If our PAC buys branded t-shirts or tote bags to give supporters in exchange for their donations, do we owe sales or use tax on those items?

Plain-English summary

The Missouri Department of Revenue ruled that a Political Action Committee (PAC) owes Missouri sales or use tax on the branded promotional items — like t-shirts or tote bags — that it plans to give supporters in exchange for their donations. The tax lands on the PAC itself, not on the donor, and it is triggered when the PAC buys the items, not when it later hands them out.

The Department's reasoning rests on how the transaction is classified. Missouri taxes retailers on sales of tangible personal property at retail. But the Department concluded that giving a branded item to a donor is not really a "sale at retail" of that item to the donor — a donor giving money to a PAC isn't treating their donation as the purchase price of a t-shirt, and the PAC isn't in the business of selling gift items. Instead, the Department characterized the PAC as using and consuming the promotional items itself, for advertising purposes, when it distributes them to supporters. Under Missouri law, a business (including a PAC) that uses or consumes tangible personal property owes the tax on it just like any other consumer would.

The practical effect: the PAC must pay Missouri sales tax when it buys the promotional items from an in-state vendor, and if it instead buys them from an out-of-state vendor, it must accrue and remit Missouri use tax on the purchase price itself.

What this means for you

Political action committees and campaign organizations

If your PAC or campaign committee plans to buy branded merchandise (shirts, bags, buttons, stickers, etc.) to thank or reward donors, budget for sales tax (if bought from a Missouri vendor) or use tax (if bought from an out-of-state vendor) on the purchase price. You are the one who owes the tax as the "user and consumer" of the items — this is not something you collect from the donor, and the donation itself is not treated as a taxable retail sale.

Nonprofits running similar donor-premium programs

The same logic — that giving away branded items in appreciation of a contribution is "use and consumption" for advertising rather than a retail sale — could apply to other membership or advocacy organizations that offer thank-you gifts for donations, not just PACs. The key facts here were that the item was not marketed or priced as merchandise and the donor's payment wasn't understood as its purchase price.

Accountants and tax professionals advising political or nonprofit clients

Track and self-assess sales/use tax at the point the organization purchases promotional items, under Section 144.020, RSMo (in-state purchases) or Section 144.610, RSMo (out-of-state purchases requiring use tax accrual). Because the ruling treats the organization as the taxable "consumer," normal resale-certificate treatment does not apply to these purchases.

Common questions

Q: Does the PAC charge sales tax to the donor when handing over the gift item?
A: No. The ruling does not treat the donor as buying the item at retail, so there is no tax to collect from the donor. Instead, the PAC itself owes sales or use tax on its own purchase of the promotional items.

Q: What's the difference between sales tax and use tax here?
A: Sales tax under Section 144.020, RSMo applies when the PAC buys the promotional items from a Missouri seller. Use tax under Section 144.610, RSMo applies instead when the PAC buys the same kind of items from an out-of-state seller, and the PAC must accrue and remit it directly.

Q: Can any other organization rely on this ruling?
A: No. Under Section 536.021.10, RSMo and 12 CSR 10-1.020, this letter ruling binds the Department only as to the requesting Applicant, only for three years from its date, and only so long as the facts and the underlying law don't change. Another PAC or nonprofit with similar facts would need its own ruling to have the same assurance, though this ruling shows how the Department is likely to reason.

Q: Would the answer change if the PAC sold the merchandise instead of giving it away for donations?
A: The ruling doesn't address that scenario directly, but the reasoning here turns on the gift not being priced or understood as a purchase; an organization that actually sells branded merchandise at a stated price would likely be making a taxable retail sale to the buyer instead, a different transaction than the one analyzed here.

Q: Does it matter whether the donation amount is bigger or smaller than the value of the gift?
A: The ruling notes that supporters likely do not view their donation as reflecting the fair market value of the item received, and that the object of the transaction is to support the Applicant's activities, not to buy merchandise — so the size of the donation relative to the gift's value wasn't treated as determinative.

Citations and references

Statutes and regulations:

• Section 536.021.10, RSMo (letter ruling procedure)
• 12 CSR 10-1.020 (letter ruling regulation)
• Section 144.020 / 144.020.1, RSMo (sales tax imposed on retailers of tangible personal property at retail)
• Section 144.610, RSMo (use tax on storage, use, or consumption of tangible personal property in Missouri)

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8357

Original ruling text

Dear Applicant:

This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated April 8, 2025.

The facts as presented in your letter ruling request are summarized as follows:

Applicant is a registered Political Action Committee with the Missouri Ethics Commission (MEC). Applicant accepts donations from supporters that are reported to the MEC along with their expenses. Applicant is planning on offering branded gift items such as t-shirts or tote bags to their supporters in exchange for their donations.

ISSUE :

Are the branded gift items offered to supporters in exchange for their donations subject to tax?

RESPONSE :

Yes. Applicant would be responsible for paying sales tax on their purchases of promotional gift items made in-state in accordance with Section 144.020, RSMo, and for accruing and remitting use tax in accordance with Section 144.610, RSMo, on promotional gift items purchased outside the State of Missouri.

Section 144.020.1, RSMo, states:

A tax is hereby levied and imposed…upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state.

Applicant should pay sales tax on their initial purchases of the promotional gift items that occurred in the State of Missouri. For the purchases of gift items out-of-state, Applicant should collect, and remit use tax specified in Section 144.610, RSMo, which states:

A tax is imposed for the privilege of storing, using or consuming within this state any article of tangible personal property…in an amount equivalent to the percentage imposed on the sales price in the sales tax law in section 144.020.

The promotional gifts given to Applicant’s supporters in exchange for donations are not “sold at retail,” but rather are used or consumed by the Applicant for advertising purposes. Supporters likely do not contemplate that the amount of their donation to Applicant represents the fair market value of the tangible personal property being received. The object of the transaction is to support the Applicant’s activities, not to buy a t-shirt or tote bag.

Instead, Applicant is using and consuming the tangible personal property by gifting it to their supporters in appreciation of their donations, and Applicant gains the benefit of advertising their branded products. Applicant would be responsible for accruing and remitting the applicable sales tax under Section 144.020 or use tax under Section 144.610, RSMo.

This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change.   For this reason, the interpretation set forth above should be reviewed on a regular basis.   Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

Should additional information be needed, please contact Associate Counsel J. Ross Shelton, General Counsel’s Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone 573-751-0961), or me.

Sincerely,

Trish Vincent