Does a tax-exempt youth softball league have to charge sales tax on food and drinks sold at its concession stand?

Plain-English summary

A 501(c)(3) youth softball league with a New York exempt-organization certificate runs a concession stand during its season, selling water, soda, candy, hot dogs, and pizza, mostly to the players. It asked whether those sales are taxable. The answer is yes.

Being a tax-exempt organization exempts many of an organization's purchases and some of its sales — but not sales of prepared food and drink. New York's Tax Law § 1116(b) carves several things out of the exempt-organization exemption, and § 1116(b)(2) specifically says that food and drink sold "in or by a restaurant, tavern, or other establishment" is taxable even when the seller is an exempt organization. Tax Law § 1105(d) taxes receipts from food and beverages sold by such establishments. A concession stand is exactly that kind of establishment — the Department's own Publication 843 even uses a girls' youth softball league concession stand as the textbook example. So the league must register for sales tax, collect, and remit on its concession sales.

The opinion also notes the mechanics: if you give a receipt, state and separately show the tax; if you don't give receipts (typical at a concession window), you can use the unit-price method — post a sign telling customers that the price of all taxable items includes sales tax — and back the tax out of your gross.

What this means for you

Nonprofits, leagues, PTAs, booster clubs

Your exempt status does not let you sell concession food and drinks tax-free. If you run a concession stand, snack bar, or similar food sale with regularity, you generally must register for sales tax and collect on those sales. This is one of the most common nonprofit sales-tax surprises.

How to handle tax at a concession window

Either separately state the tax on receipts (20 NYCRR 532.1(b)(1)) or, if you don't issue receipts, use the unit-price method: post a sign that the displayed prices include sales tax, then remit the tax portion (20 NYCRR 532.1(b)(4)).

Accountants advising exempt organizations

Distinguish exempt purchases (still generally exempt) from taxable sales of prepared food/drink under § 1116(b)(2) and § 1105(d). Occasional fundraising-sale exceptions exist elsewhere, but a regularly operated concession stand is a taxable "establishment." See Publication 843.

Common questions

Q: We're a 501(c)(3). Do we really owe sales tax on concession sales? A: Yes. The exempt-organization exemption does not cover sales of prepared food and drink. Concession-stand sales are taxable, and you must register, collect, and remit.

Q: Does it matter that we mostly sell to our own players? A: No. The sales are still taxable retail sales of food and drink by an establishment.

Q: We don't hand out receipts. How do we charge tax?
A: Use the unit-price method — post a sign stating that all displayed prices include sales tax — and remit the tax portion.

Q: Can we rely on this opinion?
A: It binds the Department only as to the petitioner, but it reflects the Department's clearly stated and published position (Publication 843). Confirm your own facts.

Citations and references

Statutes and regulations:

• Tax Law § 1105(d) (food/drink sold by restaurants or similar establishments)
• Tax Law § 1116(a)(4) (exempt-organization exemption); § 1116(b), (b)(2) (limits; food/drink still taxable)
• 20 NYCRR 529.7 (exempt-organization rules); 20 NYCRR 532.1(b) (charging tax; unit-price method)
• Publication 843, A Guide to Sales Tax in New York State for Exempt Organizations

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/a20-5s.pdf

Original ruling text

New York State Department of Taxation and Finance
Office of Counsel

TSB-A-20(5)S
Sales Tax
May 19, 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
[ REDACTED ] (‘Petitioner”). Petitioner asks whether the sales by Petitioner’s concession stand sales are subject to New York State and/or local sales tax under Articles 28 and 29 of the New York Tax Law. We conclude that the Petitioner’s concession stand sales are subject to sales tax. Facts Petitioner is a 501(c)(3) tax exempt organization. Petitioner also has an Exempt Organization Certificate from the Tax Department pursuant to 20 NYCRR 529.7(f). Petitioner’s softball season runs from the beginning of May through the end of June with a fall ball program running from beginning of September through middle of October. Petitioner operates a concession stand during the softball season one to three days a week. At the concession stand, Petitioner sells water, soda, candy, hot dogs, and pizza. The concession stand sells mostly to participants in the softball league. Analysis Tax Law § 1105 provides that retail sales of tangible personal property are subject to sales tax unless a specific exemption or exclusion applies. The Tax Law also exempts certain sales by certain organizations that are exempt from sales tax. See Tax Law § 1116(a)(4); 20 NYCRR 529.7(e). However, the sales and use tax exemption for exempt organizations is not without limits. Tax Law § 1116(b) provides, in part: (b) Nothing in this section shall exempt: (1)(i) retail sales of tangible personal property by any shop or store operated by an organization described in paragraph (4), (5), or (6) of subdivision (a) of this section; (ii) sales, other than for resale, of services described in subdivision (b) or paragraph five of subdivision (c) of section eleven hundred five of this article by that organization whether or not a shop or store; (iii) retail sales of tangible personal property and sales, other than for resale, of those services by that organization, made with a degree of regularity, frequency, and continuity by remote means, such as by telephone, the internet, mail, or otherwise; or (iv) retail

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TSB-A-20(5)S
Sales Tax
May 19, 2020

sales of tangible personal property by lease or rental by that organization as lessor, whether or not at a shop or store (emphasis added). See also 20 NYCRR 529.7(i). A “shop or store” includes “any place or establishment where goods are sold from display with a degree of regularity, frequency and continuity. . .”. Tax Law § 1116(b)(2) states that sales of food or drink in or by a restaurant or similar establishment are subject to sales tax even when operated by an exempt organization. (For example, see Publication 843, A Guide to Sales Tax in New York State for Exempt Organizations, where a girl’s youth softball league that operates a concession stand is cited as an example of an exempt organization that is required to register for sales tax purposes and to collect and remit sales tax.) While Petitioner is an exempt organization for sales tax purposes, its exemption does not extend to sales of prepared food and beverages. Tax Law § 1105(d)(i) imposes sales tax on receipts of food and beverage “sold in or by restaurants, taverns or other establishments.” Therefore, Petitioner’s concession stand sales of water, soda, candy, hot dogs and pizza are subject to sales tax. If a receipt is provided, tax shall be stated, charged, and separately shown. See 20 NYCRR 532.1(b)(1). However, if no receipt is provided, the unit price method may be used. This method entails displaying to all customers a sign stating that the price of all taxable items includes sales tax. See 20 NYCRR 532.1(b)(4). DATED: May 19, 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.