Was a religious organization's hotel-served fundraising banquet exempt, and could the hotel treat its meal charge as a sale for resale?

Plain-English summary

A religious organization contracted with a hotel for a banquet room and meals at an agreed price, paid the hotel directly, and planned to charge attendees more in order to raise money for its functions and activities.

The Board said the religious organization was the meal retailer if it held the property-tax exemption specified in California Constitution article XIII, section 3(f) and met the statute's other fundraising and use-of-revenue conditions. A different or broader property-tax exemption, such as section 214, was not enough.

When the requirements were met, the organization's meal sales to attendees were exempt. The hotel sold the meals to the organization for resale, and the organization should give the hotel a resale certificate even if the organization was not otherwise required to hold a seller's permit. The organization's own personnel did not need to physically serve the meals.

The exemption did not apply if attendees were not charged or were charged only cost, because the meal service then was not for raising revenue. For qualifying past banquets where the hotel had paid tax, the hotel was the party directed to file the refund claim after receiving supporting information from the organization.

Common questions

Was any property-tax exemption sufficient?

No. The source required the specific religious-property exemption in article XIII, section 3(f).

Did religious-organization staff have to serve the meals?

No. The hotel could prepare and serve them while selling to the organization for resale.

What if attendees paid only the hotel's cost?

The source said the exemption would not apply because the purpose was not to obtain revenue.

Who filed a refund claim for tax paid on the hotel's past sale?

The hotel, after the religious organization supplied the necessary supporting facts.

Citations and references

• California Revenue and Taxation Code sections 214 and 6363.5 (as cited)
• California Constitution article XIII, section 3(f) (as cited)

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/550-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/550-1043.pdf

Original ruling text

550.1043

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-2641

March 22, 1985

Mr. J--- M--C--- R--- S--XXX South ----- ---, CA XXXXX

Dear Mr. M---:
This is in verification of our telephone conversation of March 20, 1985 regarding the application of sales tax to fund raising banquets conducted by the C--- R--- S--- (CRS). As I understand the facts, the CRS contracts with a hotel to provide a banquet room and meals for an agreed upon amount. The hotel will prepare and serve the meals and be paid the agreed amount directly by CRS. CRS will generate revenue for its functions and activities by charging a larger amount to those persons attending the banquet. Our conversation centered on Revenue and Taxation Code Section 6363.5 (all code references hereinafter are to the Revenue and Taxation Code), which states as follows: “There are exempted from the taxes imposed by this part the gross receipts from the sale of, and the storage, use or other consumption in this state of, meals and food products for human consumption furnished or served by any religious organization at a social or other gathering conducted by it or under its auspices, if the purpose in furnishing or serving the meals and food products is to obtain revenue for the functions and activities of the organization and the revenue obtained from furnishing or serving the meals and food products is actually used in carrying on such functions and activities. For the purposes of this section ‘religious organization’ means any organization the property of which is exempt from taxation pursuant to subdivision (f) of Section 3 of Article XIII of the State Constitution.”

Mr. J--- M---

-2-

March 22, 1985
550.1043

I have underlined the last sentence of Section 6363.5 to emphasize that, as we discussed, for the sales tax exemption in Section 6363.5 to apply, the CRS must hold the exemption from property tax in subdivision (f) of Section 3 of Article XIII of the California State Constitution. If the CRS does not hold the California Constitution Article XIII Section 3(f) exemption, but holds some other property tax exemption instead, for instance the broader property tax exemption in Section 214, then the sales tax exemption in Section 6363.5 does not apply to CRS’s sales of meals at fund raising banquets. If you are uncertain as to which property tax exemption CRS holds, you should inquire at the Los Angeles County Assessor’s office. Assuming that your inquiry reveals that CRS does in fact hold the property tax exemption in California Constitution Article XIII Section 3(f), under the facts stated above, CRS is the retailer of the meals and, if all other conditions of Section 6363.5 are met, sales tax does not apply to CRS’s sale of the meals at the fund raising banquets. The hotel is selling the meals for resale to CRS and CRS should issue a resale certificate to the hotel even though CRS may not be required to hold a seller’s permit. As we also discussed, it is not necessary for CRS’s personnel to physically serve the food for the sale tax exemption to apply. But it should be kept in mind that, if a religious organization does not charge its invitees, or charges them only at cost, the purpose of serving the meals is not to raise revenues and the sales tax exemption in Section 6363.5 would not apply. If your investigation reveals that the sales tax exemption in Section 6363.5 did apply to banquets held in the past, the hotel which paid the sales tax to the Board should file a claim for refund on being supplied with the necessary information by CRS. We shall send a copy of this letter to District Principal Auditor Joseph Cohen of the Board’s Hollywood District Office so that he will be aware of our discussions. If you have further questions, feel free to write us. Very truly yours,

Donald J. Hennessy
Tax Counsel

DJH:rar
cc:

Mr. Joseph Cohen