Can a tax-exempt PTA sell school supplies to students without collecting NY sales tax, and under what conditions?

Plain-English summary

The petitioner is an elementary-school PTA, a 501(c)(3) recognized as a New York sales-tax exempt organization. As a minor fundraiser (and convenience for students), volunteers occasionally sell school supplies like pencils from a corner of the cafeteria. The PTA has always collected sales tax, but asked whether any circumstances would let it sell to students without collecting tax -- e.g., selling only a few times a year, selling at/below cost, paying tax on its own purchases, or selling only a "bare minimum" of items.

The Office of Counsel concluded mostly it must collect, with one exception:

• Exempt status doesn't cover a "shop or store." An exempt organization's exemption does not extend to retail sales it makes from a shop or store (Tax Law 1116(b)(1)). A "shop or store" is any place where goods are sold from display with a degree of regularity, frequency and continuity (20 NYCRR 529.7(i)(2)(i)).
• The exception: sporadic sales. If the PTA sells only four or five times a year on no particular schedule, those sales are sporadic and infrequent -- not from a shop or store -- so it need not collect sales tax (TSB-A-97(36)S).
• The other ideas don't work:
  • No school-supply exemption. The Tax Law has no exemption for school supplies; retail sales of them are taxable.
  • At/below cost doesn't matter. Nothing excludes tax when items are sold at or below cost.
  • "Bare minimum" of items doesn't matter. Selling only pencils or few items doesn't avoid the tax.
  • Prepaying tax on purchases doesn't help. Paying tax on its own purchases doesn't change the duty to collect on regular sales. (In fact, the PTA's purchases for resale are exempt -- it should give vendors a resale certificate -- and its other purchases are exempt as an exempt organization.)

What this means for you

PTAs, booster clubs, and school/charity groups

Your organization's exemption protects your purchases, not necessarily your sales. Sell goods regularly from a table/display and you're running a "shop or store" that must collect sales tax. The only easy out is keeping sales genuinely occasional -- a handful of times a year, off-schedule.

Buy for resale with a certificate

If you're operating a shop/store, buy your inventory tax-free for resale using a resale certificate, then collect tax from students -- don't pay tax twice.

Common questions

Q: We're tax-exempt -- why collect tax on what we sell? A: The exemption doesn't cover retail sales from a shop or store. Regular sales from display require collecting tax.

Q: Is there any way to sell to students tax-free?
A: Only by keeping it sporadic -- about four or five times a year on no set schedule. Then it's not a shop or store.

Q: Does selling at cost, or only pencils, exempt us? A: No. There's no exemption for school supplies, selling price, or small volume. Regularity is what creates the duty.

Citations and references

• Tax Law section 1116(b)(1) (exempt-org exemption doesn't cover sales from a shop or store)
• Tax Law section 1116(a)(4) (exempt organizations)
• Tax Law section 1101(b)(4) (definition of retail sale; resale)
• 20 NYCRR section 529.7(i)(2)(i) (definition of shop or store)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2013.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a13_29s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-13(29)S
Sales Tax
September 9, 2013

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S120806B

The Department of Taxation and Finance received a Petition for Advisory Opinion from name and address redacted. Petitioner, an elementary school PTA, asks whether there are circumstances under which it may display and sell items subject to the sales tax to students at the school without being required to collect and remit sales taxes under the Tax Law. We conclude that the Petitioner would have to collect sales tax in most of the circumstances it suggests. However, if Petitioner makes sales from the school cafeteria only four or five times during the school year on no particular schedule, its sales would not be considered sales made from a shop or store because they lack the required regularity and continuity. Petitioner, which has been granted exempt organization status for sales tax purposes by the Department, would not be required to collect and remit sales tax to the Department on these occasional sales. Facts Petitioner is a not-for-profit organization, recognized as such by the IRS under IRC
§ 501(c)(3), and is recognized as an exempt organization for New York State sales tax purposes. Petitioner’s exempt purpose is to enrich the programs and promote the welfare of the students at the elementary school. As one of its activities, Petitioner occasionally sells school related items (e.g., pencils) on school property during the school day. This is a minor fundraiser for Petitioner, but it also provides a service to students by offering easy access to purchase needed school supplies. The sales occur in a corner of the cafeteria and are conducted entirely by volunteers. Petitioner always considered these sales to be subject to sales tax and is current in its sales tax filings and remittances. However, over time, Petitioner repeatedly has been advised by tax professionals and others that it would not be required to collect sales tax under various circumstances, including:
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Not operating on a regular basis (i.e., operating only four or five times during the school year on no particular schedule);

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TSB-A-13(29)S
Sales Tax
September 9, 2013

Selling items at or below cost;
Paying sales tax on its purchase of the items to be resold to students; or By selling only a bare minimum of items (e.g., only pencils), thereby not being a “retail establishment.”

Petitioner asks whether these or any other circumstances would allow a not-forprofit organization to have goods available for display and sale to students, without being required to collect and remit sales tax. Analysis While Petitioner is an exempt organization for sales tax purposes, its exemption does not extend to retail sales of tangible personal property made from a “shop or store” it operates. See Tax Law § 1116(b)(1). A “retail sale” is defined in Tax Law § 1101(b)(4) as “[a] sale of tangible personal property for any purpose” other than for certain specified purposes such as resale. A “shop or store” includes “any place or establishment where goods are sold from display with a degree of regularity, frequency and continuity . . .” 20 NYCRR § 529.7(i)(2)(i). If Petitioner sells items in the school only four or five times during the school year on no particular schedule, its sales would not be considered sales made from a shop or store, because the sales would not be considered to be made with a degree of regularity and continuity. Such sales would be “sporadic and infrequent.” See TSB-A-97(36)S. The other circumstances mentioned by Petitioner would not relieve it from its responsibility to collect and remit sales tax. Petitioner did not detail what kind of school supplies it sells, except for pencils, but the Tax Law does not provide a sales tax exemption for school supplies. Tax Law § 1105 imposes sales tax on the receipts from every retail sale of tangible personal property, except as otherwise provided; for example, there is no tax on sales of items purchased for resale. “Receipt” is defined as “[t]he amount of the sale price of any property . . . valued in money, whether received in money or otherwise, including any amount for which credit is allowed by the vendor to the purchaser, without any deduction for expenses or early payment discount . . .” Tax Law § 1101(b)(3). “Sale, selling, or purchase” mean “any transaction in which there is a transfer of title or possession, or both, of tangible personal property for a consideration.” See 20 NYCRR § 526.7(a)(1). There is nothing in the law or regulations excluding the imposition of sales tax when an item is sold at or below cost, or when only a “bare minimum” of items are sold. With respect to the suggestion that Petitioner pay sales tax on its own purchase of the items to be resold to students, the payment of tax by Petitioner would not alter its obligations to collect and remit tax when its sales to students are deemed to be from a “shop or store” as discussed above. Further, we note that Petitioner’s purchases are exempt from sales and use taxes, either because Petitioner is an exempt organization (Tax Law § 1116(a)(4)) or because the purchases would be for resale if Petitioner is operating a shop or store (Tax Law § 1101(b)(4)(i)(A)). When Petitioner is purchasing items for

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TSB-A-13(29)S
Sales Tax
September 9, 2013

resale, it should provide the vendor with a properly completed resale certificate (20 NYCRR § 526.6(c).)

DATED: September 9, 2013

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts set forth therein and is binding on the Department only with respect to the person or entity to whom it is issued and only if the person or entity fully and accurately describes all relevant facts. An Advisory Opinion is based on the law, regulations, and Department policies in effect as of the date the Opinion is issued or for the specific time period at issue in the Opinion. The information provided in this document does not cover every situation and is not intended to replace the law or change its meaning.