Does a tax-exempt museum have to collect sales tax on proceeds from its charity auctions, and does the answer change depending on whether the art is donated to the museum outright versus loaned to it on consignment, or whether the museum's own staff or an outside professional runs the auction?

Plain-English summary

The Nassau County Museum of Art, a federally tax-exempt charity, holds one to three fundraising auctions a year, mostly selling artwork donated by members and others, but occasionally selling artwork loaned to it "on consignment" (where the original owner gets an agreed-upon share of the sale price and the museum keeps the rest). Auctions are sometimes run by the museum's own staff and sometimes by a hired professional auctioneer, with all buyers being individuals (no dealers). The museum asked whether it needs to collect sales tax across these different combinations.

The Department's answer turns on a single distinction: who owns the property being auctioned?

• Donated items (museum owns them): Title passes to the museum with no consideration, so the museum is selling its own property. New York generally exempts an eligible charity's sales from sales tax (§ 1116(a)(4)) — except sales made through a "shop or store," which the regulations define as a place selling goods on a regular, frequent, continuing basis. An auction doesn't fit that definition (it's a fundamentally different sale mechanism, governed by its own body of auction law), so auction sales of the museum's own donated property are not taxable, whether the museum's employees or an outside professional auctioneer conducts the sale — as long as, if a professional auctioneer is used, the invoice shows the museum as the seller (or the auctioneer keeps records proving it acted merely as the museum's agent).
• Consigned/loaned items (original owner still owns them): A consignment arrangement creates an agency relationship — the museum (or its auctioneer) is acting as the original owner's sales agent, not selling its own property. Since that original owner isn't a tax-exempt charity, the museum (or auctioneer) making that sale on the owner's behalf must collect sales tax on the proceeds, regardless of whether the museum's employees or a professional auctioneer runs the sale, and regardless of the "shop or store" exclusion (which is irrelevant here since this isn't the museum selling its own exempt property in the first place).

What this means for you

Charitable organizations running fundraising auctions

The tax-exempt "shop or store" carve-out only reaches your organization's own donated property — it doesn't extend to items you're merely helping someone else sell on consignment. Track ownership of each auction lot carefully (donated vs. consigned) since the tax treatment genuinely differs.

Museums and nonprofits using professional auctioneers

Make sure invoices for your own donated items show your organization as the seller (not just the auctioneer) — if the auctioneer's name is the only one on the invoice, the sale is presumed taxable unless the auctioneer keeps records proving it was acting as your agent.

Accountants and tax professionals

This opinion is a clean two-part framework: (1) an exempt charity's own-property auction sales escape the "shop or store" carve-out because auctions aren't shops or stores, and (2) consignment sales are analyzed as agency sales on behalf of a non-exempt owner, regardless of who's conducting the auction.

Common questions

Q: Are all of a charity's auction sales tax-exempt?
A: No — only sales of property the charity actually owns (e.g., items donated to it outright). Sales of consigned or loaned items, where someone else retains ownership and receives a share of proceeds, are taxable.

Q: Does hiring a professional auctioneer change the tax treatment?
A: Not by itself — the key question is who owns the item being sold, not who conducts the sale. But for donated items, the invoice should reflect the museum as seller (or the auctioneer should keep proof of acting as the museum's agent) to preserve the exemption.

Q: Is an auction the same as a "shop or store" for tax-exempt organization purposes?
A: No — an auction sale to the highest bidder, governed by its own body of law (e.g., UCC § 2-328), is inherently different from selling goods on a regular, continuing basis from a shop or store.

Q: Can another nonprofit rely on this ruling for its own auctions?
A: No — it's limited to this museum's specific facts; another organization should confirm its own facts (especially around consignment terms and auctioneer arrangements) with its own advisory opinion if uncertain.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(8)(i) (vendor definition)
• Tax Law § 1105(a) (retail sales tax)
• Tax Law § 1116(a)(4) (charitable organization exemption), § 1116(b)(1) (shop-or-store carve-out)
• Tax Law § 1132(c)(1) (presumption of taxability)
• 20 NYCRR § 526.10 (vendor; co-vendor rules, Example 1)
• 20 NYCRR § 529.1(f), (g) (exempt organization revocation and restrictions)
• 20 NYCRR § 529.7(i)(2) (shop or store definition, Examples 1-2)
• Uniform Commercial Code § 2-328 (auction sales); General Business Law, Article 3 (auctioneers)

Cases referenced:

• Estate of Friedman, 91 Misc. 2d 201 (1977)
• Matter of Friedman, 64 AD2d 70 (1978)
• In Re Majority of Directors of James Chambers, 17 App. Div. 340 (1897)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2003.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a03_34s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-03(34)S
Sales Tax
September 3, 2003

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S010905A

On September 5, 2001, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Nassau County Museum of Art, One Museum Drive, Roslyn Harbor,
New York, 11576.
The issues raised by Petitioner, Nassau County Museum of Art, are whether sales tax is
required to be collected on the proceeds from the auction sale of artwork and other items where the
items:
1) are donated to Petitioner and sold at live and silent auctions where either
a. Petitioner’s employees conduct the auction, or
b. the auction is conducted by a professional auctioneer, or
2) are consigned to Petitioner and sold at live and silent auctions where either
a. Petitioner’s employees conduct the auction, or
b. the auction is conducted by a professional auctioneer.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is a charitable organization, and is exempt from federal income tax under section
501(c)(3) of the Internal Revenue Code and from sales tax under section 1116(a)(4) of the Tax Law.
Petitioner conducts from one to three auctions each year. Petitioner currently conducts the auctions
using its employees and does not use an outside auctioneer. The majority of the items are pieces of
artwork donated by members and others. Some artwork is loaned to Petitioner on a consignment
basis, with the understanding that the consignor receives a portion of the auction price (which is
stipulated in advance of the auction), and Petitioner receives the remainder. All purchasers of these
auction items are individuals. There are no dealers participating in these auctions.
Applicable Law and Regulations
Section 1101(b)(8)(i) of the Tax Law provides, in part:
The term "vendor" includes:

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(A) A person making sales of tangible personal property or services, the
receipts from which are taxed by this article;
Section 1105 of the Tax Law provides, in part:
Imposition of sales tax
On and after June first, nineteen hundred seventy-one, there is hereby
imposed and there shall be paid a tax of four percent upon:
(a) The receipts from every retail sale of tangible personal property, except
as otherwise provided in this article.
Section 1116 of the Tax Law provides, in part:
(a) Except as otherwise provided in this section, any sale . . . by . . . any of
the following . . . shall not be subject to the sales and compensating use taxes
imposed under this article:
*

*

*

(4) Any corporation, association, trust, or community chest, fund, foundation,
or limited liability company, organized and operated exclusively for religious,
charitable, scientific, testing for public safety, literary or educational purposes, or to
foster national or international amateur sports competition (but only if no part of its
activities involve the provision of athletic facilities or equipment), or for the
prevention of cruelty to children or animals, no part of the net earnings of which
inures to the benefit of any private shareholder or individual, no substantial part of
the activities of which is carrying on propaganda, or otherwise attempting to
influence legislation, (except as otherwise provided in subsection (h) of section five
hundred one of the United States internal revenue code of nineteen hundred fifty­
four, as amended), and which does not participate in, or intervene in (including the
publishing or distributing of statements), any political campaign on behalf of any
candidate for public office;
*

*

*

(b) Nothing in this section shall exempt:
(1) retail sales of tangible personal property by any shop or store operated by
an organization described in paragraph (4) . . . of subdivision (a) of this section;

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Section 1132(c)(1) of the Tax Law provides, in part:
For the purpose of the proper administration of this article and to prevent
evasion of the tax hereby imposed, it shall be presumed that all receipts for property
or services of any type mentioned in subdivisions (a), (b), (c) and (d) of section
eleven hundred five . . . are subject to tax until the contrary is established, and the
burden of proving that any receipt, amusement charge or rent is not taxable
hereunder shall be upon the person required to collect tax . . . .
Section 526.10 of the Sales and Use Tax Regulations provides, in part:
Vendor. [Tax Law, 1101(b)(8)]
(a) Persons included.
(1) (i) A person making sales of tangible personal property the receipts from
which are subject to tax is a vendor.
Example 1: Auctioneers, door to door salesmen, independent brokers, and
operators of service stations, retail stores, restaurants, etc., are vendors.
*

*

*

(e) Co-vendor.
(1) Every person . . . operating as an independent contractor representing a
particular supplier selling tangible personal property is a vendor for sales tax
purposes and must collect tax on merchandise sold by him.
(2) (i) Such person shall undertake all of the responsibilities of a vendor, as
listed in subdivision (b) of this section. The person supplying the merchandise to
him is also deemed to be a vendor, and shall undertake all of the responsibilities, as
listed in subdivision (b) of this section.
(ii) Both the representative and his supplier shall be jointly responsible for
the collection and remitting of the taxes and filing of returns.
Section 529.1 of the Sales and Use Tax Regulations provides, in part:
*

*

*

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(f) The exempt status of an organization may be revoked for any reason
constituting misuse of the exemption granted, or if it is discovered that the
organization's application contained misleading or deceptive information, or if the
organization has changed its purposes, activities or organizational structure without
notifying the Taxpayer Assistance Bureau as provided by section 529.7(g) of this
Part.
(g) An officer, employee or member of any organization described in this
Part may not make tax exempt purchases or sales for the benefit of a nonexempt
private entity. . . .
Section 529.7(i)(2) of the Sales and Use Tax Regulations provides, in part:
Retail sales of tangible personal property made by any shop or store operated
by an exempt organization described in section 1116(a)(4) . . . are subject to the sales
and use tax. A shop or store as used in this section includes any place or
establishment where goods are sold from display with a degree of regularity,
frequency and continuity as well as any place where sales are made through a
temporary shop or store located on the same premises as persons required to collect
tax. . . .
Example 1: An exempt organization owning a fleet of automobiles decides
to sell, at auction, a number of the automobiles. The automobiles sold at the
auction are not subject to sales or use tax.
Example 2: An exempt organization operates a gift shop and book store.
Sales made by such shop or store are taxable.
Opinion
Petitioner is a charitable organization, exempt from federal income tax under section
501(c)(3) of the Internal Revenue Code and from sales tax under section 1116(a)(4) of the Tax Law.
Petitioner conducts from one to three auctions each year. Petitioner wishes to ascertain whether or
not it is required to collect sales tax on the proceeds from the sale of donated artwork, consigned
artwork and other items sold at live and silent auctions conducted by Petitioner’s employees or by
a professional auctioneer.
Issue 1
Donated property is property for which title is transferred to the exempt organization without
consideration. The Tax Law provides that retail sales of tangible personal property by an
organization exempt under section 1116(a)(4) of the Tax Law are not subject to sales tax unless such

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sales are made by a shop or store operated by such an organization. A “shop or store” is defined in
section 529.7(i)(2) of the Sales and Use Tax Regulations as any place or establishment where goods
are sold from display with a degree of regularity, frequency and continuity as well as any place
where sales are made through a temporary shop or store located on the same premises as persons
required to collect tax.
Auction sales of Petitioner’s own property, including donated items, conducted by
Petitioner’s employees are not sales from a “shop or store” as defined above. Items sold at auction
are sold to the highest bidder pursuant to the rules of the auction and in compliance with the laws
concerning auctions. See Uniform Commercial Code section 2-328, General Business Law,
article 3, statutory provisions respecting auctions and auctioneers. These sales are inherently
different from sales at a shop or store and, therefore, auction sales are not considered to be sales
from a shop or store. Thus, receipts from auction sales conducted by Petitioner’s employees are not
subject to sales tax. See section 529.7(i)(2) of the Sales and Use Tax Regulations.
If a professional auctioneer is hired by Petitioner to conduct an auction of items donated to
(and therefore owned by) Petitioner and is paid a flat fee for his or her services, and invoices for the
sale of the auctioned items show Petitioner as the seller, Petitioner need not collect tax on the
receipts from such sales. If the auctioneer acts as agent for or co-vendor with Petitioner, and makes
sales of property owned by Petitioner, such sales are not subject to the tax. If, however, the
auctioneer is the only name appearing on the sales invoice issued to the purchaser, the sale will be
presumed to be taxable. The auctioneer, in that case, must maintain records sufficient to establish
that it was merely acting as an agent of Petitioner in regard to that sale in order for the sale to be
exempt. See section 1132(c)(1) of the Tax Law.
Issue 2
The loan of goods to an exempt organization on a consignment basis results in the creation
of an agency relationship. The consignee (here the exempt organization) becomes the agent of the
consignor for the purpose of making sales of the consignor's property, and is obligated to account
to the consignor for the proceeds. In Estate of Friedman, 91 Misc. 2d 201 (1977), the court stated
that “It is axiomatic that a consignment for sale is quite distinct, in principle, from a sale. On the
one hand, if the provisions of a contract are such that title to the subject matter passes absolutely
from one party to the other and a correlative obligation to pay the purchase price is imposed, the
contract should be construed to be a contract of sale. . . . On the other hand, even though a contract
contains a recitation denoting passage of title and payment of purchase price, if it appears from all
the terms of the contract that the buyer is required to act in a fiduciary capacity and as such account
to the other party for the proceeds of a sale, the contract is one of consignment for sale. . . .” Cf.,
Matter of Friedman, 64 AD 2d 70 (1978); In Re Majority of Directors of James Chambers, 17 App.
Div. 340 (1897). Accordingly, if Petitioner acts as agent for a non-exempt seller by accepting
tangible personal property on a consignment basis for sale and thereby makes taxable sales, it must

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collect sales tax on receipts from such sales at auction, regardless of whether these sales constitute
sales made by a shop or store.
Since either Petitioner or the auctioneer acts as agent for a non-exempt entity by accepting
tangible personal property on a consignment basis for sale, Petitioner or the auctioneer must collect
sales tax on receipts from such sales at auction.

DATED: September 3, 2003

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.