Was the Save the Books campaign equivalent to a Friends of the Library organization for sales-tax purposes?

Plain-English summary

Mayor Tom Bradley, acting for the Los Angeles City Library, authorized the Save the Books campaign after an April 1986 fire burned or damaged beyond repair about 20 percent of the Central Library's materials. The campaign's stated purpose was to raise $10 million in private-sector gifts and pledges, with another $4 million in in-kind gifts expected, to replace books, periodicals, documents, and specialized collections destroyed in the April 29 fire.

All funds were to go to the Los Angeles Public Library Commission for new volumes or duplicate lost materials, not building repair, restoration, or rehabilitation. The campaign sold T-shirts, pins, tote bags, posters, cookbooks, and other gift items and also sought donations.

The Legal Division compared those purposes and services with four functions of a typical Friends of the Library organization: supporting library goals, increasing awareness and use, sponsoring cultural and educational programs through the public-library system, and encouraging suitable donations. It also noted that Friends units could sell merchandise and seek donations.

Although the campaign's objectives and services were not identical to a Friends organization, the Legal Division found them close enough to qualify as an equivalent organization under section 6370(a)(2). The campaign was therefore the consumer of merchandise it sold. Tax applied to the campaign's acquisition price under the described consumer framework, while its later merchandise-sale gross receipts were not subject to sales tax.

Source and live-annotation limits

The PDF refers to an inquiry and a submission of the campaign's purposes and objectives but does not include either underlying document. It identifies no redacted organization or representative, legal form, governing document, exemption determination, campaign start or end date, gift or pledge, donor, in-kind item, amount actually raised or transferred, purchased volume, duplicate material, merchandise quantity, purchase price, selling price, customer, sale, donation receipt, invoice, return, tax calculation or payment, audit, assessment, claim, appeal, implementation, or later outcome. The $10 million and $4 million amounts are goals or expectations, not documented receipts.

The extracted official text contains apparent published typographical errors including as t, theis, n pertinent, services offered by Friends, and purview or section; those words remain verbatim in the original-text section.

The live annotation preserves the campaign's library-material replacement purpose, Friends-of-the-Library equivalence, consumer status, exclusive fundraising purpose, date, and section 6370 result. It says the Central Los Angeles Library fire occurred on April 29, 1987. The supporting letter instead says the materials were lost in the April 1986 fire and later refers to the April 29 fire without stating the year again. The source does not resolve that conflict. The live annotation also omits the requester and author, Mayor Bradley, approximately 20-percent loss, fundraising targets, Library Commission, building-work exclusion, merchandise and donations, comparison criteria, purchase-stage tax explanation, absent submissions and transaction records, source errors, and absent implementation and outcome.

What this means for you

Library-support groups, nonprofit fundraisers, and tax professionals

Consumer treatment turned on the organization's objectives and services being sufficiently close to those of a Friends of the Library group. Preserve formation and governing documents, library authorization, campaign purposes, agreements governing use of funds, fundraising goals and receipts, gifts and pledges, in-kind contributions, merchandise lists, purchases and acquisition tax, sales and gross receipts, donations, invoices, returns, tax calculations, and payments. Do not treat the live annotation's fire year as reconciled with the supporting letter.

Common questions

Did the campaign need objectives identical to Friends of the Library?

No. California found its closely aligned library-support objectives sufficient.

Were its fundraising merchandise receipts taxable?

No, under the opinion's section 6370 consumer treatment.

Did the campaign have to perform every Friends of the Library function?

No. The Legal Division expressly said its objectives and services were not identical but were close enough.

Did the opinion document that the campaign actually raised $10 million?

No. That was the stated fundraising objective; an additional $4 million in in-kind gifts was expected.

Does the official record give one consistent fire year?

No. The supporting letter says April 1986 and later says April 29 without a year; the live annotation says April 29, 1987.

Citations and references

• California Revenue and Taxation Code §§ 6051 and 6370(a)(2)
• California Code of Regulations, title 18, § 1500(c)(3)
• Submitted campaign purpose and objectives — summarized and partly reproduced, but the underlying submission is not included
• Inquiry, organizational, library, campaign, donor, gift, pledge, merchandise, transaction, reporting, tax, and later-proceeding records — implicated but not documented

Verbatim support

From the official Legal Division opinion:

While REDACTED TEXT does not have identical objectives of, or perform precisely the same services as, a “Friends of the Library” organization, we believe its objectives and services are close enough to qualify REDACTED TEXT an “equivalent organization” within the purview or section 6370(a)(2).

Because REDACTED TEXT is an equivalent organization to “Friends of the Library”, REDACTED TEXT is a consumer of tangible personal property which it sells. Thus, the gross receipts from the sale of merchandise by REDACTED TEXT is not subject to tax pursuant to section 6051.

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/390-0605.pdf

Original ruling text

STATE OF CALIFORNIA

390.0605

STATE BOARD OF EQUALIZATION
(916) 445-8485
December 21, 1987

REDACTED TEXT

Dear REDACTED TEXT:
Your inquiry on behalf of the REDACTED TEXT organization has been referred to the undersigned for reply. As I understand the facts, Mayor Tom Bradley, on behalf of the Los Angeles City Library, authorized commencement of the REDACTED TEXT campaign to raise revenue in order to replace approximately 20 percent of the Central Library’s materials which were burned or damaged beyond repair in the April, 1986, fire. You requested our opinion as t the application of the Sales and Use Tax Law to sales of tangible personal property by REDACTED TEXT. At our request, you have submitted the purpose and objectives of REDACTED TEXT and they list as follows: The purpose of the REDACTED TEXT campaign is to raise $10,000,000 in gifts and pledges from the private sector for the replacement of those books, periodicals, documents, and specialized collections destroyed in the April 29 fire in the Central Los Angeles Public Library fire. An additional $4,000,000 “in kind” gifts is expected to be forthcoming during the campaign. All funds raised will be given to the Los Angeles Public Library Commission for its use in the purchase of new volumes, and/or the acquisition of duplicate materials lost in the fire. No funds given are to be used for the repair, restoration or rehabilitation of the Los Angeles Central Library building. As part of its effort to raise $10,000,000, REDACTED TEXT sells T-shirts, pins, tote bags, posters [illegible], cookbooks, and other gift items. In addition, REDACTED TEXT also seeks donations.

REDACTED TEXT

-2-

December 21, 1987

Except where the sales are specifically exempted by statute, sales tax applies to the gross receipts of retailers from all retail sales of tangible personal property in theis State (Rev. & Tax. Code § 6051). Revenue and Taxation Code section 6370 states, n pertinent part, that “nonprofit associations commonly called the Friends of the Library and equivalent organizations…[are] consumer[s] of and shall not be considered retailer[s] within the provisions of this part with respect to, tangible personal property which [they] sell …” Sales and Use Tax Regulation 1500(c)(3), which interprets and applies the Code, provides that “when it is stated that certain persons are ‘consumers’of tangible personal property …it should be understood that the sales to such persons are retail sales in respect to which … the sales tax … applies….” Thus, if an organization is deemed the consumer of tangible personal property, then sales tax is applicable to the sales price paid by that organization in obtaining the tangible personal property. If that organization subsequently sells that same tangible personal property, no sales tax will be applied to that sale. Conversely, if the organization is the retailer of tangible personal property, then sales tax is applicable based on the gross receipts received by that organization from its sales. In order to determine whether a particular organization is equivalent to “Friends of the Library” and provides the same type of service t library districts, municipal libraries, or county libraries in this State, it is helpful to compare the objectives and services offered by that organization to the objectives and services offered by “Friends of the Library”. Following is a list of purposes of and services provided by a typical “friends of the Library” organization: (a) To encourage public support for library goals and objectives; (b) To intensify community awareness and use of our public libraries; (c) To sponsor programs designed to add to the cultural and educational life of the community through the Public Library System; (d) To encourage donations suitable for attaining the goals and objectives of the library district, municipal library, or county library. In addition, an organizational unit of “Friends of the Library” may also sell Tshirts, buttons, mugs and books amongst other merchandise and seek donations to raise revenue. While REDACTED TEXT does not have identical objectives of, or perform precisely the same services as, a “Friends of the Library” organization, we believe its objectives and services are close enough to qualify REDACTED TEXT an “equivalent organization” within the purview or section 6370(a)(2).

REDACTED TEXT

-3-

December 21, 1987

Because REDACTED TEXT is an equivalent organization to “Friends of the Library”, REDACTED TEXT is a consumer of tangible personal property which it sells. Thus, the gross receipts from the sale of merchandise by REDACTED TEXT is not subject to tax pursuant to section 6051. If you have any further questions, please feel free to write again. Very truly yours,

E. L. Sorensen, Jr.
Senior Tax Counsel
ELS:md