Does a charity have to charge sales tax on dinner tickets at its annual fundraiser, and how do donations and the $25,000 limit factor in?

Plain-English summary

A 501(c)(3) charity hosts an annual auction and dinner. The auction items are all donated, and the auction's own proceeds are under $25,000 — but the total tops $25,000 once the dinner proceeds are added. The charity asked whether it must collect sales tax on the dinner.

The Department's framework — the "occasional sale" exemption (§ 39-26-718): A charity's sales are exempt from state sales tax only if the event qualifies as an occasional sale, which requires all three: (1) no more than 12 days of sales in the calendar year, (2) net proceeds of $25,000 or less, and (3) proceeds used for a charitable purpose. When a charity sells tickets that entitle the buyer to a dinner or other taxable goods, the ticket price is taxable unless the sale is an occasional sale or part of the price is a donation.

How the math works:

• The dinner price goes into gross proceeds, but the cost of the dinner is deducted to compute the $25,000 net threshold.
• The portion of a ticket price above the fair market value of the taxable goods (the dinner) is a non-taxable donation — a gift isn't a sale (Reg 39-26-102.10) — and it doesn't count toward the $25,000 threshold (it wasn't paid for a taxable item). The charity must prove the buyer intended to donate.

The Department's worked example: $100 ticket (dinner FMV $25, $75 stated donation), 300 tickets, dinner costs $10 each; the silent auction yields $30,000 gross / $20,000 net. The $22,500 in donations (300 × $75) is exempt and excluded from net proceeds. Dinner net = 300 × ($25 − $10) = $4,500. Total net = $20,000 + $4,500 = $24,500 — under $25,000, so no sales tax is due.

The cliff: Exceeding either the $25,000 or the 12-day threshold destroys the exemption entirely — tax is then due on the gross proceeds of all sales, including the initial $25,000 (donations remain exempt). In the example, if auction net were $23,000, total net would be $27,500 > $25,000, so tax would apply to the full gross ($30,000 auction + $7,500 dinner), with donations still untaxed.

Local taxes: State-administered local jurisdictions may elect to tax charitable occasional sales (listed in DR 1002) — so local tax can be due on the gross auction and dinner proceeds even where the state exemption applies, but never on donations.

What this means for you

Charities and nonprofit fundraisers

Your fundraiser sales can be completely exempt as an occasional sale — but only if you stay under both caps: ≤12 sale-days and ≤$25,000 net. Structure tickets to separate the true donation from the fair market value of what the buyer receives (the dinner), and document the donative intent — the donation is never taxed and never counts toward the cap. Watch the cliff: cross either threshold and you owe tax on everything, back to dollar one, on the gross price.

Event planners and development staff

Use ticket language that states the donation portion and reflects the FMV of the meal/goods. Track your number of sale-days across the year, not just this event — multiple sales events can blow the 12-day limit. And remember local jurisdictions may tax the occasional sale even when the state doesn't (check DR 1002).

Accountants and tax professionals

The exemption is § 39-26-718 (occasional sale), conditioned on 12-days / $25,000-net / charitable-purpose. Net proceeds = gross minus the cost of the taxable goods, and minus the donation portion (gift, Reg 39-26-102.10, with provable donative intent). The all-or-nothing nature is the trap — exceeding a threshold taxes the gross of all sales including the first $25,000, computed on the buyer's price (§ 39-26-104(1)). Local option per § 29-2-105(1)(d) / DR 1002; see FYI Sales 2. Related charity rulings: [[gil-18-014-sales-tax-on-catering-by-charitable-organization]] and [[gil-21-002-sales-and-use-tax-on-items-given-as-gifts-by-a-charitable-organization]]. Watch the home-rule-city caveat below.

Common questions

Q: Does a charity have to charge sales tax on auction and dinner tickets?
A: Not if the event qualifies as an occasional sale — ≤12 sale-days in the year, ≤$25,000 net proceeds, used for charity. If it qualifies, no state sales tax is due on the auction or dinner.

Q: How is the $25,000 limit calculated?
A: On net proceeds — gross minus the cost of the taxable goods (e.g., the dinner) and minus the donation portion of tickets. Donations are gifts, not sales, so they're excluded.

Q: What happens if we go over $25,000 or 12 days?
A: The exemption is lost entirely. Tax is then due on the gross proceeds of all sales, including the first $25,000 — though donations stay exempt.

Q: How do we treat the donation part of a ticket?
A: The amount above the dinner's fair market value is a non-taxable donation and doesn't count toward the threshold — but you must establish the buyer's intent to donate.

Q: Do local taxes apply?
A: They can. State-administered local jurisdictions may elect to tax charitable occasional sales (see DR 1002). Self-collected home-rule cities set their own rules.

Q: Can I rely on this letter?
A: No. A General Information Letter is general guidance, not binding on the Department, and makes no determination on specific facts.

Citations and references

Statutes, rules, and forms:
- § 39-26-718, C.R.S. (occasional-sale exemption for charitable organizations)
- § 39-26-104(1), C.R.S. (tax calculated on the buyer's gross price)
- Department Regulation 39-26-102.10 ("Sale"; gifts/donations are not sales)
- § 29-2-105(1)(d), C.R.S. and DR 1002 (local option to tax charitable occasional sales); FYI Sales 2

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-13-013.pdf

Original ruling text

Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]

GIL-13-013
April 18, 2013
XXXXXXXXXXXXXXXX
ATTN: XXXXXXXXXXX
XXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXX
Re: 501(c)(3) Organization’s $25,000 Proceeds Limit
Dear XXXXXXXXXXX,
You submitted on behalf of your client, a 501(c)(3) organization (“Organization”), a request for
guidance regarding whether Organization needs to collect sales tax on the dinner provided at
their annual auction.
The Colorado Department of Revenue (“Department”) issues general information letters and
private letter rulings. A general information letter provides a general overview of the relevant
tax issues and is not binding on the Department. A private letter ruling provides a specific
determination for a specific set of facts, is binding on the Department but not on the taxpayer,
and requires payment of a fee. For more information about general information letters and
private letter rulings, please see Department regulation 24-35-103.5 at
www.colorado.gov/revenue/tax > Tax Library > Rulings.
The Department initially treats your request as one of a general information letter. If you would
like the Department to issue a private letter ruling on the issues you raise, you can resubmit a
request and fee in compliance with regulation 24-35-103.5. It is important to remember that
general information letters, such as this one, are general discussions of tax law and are not a
determination of the tax consequence of any particular action or inaction.
Issue
Does Organization need to collect sales tax on the price for dinner provided at Organization’s
annual auction if the proceeds, including the dinner, are more than $25,000?
Background
Organization is hosting an annual auction and dinner event. The auction items are all donated
for the auction sale and the proceeds from the auction sale are less than $25,000. However,
the total proceeds exceed $25,000 if the proceeds of the dinner are included.

Discussion
Sales by charitable organizations are exempt from state sales tax if the sale qualifies as an
occasional sale.1 In order to qualify for the occasional sale exemption, the charitable
organization cannot conduct more than twelve days of sales in any calendar year, the net
proceeds cannot exceed $25,000, and the proceeds must be used for a charitable purpose.
When a charitable organization sells tickets to attend a charitable fundraising event and the
ticket entitles purchaser to a dinner or other taxable goods or services, then the ticket price is
taxable, unless (1) the ticket qualifies as an occasional sale or, (2) a portion of the ticket price
reflects a donation.
The price of the dinner is included in the gross proceeds calculation, but the cost of the dinner
is an expense that is deducted from the gross proceeds to calculate the $25,000 net proceed
threshold. The Department will treat that portion of the ticket price that exceeds the fair market
value of the taxable goods or services (e.g., dinner) as a non-taxable donation.2 The portion of
the ticket that reflects a donation is not included in the $25,000 threshold because the donation
was not paid in consideration for the purchase of a taxable item (In the example below, the $25
was the consideration paid for the dinner and the auction price is the consideration paid for the
auctioned item).
For example, a charitable organization sells tickets for a silent auction. The ticket price is $100
and includes a dinner. The fair market value of the dinner is $25. Three hundred tickets are
sold. The ticket states that $75 of the ticket price is a donation.3 The direct cost to the
charitable organization for the dinner is $10/dinner. The silent auction generates $30,000 in
gross proceeds and $20,000 in net proceeds from the sale of auctioned items. The donation
proceeds of $22,500 ($75 X 300) is not taxable because they are gifts. The $22,500 is also not
counted as part of the net proceeds because the donations are not paid in exchange for the
sale of tangible personal property. The net proceeds from the sale of the dinner is $4,500 (300
X ($25-$10)). The net proceeds from the auctioned items and dinner are $24,500 ($20,000 +
$4,500). Because the charity has not exceeded the $25,000 threshold, sales tax is not due on
the net proceeds or on the donations.
It is important to understand that there at least two important consequences of exceeding either
the $25,000 or the twelve days of sale thresholds. If either threshold is exceeded, then tax is
due on (1) the gross proceeds and (2) all sales, including the initial $25,000. For example, if
the silent auction in the example above generated $23,000 in net proceeds, the total amount of
net proceeds for the sale ($23,000 + $4,500 = $27,500) exceeds the $25,000 threshold and the
occasional sale exemption does not apply. Sales tax applies to all sale proceeds, including to
the initial $25,000.4 Sales tax is calculated on the gross price (the price paid by the buyer),5
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See, §39-26-718, C.R.S. and FYI Sales 2 “Sales Tax Exempt Status for Charitable Organizations: Application
Requirements.” You can view this statute, FYI, and forms by visiting the Department’s Web site at
www.Colorado.gov/revenue/tax > Tax Library.
We note that a donation is not subject to sales tax because gifts are not subject to sales tax. Regulation (39-)
26-102.10, “Sale.” Thus, a donation is not subject to tax even if the donation is not used for charitable
purposes. However, if the donations are not used for a charitable purpose, then the organization may lose its
status as a charitable organization.
In order to establish a donation, the charity must establish by competent evidence that the purchaser had intent
to donate.
The exemption for occasional sales is conditional (sales by charitable organizations are exempt “if”) and if the
exemption threshold is exceeded then the condition is not met. A contrary conclusion would lead to the

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which is $30,000 for the auctioned goods and $7,500 ($25 X 300) for the dinner. The
donations ($75 X 300) remain exempt of tax because donations are not taxable.
State-administered local tax jurisdictions have the option to levy sales tax on occasional sales
by charitable entities. Thus, in the example above, local sales tax is due on the gross
proceeds of the auction and dinner, but not on the donation. Department publication DR 1002
lists all state-administered local tax jurisdictions and whether they have elected to tax
occasional sales.6
Miscellaneous
This letter represents the good faith opinion of Department personnel who are knowledgeable
on state taxes issues. However, the Department does not make a specific determination here
on any of the issues raised and the Department is not bound by this general information letter.
The Department administers state and state-administered local sales and use taxes. This
letter does not address sales and use taxes administered by home-rule cities and home-rule
counties. You may wish to consult with local governments which administer their own sales or
use taxes about the applicability of those taxes. Visit our web site at
www.colorado.gov/revenue/tax for more information about state and local sales taxes.
Enclosed is a redacted version of this letter. Pursuant to statute and regulation, this redacted
letter will be made public within 60 days of the date of this letter. Please let me know in writing
within that 60 day period whether you have any suggestions or concerns about this redacted
letter.
Sincerely,
Office of Tax Policy
Colorado Department of Revenue

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unwarranted result of exempting the first $25,000 in net sales of charitable organization even if the organization
regularly engaged the sale of taxable goods.
§39-26-104(1), C.R.S.
You can view this form by visiting the Department’s Web site at www.colorado.gov/revune/tax > Forms > Forms
by Number > DR 1002

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