Does a church get one tax-free fundraiser a year, and is the charitable portion of a golf-tournament entry fee exempt from sales tax?

Plain-English summary

A firm, acting under a power of attorney for a nonprofit religious organization (a 501(c)(3) church), asked the Department three questions about sales tax on the church's fundraising events — two annual ticketed dinners and a proposed golf tournament with an entry fee well above the value of what participants receive. The Department gave a favorable answer on the free event, but a strict answer on the golf fee.

One tax-free fundraiser a year. The Department confirmed that under K.A.R. 92-19-67, "religious organizations are allowed one fund raising event per year for which no tax is due." So the church gets one annual fundraising event on which it need not collect sales tax.

The church picks which event. Asked whether it can choose which event is the tax-free one, the Department answered "Yes." The church can apply the once-a-year exemption to whichever fundraiser it prefers.

But the golf entry fee is taxed on the full amount — no charitable-contribution deduction. The church's key question was about the golf tournament: it planned to charge an entry fee (e.g., $500) far above the fair market value of the golf, cart, and balls provided (e.g., $100), and asked whether the excess could be treated as a tax-exempt charitable contribution. The Department said no: "The sales tax is based on the gross receipt of the seller [retailer] with no reductions for a charitable contribution." The tax applies to the entire entry fee, not just the fair-market-value portion.

Bottom line: a religious organization gets one tax-free fundraiser per year of its choosing (K.A.R. 92-19-67), but on any taxable event the tax is measured by the full gross receipts — the church cannot carve out the "donation" portion of a high entry fee just because it exceeds the value received.

What this means for you

Churches and religious organizations

You are entitled to one tax-free fund-raising event per year under K.A.R. 92-19-67, and you may choose which event to apply it to. Plan your calendar so the exemption lands on your highest-grossing taxable event.

Don't net out the "donation" portion of a fee

For a taxable event, Kansas taxes your gross receipts. If you charge an entry or ticket price above the value of what attendees receive, you cannot treat the excess as a tax-free charitable contribution — the tax applies to the whole charge. Price and budget accordingly.

Pick the tax-free event deliberately

Because the exemption is limited to one event per year, and the church chooses which, use it on the event where it saves the most tax. Track your fundraisers so you apply the exemption intentionally rather than by default.

Common questions

Q: Does a church get a tax-free fundraiser?
A: Yes. Under K.A.R. 92-19-67, a religious organization is allowed one fund-raising event per year for which no sales tax is due.

Q: Can the church choose which event is tax-free?
A: Yes. The Department confirmed the church may choose which fund-raising event will be the tax-free one.

Q: Can the church treat the above-value part of a golf entry fee as a tax-free donation?
A: No. Sales tax is based on the seller's gross receipts with no reduction for a charitable contribution, so the full entry fee is taxable at a taxable event.

Citations and references

• K.A.R. 92-19-67 — allows a religious organization one fund-raising event per year for which no sales tax is due; the church may choose which event receives the exemption.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2001-088

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

August 17, 2001

XXXXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXXX

Dear XXXXXXXXXX

The purpose of this letter is to respond to your letter dated July 23, 2001. In it, you ask if your client is required to collect and remit Kansas retailers’ sale or compensating taxes on the gross receipts from various fund raising activities.

In your letter you stated:

As evidenced by the enclosed power of attorney, our office represents the above-referenced taxpayer, a non-profit religious organization (the "Church"), with respect to its tax matters. In connection with this representation, and pursuant to K.A.R. § 92-19-59, we hereby request a private letter ruling on a sales tax issue relating to the Church. The facts and issues on which we base this request are set forth immediately below.

FACTS

As indicated above, the Church is a church organized under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). The Church currently sponsors two fund-raising events throughout the year - a XXXX and a XXXXX. The Church sells tickets to these functions for a set amount both in advance of the event and at the door. The purchase of a ticket entitles the holder to a dinner at the function by either dining at the Church or picking up the meal and taking it elsewhere to eat. The Church is considering sponsoring a golf tournament as a third fund-raising function. Participants would be required to pay an entry fee which would entitle them to compete in the tournament and would entitle them to receive other amenities such as a golf cart, a bucket of balls, etc. The fair market value of the items and services provided, however, will be less than the amount of the entry fee. For example, the Church may charge an entry fee of $500.00 when the eighteen (I8) rounds of golf, golf balls, golf cart, etc. had only a fair market value of $ 100.00.

Your letter continues with a series of questions:

The issues on which the Church requests a private letter ruling are as follows:

1. Does K.A.R. § 92-19-67 entitle the Church to one "tax-free" fund-raising event per year?

Answer: Yes, religious organizations are allowed one fund raising event per year for which no tax is due.

2. If the Church is entitled to one "tax-free" fund-raising event per year, is it entitled to choose which fund raising event will be the "tax-free" event?

Answer: Yes.

3. With respect to the golf tournament, is the Church required to collect sales tax on the portion of the entry fee which exceeds the fair market value of the services or would such amount be considered a charitable contribution which would be exempt from sales tax?

Answer: The sales tax is based on the gross receipt of the seller [retailer] with no reductions for a charitable contribution.

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 08/17/2001 Date Modified: 10/11/2001

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