NY TSB-A-20(41)S Sales Tax 2020-10-13

Must a 501(c)(3) charity collect sales tax at a two-day annual fundraiser on its own goods and on goods it sells for absent vendors?

Short answer: It depends on whose goods are sold. The charity's sales of its own items at a two-day annual fundraiser are exempt, because a once-a-year event isn't a 'shop or store' operated with regularity, frequency, and continuity. But when the charity sells goods on consignment for non-exempt vendors who aren't present, it acts as their agent or co-vendor, so those sales are taxable — and the charity must collect and remit the tax (not return it to the vendors), and is jointly liable for it.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

A § 501(c)(3) charity, registered as a New York exempt organization, holds a two-day annual fundraiser. It sells some of its own items and also sells tangible personal property on consignment for vendors who don't attend, keeping a commission and remitting the rest (plus tax) to those vendors. It asked whether it must collect sales tax on each.

The Office of Counsel split the answer:

The charity's own sales are exempt. Exempt organizations don't charge sales tax on their sales, except sales made from a shop or store the organization operates. A "shop or store" is a place where goods are sold from display with regularity, frequency, and continuity. A two-day annual event lacks that frequency and continuity, so it isn't a shop or store — and the charity's sales of its own items are exempt. (If it already collected tax on those, it can seek a refund under § 1139, but only after refunding the tax to its customers.)
The consignment sales for absent vendors are taxable. When the charity sells goods on consignment for non-exempt vendors, it acts as their agent or co-vendor. Those sales don't get the charity's exemption — they're taxable regardless of the shop-or-store question — and, as a co-vendor, the charity is jointly responsible for the tax. So it must collect the tax and remit it to the Department, rather than passing the collected tax back to the vendors.

What this means for you

Charities and nonprofit fundraisers

Your own merchandise sold at an occasional event (like a once-a-year sale) is generally exempt — an infrequent event isn't a taxable "shop or store." But the picture flips when you sell other people's goods: selling on consignment for taxable vendors makes you a co-vendor who must collect and remit the tax.

Nonprofits running gift shops or recurring sales

Regular, continuous selling is a shop or store, and those sales are taxable even though you're exempt. Frequency and continuity are what matter.

Accountants and tax professionals

Two tests: (1) § 1116(b)(1) shop-or-store via the regularity/frequency/continuity standard in 20 NYCRR 529.7(i)(2); and (2) co-vendor/agency liability under § 1101(b)(8)(ii)(A) for consignment sales of non-exempt vendors' goods (Nassau County Museum of Art; Jericho Boats).

Common questions

Q: Does our charity have to charge tax on items we sell at our annual fundraiser?
A: Not on your own items — a two-day annual event isn't a "shop or store," so those sales are exempt.

Q: What about goods we sell on consignment for outside vendors?
A: Those are taxable. You're acting as the vendors' agent/co-vendor, so you must collect the tax and remit it to the Department.

Q: We already collected tax on our own sales by mistake — can we get it back?
A: You can apply for a refund under § 1139, but only after you refund the tax to the customers who paid it.

Q: Would a year-round gift shop be treated the same way?
A: No. Regular, continuous selling is a "shop or store," so those sales would be taxable even though you're an exempt organization.

Q: Can I 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 § 1105 (sales tax on sales of tangible personal property)
Tax Law § 1116(b)(1) (exempt-org sales taxable if made from a shop or store it operates)
Tax Law § 1101(b)(8)(ii)(A) (co-vendor/agent treated as a vendor)
Tax Law § 1139 (refund procedure, requires refund to customers first)
20 NYCRR 529.7(i)(2) (definition of shop or store: regularity, frequency, continuity)
TSB-A-13(29)S; TSB-A-03(34)S (Nassau County Museum of Art); Matter of Jericho Boats of Smithtown v. State Tax Commission, 144 AD2d 163 (3d Dep't 1988); Publication 843; TB-ST-350

Source

Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales-ao-2020.htm
Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a20-41s.pdf

Original ruling text

New York State Department of Taxation and Finance
Office of Counsel

TSB-A-20(41)S
Sales Tax
October 13, 2020

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION
The Department of Taxation and Finance received a Petition for Advisory Opinion from
the [ REDACTED ] (“Petitioner”). Petitioner asks whether it must collect sales tax at an
annual fundraising event for both the products it sells and sales made on behalf of vendors who
are not present at the event.
We conclude that Petitioner’s sales of its own products at the annual fundraiser are
exempt from sales tax as those sales do not constitute sales from a shop or store operated by an
exempt organization. However, sales on consignment from contributing vendors, who do not
attend the event, are subject to taxation because Petitioner is acting as an agent or co-vendor of
these vendors.
Facts
Petitioner is an exempt organization under IRC § 501(c)(3) and is registered as an exempt
organization for New York State sales tax purposes. Petitioner holds an annual two day
“[ REDACTED ]” fundraiser where Petitioner sells tangible personal property on behalf of
vendors who are not present at the fundraiser. On these sales, Petitioner retains a commission
and remits the balance of the proceeds, plus sales tax, to the vendors. Petitioner also sells its own
items at the fundraiser and collects and remits sales tax on those sales.
Analysis
Tax Law § 1105 imposes sales tax on all sales of tangible personal property. However,
Tax Law § 1116 provides that sales of tangible personal property by exempt organizations are
not subject to sales tax, with some exceptions, such as sales of tangible personal property by any
shop or store operated by the exempt organization. See Tax Law § 1116(b)(1). A shop or store is
“any place or establishment where goods are sold from display with a degree of regularity,
frequency and continuity…” 20 NYCRR 529.7(i)(2) (emphasis added). A two-day annual event
lacks the frequency and continuity required to constitute the operation of a shop or store within
the meaning of the Tax Law. Thus, Petitioner’s sales of its own items at the fundraiser are
exempt from sales and compensating use tax. See TSB-A-13(29)S and Publication 843 A Guide
to Sales Tax in New York State for Exempt Organizations. If Petitioner has collected sales tax on
these sales, Petitioner can apply to the Department for a refund pursuant to Tax Law § 1139
within the time periods provided by that section, but only if it can demonstrate that it first
refunded the tax to its customers. See TB-ST-350, How to Apply for a Refund of Sales and Use
Tax.

-2-

TSB-A-20(41)S
Sales Tax
October 13, 2020

Notwithstanding the fact that Petitioner’s own sales are not subject to sales tax, its sales
of tangible personal property consigned to it by vendors are subject to sales tax. Such sale
arrangements result in a co-vendor or agency relationship on behalf of the non-exempt vendor
and, therefore, the Petitioner must collect sales tax on those sales whether or not the sales are
made by a shop or store operated by Petitioner. See, e.g., Nassau County Museum of Art, TSB-A03(34)S. Furthermore, as a co-vendor, Petitioner is jointly responsible for the taxes due on the
sales made on behalf of the consignors. Accordingly, Petitioner must collect sales tax and remit
that tax to the Department for sales made on behalf of the absent vendors, rather than returning
the collected tax to these vendors See Tax Law § 1101(b)(8)(ii)(A); Matter of Jericho Boats of
Smithtown, Inc. v. State Tax Commission, 144 AD 2d 163 (3d Dep’t 1988).
DATED: October 13, 2020

/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.