Must a college 501(c)(3) faculty-student association collect sales tax on admissions to the theatrical, athletic, recreational, and social events it holds to raise funds?

Plain-English summary

The Jamestown Community College Faculty-Student Association (JCC-FSA) is an IRC 501(c)(3) organization operated exclusively for educational purposes. It collects admissions to theatrical events, athletic events, recreational activities, dances, and other social events, with the proceeds benefiting the association. It asked whether it must collect sales tax on those admissions.

The Department sorted the admissions into three buckets:

• Dramatic or musical arts performances — exempt by the amusement tax itself. The amusement tax on admissions (Tax Law 1105(f)(1)) excepts dramatic or musical arts performances (as well as motion picture theaters and race tracks). So admissions to the association's arts performances are not taxable, independent of its exempt-organization status.
• Other non-athletic events — exempt because proceeds inure to the exempt org. For the non-arts theatrical events, recreational activities, dances, and other social events, the exemption comes from the organization's status: admissions all of the proceeds of which inure exclusively to a qualifying exempt organization are not subject to the 1105(f) amusement tax (Tax Law 1116(d)(1)).
• Athletic events — taxable (the key exception). Tax Law 1116(d)(2)(A) withdraws that exemption for admissions to any athletic game or exhibition unless the proceeds inure to elementary or secondary schools (or, for a game between two such schools, to a 1116(a)(4) organization). Because JCC-FSA is a community college association, its athletic-event admissions do not meet that condition and are taxable.

Two threshold points. First, only organizations meeting paragraph (3) of IRC 501(c) qualify under Tax Law 1116(a)(4) — not the other 501(c) categories (New York State Grange Patron of Husbandry, TSB-A-81(55)S); JCC-FSA's 501(c)(3) status is presumed to satisfy this for purposes of the opinion. Second, the association must establish its exempt status with the Department's Technical Services Bureau to claim any 1116 exemption (20 NYCRR 529.1(b)).

What this means for you

Nonprofit status doesn't blanket-exempt every admission — athletic events are carved out. New York generally exempts admissions whose proceeds go entirely to a qualifying charity or educational organization, but it deliberately keeps taxing athletic-game admissions unless the money benefits K-12 schools. A college's athletic gate receipts are taxable.

Know the two different exemption paths. Arts performances are exempt because of what they are (1105(f)(1) excepts them). Your dances, socials, and recreational events are exempt because of who gets the money (1116(d)(1)). If either path applies, the admission isn't taxed.

Register your exempt status first. Being a 501(c)(3) isn't self-executing for New York sales tax. You must establish exempt-organization status with the Department (529.1(b)) before relying on the 1116 exemptions.

Common questions

Q: We're a college 501(c)(3). Do we collect tax on our fundraiser admissions?
A: Not on dramatic/musical arts performances (exempt under 1105(f)(1)), and not on dances, socials, or recreational events (exempt because proceeds inure to your organization under 1116(d)(1)). But you must collect tax on athletic-event admissions.

Q: Why are our athletic games taxable when everything else isn't?
A: Section 1116(d)(2)(A) keeps athletic-game admissions taxable unless the proceeds inure to elementary or secondary schools. A community college's proceeds don't qualify.

Q: We have IRS 501(c)(3) status. Is that enough?
A: It's the basis, but only 501(c)(3) organizations qualify under 1116(a)(4), and you still must establish your exempt status with the Department's Technical Services Bureau (529.1(b)) before claiming the exemptions.

Citations and references

Tax Law:

• 1105(f)(1) — taxes amusement admissions but excepts dramatic or musical arts performances, motion picture theaters, and race tracks
• 1116(a)(4) — exempt-organization status for entities organized and operated exclusively for charitable, educational, etc. purposes (modeled on and using the wording of IRC 501(c)(3))
• 1116(d)(1) — admissions all of whose proceeds inure exclusively to a qualifying exempt organization are not subject to the 1105(f) tax
• 1116(d)(2)(A) — exception: admissions to athletic games/exhibitions remain taxable unless proceeds inure to elementary or secondary schools

Regulation:

• 20 NYCRR 529.1(b) — an organization must establish its exempt status with the Department to claim the 1116 exemptions

Prior opinion cited:

• New York State Grange Patron of Husbandry, TSB-A-81(55)S — only IRC 501(c)(3) organizations qualify under Tax Law 1116(a)(4)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1985.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a85_44s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-85(44)S
Sales Tax
October 16, 1985

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S850301A

On March 1, 1985 a Petition for Advisory Opinion was received from the Jamestown
Campus of the Jamestown Community College Faculty-Student Association, 525 Falconer Street,
Jamestown, New York 14701.
The issue raised is whether Petitioner is required to collect sales tax on admission charges
collected from various activities held to raise funds for its organization.
The Jamestown Community College Faculty Student Association, hereinafter "JCC-FSA",
is an exempt organization pursuant to Internal Revenue Code section 501(c)(3). It is an entity
organized and operated exclusively for educational purposes. JCC-FSA collects admissions to
theatrical events, athletic events, recreational activities, dances and other social events. The gross
proceeds of the activities inure to the benefit of JCC-FSA.
Section 1105(f)(1) of the Tax Law imposes a tax on "Any admission charge where such
charge is in excess of ten cents to or for the use of any place of amusement in the state except for
charges for admission to race tracks . . . or dramatic or musical arts performances or motion picture
theaters...."
Section 1116(a) exempts from sales and use tax any sale or amusement charge by or to any
of the following or any use or occupancy by any of the following:
"(4) Any corporation, association . . . organized and operated exclusively
for religious, charitable, scientific, testing for public safety, literary or
educational purposes,... no part of the net earnings of which inures to the
benefit of any private shareholder or individual...."
Section 1116(a)(4) was modeled after section 501(c)(3) of the Internal Revenue Code and
contains identical wording. Although section 501(c) of the Internal Revenue Code contains twenty­
two paragraphs which provide income tax exemptions to different types of organizations, only those
organizations which meet the requirements of paragraph three of section 501(c) qualify for sales tax
exemption pursuant to section 1116(a)(4) of the Tax Law. New York State Grange Patron of
Husbandry, State Tax Commission Advisory Opinion, November 27, 1981, TSB-A-81(55)S.
Inasmuch as Petitioner has exempt organization status under Internal Revenue Code section
501(c)(3), it is presumed, for purposes of this Advisory Opinion only, that Petitioner meets the
requirements for exempt organization status under section 1116(a)(4) of the Sales and Use Tax Law.

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-85(44)S
Sales Tax
October 16, 1985

Section 1116(d)(1) of the Tax Law provides that ". . . any admissions all of the proceeds of
which inure exclusively to the benefit of the following organizations shall not be subject to any of
the taxes imposed under subdivision (f) of section 1105: (A) an organization described in paragraph
(4), (5) or (6) of subdivision (a) of this section. . . ."
An exception to the exemption provided for in section 1116(d)(1) of the Tax Law is
contained in section 1116(d)(2) of the Tax Law and states as follows:
(2) The exemption provided under paragraph (1) of this subdivision shall not
apply in the case of admissions to:
(A) Any athletic game or exhibition unless the proceeds shall inure
exclusively to the benefit of elementary or secondary schools or unless in the case of
an athletic game between two elementary or secondary schools, the entire gross
proceeds from such game shall inure to the benefit of one or more organizations
described in paragraph (4) of subdivision (a) of this section;
(B) Carnivals, rodeos, or circuses in which any professional performer or
operator participates for compensation, unless the entire net profit from such
carnival, rodeo or circus shall inure exclusively to the benefit of an organization
described in paragraph four of subdivision (a) of this section, and such organization
shall have as its charitable or educational purpose the operation of a school and of
such a carnival, rodeo or circus. . . .
Accordingly, the admissions collected by the JCC-FSA from its theatrical events is exempt
from sales tax pursuant to section 1105(f)(1) of the Tax Law to the extent that such admissions are
for dramatic or musical arts performances. The admissions collected from theatrical events other
than dramatic or musical arts performances, the recreational activities, dances and other social events
are exempt from sales tax to the extent provided for in section 1116(d)(1) and (2) of the Tax Law.
The admissions collected by the JCC-FSA from its athletic events are taxable unless the athletic
event falls within the exception set out in section 1116(d)(2)(A) of the Tax Law. It should be noted
that Petitioner must establish its exempt status with the Technical Services Bureau in order to qualify
for the exemptions set forth in section 1116 of the Tax Law. (20 NYCRR 529.1[b]).

DATED: September 16, 1985

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth herein.