versus-agent distinction matter?

It changed the supplier's tax measure from the price charged to the PTA to the receipts from ultimate customers.

What were the four own-account presumption factors?

Solicitation in the nonprofit's name, collection in its name, its responsibility for and payment to the supplier, and a contract clearly providing for its purchase and resale to customers.

Did the source include the agreement or sales materials?

No.

What if a section 6015 supplier did not know the customer price?

The quoted regulation used suggested retail selling price.

Did the opinion verify the supplier's food-product treatment?

No. It reports the supplier's position but answers the branding-and-agency question.

Was an actual fundraiser or tax payment documented?

No.

Citations and references

• California Revenue and Taxation Code § 6015
• California Code of Regulations, title 18, § 1597(f) and (h)
• July 29 request; PTA agreement, brochures, order forms, branding, incentive program, merchandise, permits, transactions, and tax records; and outcome — described or implicated but not documented

Verbatim support

From the official Senior Tax Counsel opinion:

The nonprofit organization is presumed to be buying and selling on its own account if all of the following factors are present: 1) the organization solicits the orders from the public in its own name; 2) the organization collects the sale price from the customer in its own name; 3) the organization is responsible for and pays the supplier for the merchandise; and 4) the contract between the organization and the supplier clearly identifies the fact the organization will purchase and resell the products to its customer

On the other hand, if the PTA acts an agent making sales on behalf of REDACTED TEXT, the sales tax liability of REDACTED TEXT is measured by the gross receipts of the sales to the ultimate purchasers.

Based on the information you have provided, the mere presence of REDACTED TEXT’s trade name and logo on the sales brochures and the logo on the sales forms would not cause the PTA to be merely an agent for REDACTED TEXT provided the sales brochures and sales forms clearly show the PTA solicits the orders from the customers and collects the sale price from the customers in its own name.

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/390-0084.pdf

Original ruling text

390.0084

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

LEGAL DIVISION
450 N STREET, SACRAMENTO, CALIFORNIA
(P. O. BOX 942879, SACRAMENTO, CA 94279-0082)
TELEPHONE: (916) 445-6450
FAX: (916) 323-3387

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

November 6, 1996
E. L. SORENSEN, JR.

Exe cutive Dire cto r

REDACTED TEXT

REDACTED TEXT
Dear REDACTED TEXT:
This is in reply to your July 29, 1996 letter regarding the application of sales tax to sales by REDACTED TEXT under the following facts you provided: “We are in the business of fund raising sales. We provide nonprofit organizations, primarily Parent Teacher Associations (‘PTA’), with merchandise that they resell as part of their fund raising activities. It is the typical fund raising program where the PTA contracts with us for the program. We have an agreement with the PTA that they are purchasing the property for resale as part of their fund raising program. We agree to provide the PTA with sales brochures and materials, an optional incentive program that awards prizes to the students that participate, and the product. . . .” You go on to note that, since the PTA is considered the consumers of the products you sell to them, you collect tax reimbursement on the price you charge to the PTA for the program. You consider sales of food products as exempt. In the past, you have used generic brochures which have been furnished by the companies which supply you with your product. Your name has not been listed on either the brochures or sales materials used by the PTA. Recently, however, you have developed a specific marketing plan that will capitalize on a unique trade name and logo you have registered for your use. That will enable you to establish a better name identification with your PTA customers. While the forms provide for the PTA or similar organization to be prominently listed on the order form used by its student members, you will be including your trade name and logo on the sales brochures and at least your logo on the sales order form that will be used by the PTA’s members. You believe the marketing plan that you assist the PTA to develop will still emphasize that the sale is being made by the organization, not your company. However, if you are

REDACTED TEXT

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November 6, 1996
390.0084

successful in marketing your new name and logo, you will encourage the PTA to also stress that the product is being provided to the PTA by your company. Given this information, you asked for our opinion as to whether your placing your company’s name and logo on the sales brochures and order forms would result in the State Board of Equalization considering the PTA or equivalent organization as not soliciting orders from the public in its own name for purposes of Sales and Use Tax Regulation 1597, subdivision (h), which provides: “A nonprofit organization is treated as a consumer of tangible personal property it may sell under circumstances described in subdivisions (d),(e) and (f) of this regulation. In other cases, a nonprofit organization is regarded as a retailer of property it sells to consumers, or it is regarded as an agent of the companies which furnish the property to it for delivery to consumers. “When a nonprofit organization solicits orders, collects payments, and distributes tangible personal property for a supplier, it is considered to be the agent of that supplier. Accordingly, the supplier, not the organization, is the retailer of the merchandise sold. This is true unless documentation establishes that the nonprofit organization is buying and selling for its own account. The nonprofit organization is presumed to be buying and selling on its own account if all of the following factors are present: 1) the organization solicits the orders from the public in its own name; 2) the organization collects the sale price from the customer in its own name; 3) the organization is responsible for and pays the supplier for the merchandise; and 4) the contract between the organization and the supplier clearly identifies the fact the organization will purchase and resell the products to its customer If it is selling for its own account, the nonprofit organization will be required to obtain a permit and will be considered the retailer, unless the supplier has been classified by the Board as a retailer under Revenue and Taxation Code Section 6015, or the nonprofit organization is classified under sudivisions (d), (e) and (f) of this regulation. “If the supplier is a 6015 retailer, the supplier must pay the tax and the organization does not need a seller’s permit. The measure of tax is the amount charged to the consumer. When this price is unknown by the supplier, tax will apply to the suggested retail selling price. If the nonprofit organization is classified as a consumer under subdivisions (d), (e) and (f) of this regulation, the supplier will calculate tax measured by the selling price to the nonprofit organization.” Under Regulation 1597, subdivision (f), PTAs and equivalent organizations are classified as consumers. If REDACTED TEXT makes sales to the PTA or equivalent organization (PTA, herein), which, in turn, sells on its own account, REDACTED TEXT’s sales tax liability is measured by the gross receipts of its sale to the PTA. On the other hand, if the PTA acts an agent making sales on behalf of REDACTED TEXT, the sales tax liability of REDACTED TEXT is measured by the gross receipts of the sales to the ultimate purchasers.

REDACTED TEXT

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November 6, 1996
390.0084

Based on the information you have provided, the mere presence of REDACTED TEXT’s trade name and logo on the sales brochures and the logo on the sales forms would not cause the PTA to be merely an agent for REDACTED TEXT provided the sales brochures and sales forms clearly show the PTA solicits the orders from the customers and collects the sale price from the customers in its own name. We hope this answers your question; however, if you need further information, feel free to write again. Very truly yours, Ronald L. Dick Senior Tax Counsel RLD:sr cc:

Oakland District Administrator - CH