Can a Colorado educational charity buy meals for attendees at its medical conferences without sales or use tax?

Plain-English summary

The Colorado Department of Revenue concluded that an educational organization's purchases of food for attendees at its medical conferences were made in the conduct of its regular charitable activities and were exempt from sales and use tax, assuming the organization qualified for the charitable-organization exemption.

The attendees paid a flat conference fee that included a meal. The Department considered a rule that normally denies the exemption when a charity buys goods such as food, transfers them to someone else for personal use, and recoups the price. It found that these meals were consumed during the educational conferences, as part of the organization's charitable function, rather than transferred for unrelated personal use.

The ruling addresses that narrow meal-purchase question. The Department expressly declined to decide whether the requester actually qualified as a charitable organization eligible for the exemption.

What this means for you

Educational charities

Food purchased for and consumed during a qualifying educational conference can fall within regular charitable activities, even when attendees pay a flat fee that includes the meal. The organization's own exemption status still needs to be established; this ruling did not establish it.

Conference organizers and accountants

The timing and use of the food mattered. The Department distinguished meals consumed during the conference from goods transferred to attendees for personal use outside the charitable activity. Keep records of the conference purpose and how the food was used.

Common questions

Q: Does charging a conference fee automatically make the meals taxable? A: No. The Department knew the flat fee included a meal, yet found these meals were consumed as part of the educational conferences.

Q: Did the Department approve the organization's charitable status? A: No. It expressly gave no opinion on whether the organization qualified as an eligible charitable organization.

Q: Can another nonprofit rely on this PLR?
A: No. Only the requesting taxpayer may rely on it, and only on its facts.

Citations and references

• § 39-26-718(1), C.R.S. (sales to charitable organizations in regular charitable activities).
• § 39-26-102(2.5), C.R.S. (charitable organizations).
• 1 CCR 201-4, Reg. 39-26-718(2)(d)(i) and (5)(a) (educational purpose and personal-use transfer rule).
• 1 CCR 201-1, Reg. 24-35-103.5 (private letter ruling procedure).

Source

• Official index: Colorado All Letter Rulings.
• Original PDF: PLR-20-002.pdf, dated February 10, 2020.
• The document's opening identifies it as PLR 20-002; its second-page running header instead reads "PLR 20-001." The source does not explain that mismatch.

Original ruling text

Physical Address: Mailing Address:
Office of Tax Policy Analysis Office of Tax Policy Analysis, Room 607 1375 Sherman Street, Room 607 P.O. Box 17087
Denver, CO 80203
Denver, CO 80217-0087

PLR 20-002

February 10, 2020

XXXXXXXXXXX
Attn: XXXXXXXX
XXXXXXXXXXX
XXXXXXXXXXX

Re: Charitable Activities

Dear XXXXXXXXXXX,

You submitted a request for a private letter ruling on behalf of XXXXXXX (“Organization”) to the Colorado Department of Revenue (“Department”) pursuant to 1 CCR 201-1, Reg. 24-35-103.5. This letter is the Department’s private letter ruling. This ruling is binding on the Department to the extent set forth in 1 CCR 201-1, Reg. 24-35-103.5. It cannot be relied upon by any taxpayer other than the taxpayer to whom the ruling is made.

Issue

Is Organization’s purchase of food for attendees at educational conferences it organizes and hosts made in the conduct of its regular charitable functions and activities and therefore exempt from sales and use taxes?

Conclusion

Organization’s purchase of food for attendees at educational conferences it organizes and hosts is made in the conduct of its regular charitable functions and activities and therefore exempt from sales and use taxes.

Background

Organization is a charitable and educational organization under section 501(c)(3) of the Internal Revenue Code. Organization’s mission is, in part, to provide knowledge and diverse learning resources with the goal of improving patient care. To achieve its mission, Organization publishes medical journals and conducts educational conferences for participants engaged in specialized areas of healthcare.

Organization’s educational conferences are designed for medical students and practicing professionals to further their education in an area of specialization and qualify for medical education credits. Organization charges participants a flat fee to attend its educational conferences. Included in the conference fee is a meal that is provided to participants. Organization currently pays applicable state and state-administered sales taxes on the purchase of food for conference participants.

Discussion

Colorado allows a sales tax exemption for “all sales made to charitable organizations, in the conduct of 1 their regular charitable functions and activities.” Charitable organizations in Colorado include any entity 2 that is “organized and operated exclusively for…educational purposes.” Educational purposes include

1
§ 39-26-718(1), C.R.S. See also § 39-26-713(2)(d), C.R.S.
2
§ 39-26-102(2.5), C.R.S.

Page 2

PLR 20-001
February 10, 2020
Page 2
3 instruction or training of individuals for the purpose of improving or developing his or her capabilities. Organization’s conferences serve an educational purpose and are therefore part of Organization’s regular charitable functions and activities. Consequently, purchases made by Organization for its educational conferences are generally made in the conduct of its regular charitable functions and activities.

However, regulation limits the exemption, providing that “[w]henever a charitable organization purchases tangible personal property (such as…food….) that is to be transferred to anyone else for personal use and all or part of the price of the goods is recouped from the user through direct payment…the organization's exempt status does not apply and sales tax must be paid to the vendor by the exempt 4 organization.”

Although Organization recoups the price of food through the fee paid by conference attendees, the food is not transferred to attendees for their “personal use” within the meaning of the regulation. “Personal use” as it is used in the regulation refers to any use by the transferee that is not exclusively in furtherance of the regular charitable functions and activities of the exempt organization. Here, attendees receipt and consumption of food is specifically part of the educational conferences hosted by Organization because the attendees consume the food exclusively during the conferences, which are part of the Organization’s regular charitable functions and activities.

This ruling addresses only the narrow issue of whether Organization’s purchase of food for attendees at conferences it organizes and hosts is made in the conduct of its regular charitable functions and activities. Organization has not requested a ruling, and the Department expresses no opinion, about whether Organization qualifies as a charitable organization eligible for the sales tax exemption.

Miscellaneous

This ruling is premised on the assumption that Company has completely and accurately disclosed all material facts and that all representations are true and complete. The Department reserves the right, among others, to independently evaluate Organization’s representations and assumptions. The ruling is null and void if any such assumption and representation is incorrect and has a material bearing on the conclusions reached in this ruling and is subject to modification or revocation in accordance to 1 CCR 201-1, Reg. 24-35-103.5.

This ruling is binding on the Department to the extent set forth in 1 CCR 201-1, Reg. 24-35-103.5. It cannot be relied upon by any taxpayer other than the taxpayer to whom the ruling is made.

Sincerely,

Office of Tax Policy & Analysis
Colorado Department of Revenue
This ruling cannot be relied upon by any other taxpayer other than the taxpayer to whom the ruling is made.

3
1 CCR 201-4, Reg. 39-26-718(2)(d)(i).
4
1 CCR 201-4, Reg. 39-26-718(5)(a).