Must state employees informally reselling used books for charity collect Kansas sales tax, and can they give donors a deduction receipt?

Plain-English summary

State-agency employees planned to informally resell donated used books to raise money for a good cause, and asked two things: must they collect sales tax, and can they give donors a deduction receipt? The Department said no sales tax is due, and no deduction receipt should be given.

The facts. "The employees will be acting informally to raise the funds. The funds in question are not collected or accounted for by the agency," and the employees "engages in different kinds of fundraising activities from year to year."

Sales tax — isolated or occasional sale. "Based on this information, your book sale this year would qualify as an isolated or occasional sale. This means that your ad hoc group of employees who raise funds for Good Cause are not required to collect sales tax on the sale of used books."

Deduction receipts — no. On whether donors could get a receipt to claim an income-tax deduction, the Department said "this question is answered by federal law" and "you should not provide donors with such a receipt." "For a donation to be deductible under the internal revenue code, the donation must be made to an qualified organization." Because "the donations are made to your ad hoc group of employees ... [t]hese donations made to your employees is not a donation to Good Cause." The Department enclosed IRS Topic 506.

What this means for you

Informal, one-off charity sellers

A genuinely occasional, informal fundraising sale — not a regular business — can qualify as an isolated or occasional sale in Kansas, meaning no sales tax collection on those receipts. The facts here mattered: informal effort, funds not run through the agency, and varying activities year to year.

Do not hand out deduction receipts you cannot support

If people donate goods to an informal group rather than to a qualified charitable organization, those donations generally are not tax-deductible, and the group should not issue receipts implying they are. Direct donations to the qualified charity itself are the deductible path.

The two questions have different sources of law

Sales-tax collection is Kansas law (the isolated/occasional-sale concept); deductibility is federal income-tax law. The Department answered the first and pointed to the IRS (Topic 506) for the second.

Common questions

Q: Do informal employee fundraiser book sales owe Kansas sales tax?
A: No, on these facts. The Department treated the sale as an isolated or occasional sale, so the ad hoc employee group need not collect sales tax.

Q: Can donors deduct the used books they gave?
A: Generally no. The Department said donations to the ad hoc employee group are not donations to a qualified organization, so they are not deductible, and no receipt should be provided.

Q: How could donations be made deductible?
A: The Department noted that direct donations to the qualified charity ("Good Cause") itself may qualify — but property given to an intermediary group that ultimately benefits the charity does not.

Citations and references

• The Department did not cite a specific Kansas statute. It treated the used-book fundraiser as an isolated or occasional sale, so no Kansas sales tax collection was required. On deductibility it applied federal law — a charitable deduction under the Internal Revenue Code requires a donation to a qualified organization — and enclosed IRS Topic 506; donations to the ad hoc employee group are not deductible.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-2000-036

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

November 28, 2000

XXXX
XXXX
XXXX

RE: Your e-mail inquiry

Dear XXXX:

I have been asked to answer the questions raised in your e-mail that we received earlier this month. You ask if employees of a state agency are required to collect sales tax on used books that they will resell to raise funds for Good Cause. You indicated that the employees will be acting informally to raise the funds. The funds in question are not collected or accounted for by the agency. You also indicate that agency employees engages in different kinds of fundraising activities from year to year.

Based on this information, your book sale this year would qualify as an isolated or occasional sale. This means that your ad hoc group of employees who raise funds for Good Cause are not required to collect sales tax on the sale of used books.

You also ask whether you can provide a receipt to book donors to use to claim a deduction for income tax purposes. This question is answered by federal law. My research indicates that you should not provide donors with such a receipt. For a donation to be deductible under the internal revenue code, the donation must be made to an qualified organization. In your case, the donations are made to your ad hoc group of employees to sell books to raise proceeds to benefit Good Cause. These donations made to your employees is not a donation to Good Cause. While direct donations to Good Cause may qualify for exemption, it does not appear that someone can claim an income tax deduction by donating property to one group even though it may ultimately benefit another organization. I have enclosed a copy of Topic 506 from the IRS website which discusses such contributions in more detail.

I hope that this adequately answers your question. If not, please call me at 296-3081.

Sincerely,

Thomas E. Hatten
Attorney/Policy & Research

Enclosure

Date Composed: 11/29/2000 Date Modified: 10/10/2001

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