Must a school student club that collects donations to buy childrens books for a charity report the money on sales tax returns?

Plain-English summary

A New York public school district asked, on behalf of a student club, whether money the club collects in a fundraiser must be reported on sales tax returns. The club hands donors a form listing childrens book titles and prices; a donor picks the books to donate and pays the club; the club forwards the forms and the money to a 501(c)(3) charity, which buys the books and gives them to children.

The Office of Counsel concluded the collections are not taxable:

• The club is not buying or selling the books — it only solicits and forwards donations.
• Because no sale of tangible personal property occurs (Tax Law section 1101(b)(4)), the donations are not subject to sales tax.
• The charity that receives the money is the actual purchaser of the books.
• So the club does not have to report any of the donations on sales tax returns.

What this means for you

Schools, PTAs, and student clubs running pass-through fundraisers

If you only collect money and pass it to a charity that does the buying, you have not made a taxable sale and have nothing to report on a sales tax return. The key facts are that you never take title to goods and never sell anything to the donor.

The line to watch

If instead the club bought the books itself and sold or transferred them to donors or others, that could be a retail sale and the analysis would change. Structure matters: soliciting donations is not selling.

Common questions

Q: Donors pick specific book titles and pay set prices — isnt that buying a book? A: No. The donor is making a donation toward the charitys book purchases. The club never sells the donor a book; it forwards the money to the charity, which buys the books.

Q: Does the club need to register or file sales tax returns for this? A: Not for this activity. With no sale of tangible personal property, there is nothing to report.

Q: Can we rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law section 1101(b)(4) (definition of retail sale)
• Internal Revenue Code section 501(c)(3) (the receiving charity)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2017.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a17_7s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-17(7)S
Sales Tax
May 1, 2017

Office of Counsel
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S151005C

The Department of Taxation and Finance (“the Department”) received a Petition for Advisory Opinion from REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED (hereinafter “Petitioner”). Petitioner asks whether a student club (which is an exempt organization for New York sales tax purposes) that solicits monetary donations for the purchase of books for children must report the funds collected on quarterly sales tax returns. We conclude that, because the student club is only soliciting donations for the purchase of the books and is not actually selling any books, the club does not need to report the funds collected on sales tax returns. Facts Petitioner is a public school district located in New York. A student club in Petitioner’s school district proposes to participate in a charitable fundraiser with a local charity that is an exempt Internal Revenue Code §501(c)(3) organization. This charity provides books for children. The student club would distribute to potential donors a form listing children’s book titles and the corresponding cost for each book. A donor then completes the form by selecting the books he or she wishes to donate and forwards the form and payment to the student club. The club forwards the forms and collected payments to the charity to buy the books and distribute to recipients. Analysis Here, the student club is not purchasing or selling books, but only soliciting donations from various donors. The club then remits the monetary donations to the charity, which purchases books with the funds received. The donations received by the club are not subject to sales tax as no sale of tangible personal property has occurred. Tax Law Section 1101(b)(4). The charity, to which the donations are forwarded, is the purchaser of the books.

-2-

TSB-A-17(7)S
Sales Tax
May 1, 2017

Therefore, the student club does not need to report any of the donations/funds collected on sales tax returns.

DATED: May 1, 2017
/S/
DEBORAH R. LIEBMAN
Deputy Counsel
NOTE:

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.