Did federal nonprofit status exempt a youth organization's California conference activities from sales and use tax?

Plain-English summary

The requester described a national membership organization whose mission was to strengthen existing youth-corps programs and promote new ones. It sponsored an annual conference to provide education and technical assistance to staff and education to young people employed in corps programs. The organization reported federal section 501(c)(3) status, tax-exempt status in Maryland and the District of Columbia, and an Ohio sales-and-use-tax exemption for its last conference. It requested a California exemption for a planned Long Beach conference from July 29 through August 1; the letter does not state that conference's year.

Staff Counsel explained that nonprofit or income-tax-exempt status did not create a blanket California sales-and-use-tax exemption. The request did not make clear whether the organization sought exemption for property sold to it or property it sold, and supplied no facts supporting a specific statutory exemption. Retail property sales to or by the organization remained taxable unless specifically exempt. California retail sales by the organization generated sales tax; property it resold without prior use could be bought ex-tax for resale, while sales or use tax applied to property it purchased in California or for California use.

The educational workshops could receive different treatment. Based on the limited information, Staff Counsel said it appeared people contracted for staff-development and technical-assistance training. If so, the organization generally provided a service, and tangible property such as how-to training manuals was incidental to it. The organization was then the materials' consumer, not a seller of them: sales tax did not apply to the service charges, but sales or use tax applied to the organization's purchase of the materials.

Source and live-annotation limits

The PDF does not include the March 15 request letter, Regulation 1668 enclosure, Pamphlet No. 18 enclosure, or the supporting source for Business Taxes Law Guide Annotation 515.0015. It identifies neither the full organization nor requester and supplies no governing or exemption records, conference year, site agreement, registration offer, attendee, workshop description, educational-service contract, technical-assistance record, training manual, other property, vendor, purchase, prior use, resale, invoice, charge, receipt, return, exemption certificate, tax calculation or payment, audit, assessment, claim, appeal, implementation, or later outcome. Federal, Maryland, District of Columbia, and Ohio status are requester statements summarized in the letter, not separately documented determinations.

The live annotation preserves the youth organization's federal and state income-tax-exempt status, absence of a blanket California sales-and-use-tax exemption, full-selling-price rule for retail property sales to or by it, statutory-exception condition, and date. It omits the requester and author, organization's mission, annual conference and attendees, Maryland, District of Columbia and Ohio details, Long Beach request, uncertainty over incoming versus outgoing sales, lack of specific-exemption facts, California retail sales, resale purchases, California use, conditional educational-service and incidental-manual analysis, Annotation 515.0015, absent request and enclosures, missing records, and absent implementation and outcome.

What this means for you

Nonprofits, conference operators, educational-service providers, and tax professionals

Do not treat federal, another state's, or District of Columbia exemption status as a blanket California sales-and-use-tax exemption. Identify whether each transaction is a purchase by the organization, retail sale by it, resale purchase, or service with incidental property. Preserve exemption and governing records, event dates and locations, registrations and attendee contracts, workshop and technical-assistance materials, every item furnished, purchase and prior-use records, resale certificates, invoices and receipts, returns, tax calculations, and payments. The service result here was conditional, not a ruling that all conference materials are incidental.

Common questions

Did section 501(c)(3) status create a California sales-tax exemption?

No.

Could the organization buy inventory for resale without tax?

Yes, if it resold the property without prior use.

Were conference training manuals necessarily sold to attendees?

No. On the described service facts, they were incidental to educational services.

Did the letter grant the requested conference-period exemption?

No. It found no facts supporting a specific exemption and instead explained the treatment of different transaction types.

Did another jurisdiction's exemption control California treatment?

No. The letter recorded prior Ohio and other exemption status but applied California sales-and-use-tax rules.

Was the educational-service conclusion unconditional?

No. It depended on people contracting for educational services and the manuals being incidental to those services.

Citations and references

• California Revenue and Taxation Code §§ 6007, 6051, 6201, and 6401
• California Code of Regulations, title 18, §§ 1501, 1620, and 1668
• Business Taxes Law Guide Annotation 515.0015 (March 31, 1980) — cited source not included
• Sales and Use Tax Pamphlet No. 18, Tax Tips for Nonprofit Organizations — identified as an enclosure but not included
• March 15, 1995 request letter — not included
• Organization, exemption, conference, service, property, vendor, transaction, resale, reporting, tax, and later-proceeding records — implicated but not documented

Verbatim support

From the official Staff Counsel letter:

Although many nonprofit organizations have tax exempt status for federal and state income tax purposes, California law does not provide a general, blanket exemption from tax for sales and use tax purposes.

You have not indicated any facts that would exempt retail sales to or by your organization from California's sales or use tax.

If such is the case, N--- will generally be regarded as providing a service, and any tangible personal property it furnishes such as the "how-to" training manuals will be considered incidental to the educational services provided.

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/390-0920.pdf

Original ruling text

390.0920

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

LEGAL DIVISION - MIC 82
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0082)
Tele: (916) 322-2976
FAX: (916) 323-3387

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

May 24, 1995

────────
BURTON W. OLIVER
Executive Director

Mr. M--- A. B--Office Manager/Conference Associate
N--- A--- of S--- &
C--- Corps
XXX --- Street, NW, Suite XXX
---, DC XXXXX
Dear Mr. B---:
This is in response to your letter dated March 15, 1995 regarding the application of tax to the activities of a nonprofit organization. You state that the N--- A--- of S--- and C-- Corps (N---) is a national membership organization whose mission is to strengthen the quality of existing youth corps programs and to promote the development of new corps. You explain that N--- sponsors an annual conference for youth corps staff and corpsmembers, and that the purpose of the conference is to provide education and technical assistance to staff members, and to provide education to the young people employed in the corps programs. You state: "The N--- A--- of S--- and C--- Corps is a 501(c)(3), as determined by the Internal Revenue Service. We are also tax exempt in the state of Maryland and in the District of Columbia as well. At our last conference in Cleveland, Ohio, I requested and received an exemption from the Ohio Sales and Use Tax for the duration of the conference." You explain that your next conference will be held in Long Beach, California, and you state: "I am writing to request an exemption from the California Sales and Use Tax for the period of our conference, July 29 through August 1."

Mr. M--- A. B---

-2-

May 24, 1995
390.0920

DISCUSSION
Retail sales of tangible personal property in California are subject to sales tax, measured by gross receipts, unless specifically exempt by statute. (Rev. & Tax. Code § 6051.) A retail sale is a sale for any purpose other than resale in the regular course of business. (Rev. & Tax. Code § 6007.) When sales tax does not apply, such as when sales take place outside of California, the use tax, measured by the sales price of the property sold, applies to the use of property purchased from a retailer for storage, use, or other consumption in California. (Rev. & Tax. Code §§ 6201, 6401, Reg. 1620.) Although many nonprofit organizations have tax exempt status for federal and state income tax purposes, California law does not provide a general, blanket exemption from tax for sales and use tax purposes. This means that a retail sale of tangible personal property to or by such an organization will be subject to tax measured by the full selling price unless specifically exempt by statute. It is not clear whether you are asking for an exemption from tax on sales of tangible personal property to N---, or whether you are asking for an exemption with respect to sales of tangible personal property made by N---. You have not indicated any facts that would exempt retail sales to or by your organization from California's sales or use tax. If N--- makes retail sales of tangible personal property inside California, it will owe sales tax. However, any property N--- purchases that it resells without prior use may be purchased extax for resale. (See Reg. 1668, a copy of which is enclosed.) Sales or use tax will apply with respect to any property it purchases in California, or purchases for use in California. I note that persons who transfer tangible personal property incidental to the performance of a service are consumers of that tangible personal property. (Reg. 1501). Based on the information you have provided, it appears that persons contract with N--- to have it provide educational services such as the workshops on staff development and technical assistance training. If such is the case, N--- will generally be regarded as providing a service, and any tangible personal property it furnishes such as the "how-to" training manuals will be considered incidental to the educational services provided. (See Business Taxes Law Guide Annotation 515.0015 (3/31/80).) N--- would not be regarded as selling tangible personal property when performing such services, and sales tax would not apply to its charges. Sales or use tax would apply, however, with respect to N---'s purchase of such property.

Mr. M--- A. B---

-3-

May 24, 1995
390.0920

I have enclosed, for your information, a copy of Sales and Use Tax Pamphlet number 18, entitled "Tax Tips for Nonprofit Organizations." If you have further questions, please feel free to write again. Sincerely,

Kelly W. Ching
Staff Counsel
KWC:plh

Enclosures

• Regulation 1668
• Pamphlet No. 18