Could a school parents' organization be treated as the consumer of donated items sold at its annual auction?

Plain-English summary

The development director of a redacted high school asked about sales tax on its fundraising auctions. Parents of students conducted an annual auction, and proceeds benefited all students under high-school-board policies. Every item sold had been donated to the school.

The requester said sales tax had been charged in the past on items bought by attendees but now understood the event to fall under the Board's consumer treatment for equivalent organizations, making collection and remittance incorrect. The opinion does not decide what should happen to tax previously collected.

Regulation 1597(a) treated specified organizations as consumers rather than retailers of certain property under stated conditions. Under subdivision (g), an organization equivalent to a nonprofit PTA qualified when it performed the same type of service for public or private schools, was authorized within the school by its governing authority, and used sale profits exclusively to further organizational purposes.

Tax Counsel John L. Waid did not independently establish those conditions. He said that if the parent organization was PTA-equivalent as the request indicated, it qualified for consumer status. Donation of the auction property to the school did not alter that conditional result.

Source and live-annotation limits

The official PDF does not include the March 4 request, parent-organization governing or nonprofit records, PTA-comparison evidence, school authorization, school-board policies, auction announcements or records, donated property or donation documents, donor or purchaser records, profit-use evidence, invoices, sales-tax charges, receipts, prior returns or remittances, refund records, Regulation 1597 enclosure, exemption documentation, tax calculations or payments, audit, assessment, claim, appeal, or later outcome. The school, director, parent organization, board, students, donors, purchasers, property, transactions, quantities, prices, proceeds, profits, and tax amounts are redacted, unidentified, or undocumented.

The source prints in response to yours to me and as you letter indicates; the original-text section preserves those published forms rather than silently correcting them.

The live annotation preserves the high school, annual parent auction, student benefit, board-policy condition, donated property, Regulation 1597(g), conditional equivalency, consumer result, date, and donation conclusion. It omits the request and counsel, prior tax collection and requester's remittance position, Regulation 1597(a), public-or-private-school language, same-service, governing-authority and exclusive-profit-use conditions, reliance on the requester's unverified indication, unresolved previously collected tax, missing records and enclosure, redactions and source quirks, and absent outcome.

What this means for you

Parent organizations, schools, auction organizers, and tax professionals

Preserve the organization's governing and nonprofit records, PTA-comparison facts, written school authorization, board policies, auction items and donor documents, seller and purchaser identities, sale prices, exclusive profit use, invoices, tax collected, returns and remittances, refunds, exemption documents, tax calculations, and payments. Determine qualification before deciding how to invoice, collect, or remit tax.

Common questions

Did donated auction property defeat the consumer treatment?

No.

Did every school fundraiser automatically qualify?

No. The parents' organization had to meet the PTA-equivalent conditions.

Did the opinion verify the parents' organization was PTA-equivalent?

No. It conditionally relied on the requester's indication.

What conditions did Regulation 1597(g) require?

The same type of service as a PTA, authorization by the school's governing authority, and exclusive use of sale profits for organizational purposes.

Did the opinion say what to do with tax previously collected?

No.

Did the source include Regulation 1597?

No. It says a copy was enclosed, but the published PDF omits it.

Citations and references

• California Code of Regulations, title 18, § 1597(a) and (g)
• March 4 request; Regulation 1597 enclosure; organization, school-authorization, auction, donation, sale, profit-use, prior-tax, refund, and remittance records; and outcome — described or implicated but not documented

Verbatim support

From the official Tax Counsel opinion:

If the parents’ organization is equivalent to a parent-teacher association as described above, as you letter indicates that it is, then it qualifies for consumer status under the above authority.

The fact that the property sold is donated to the school does not affect the exemption.

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/390-0098.pdf

Original ruling text

390.0098

STATE OF CALIFORNIA

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

April 8, 1992

Mr. M--- L. W--Director of Development
J--- High School
---, CA XXXXX-XXXX
RE:

SR -- XX-XXXXXX
Auction Sales

Dear Mr. W---:
I am writing this in response to yours to me of March 4, 1992. You have asked for advice regarding the application of sales tax to your school’s fund-raising auctions. I.

FACTUAL BACKGROUND
You recite the factual basis of your question as follows: “J--- High School has an annual auction, which is put on by the parents of the high school students. The proceeds of the auction benefit all students, in accordance with the policies of the J--- High School Board. “In the past, sales tax has been charged for items purchased by those attending the auction. However, all items sold have been donated to the school for the auction. Our understanding now is that this event would qualify under the Board of Equalization’s provisions regarding ‘equivalent organizations’ which qualify as consumers. In this case it is not correct to charge, collect, and remit sales tax.”

OPINION
Certain organizations are consumers and not retailers of specified kinds of tangible personal property under certain conditions. (Reg. 1597(a).) Organizations equivalent to nonprofit parent-teacher associations that perform the same type of service for public or private schools and are authorized to operate within the school by the governing authority of the school are consumers and not retailers of tangible personal property sold by them if the profits from

Mr. M--- W---

-2-

April 8, 1992
390.0098

such sales are used exclusively in the furtherance of the purposes of the organization. (Reg. 1597(g).) You state that the students’ parents put on these annual auctions and that the profits go to the students. If the parents’ organization is equivalent to a parent-teacher association as described above, as you letter indicates that it is, then it qualifies for consumer status under the above authority. The fact that the property sold is donated to the school does not affect the exemption. For your information, I have enclosed a copy of Regulation 1597. 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
1026I
Enc.: Regulation 1597