Does a tax-exempt historical society have to collect sales tax on items it sells through a local store, a card table, and word-of-mouth from members' homes?

Plain-English summary

The Point O'Woods Historical Society is a tax-exempt organization (under Tax Law § 1116(a)(4)) dedicated to preserving the history of the small Fire Island hamlet of Point O'Woods, New York. To fund its work, it sells community-themed items -- maps, a photo history book, glasses, and books about Fire Island -- through several different channels: occasional card tables set up in front of a privately run post office; a small, passive consignment-style arrangement inside a "candy store" and a thrift shop (both owned by the local property association, with the stores simply collecting payments and handing over the proceeds); and informal word-of-mouth sales out of members' own houses during the off-season. The Society asked three things: is it liable to collect sales tax on any of this; if not, how does it cancel its sales tax registration; and could it (or its customers) get a refund of tax already collected.

New York generally exempts sales by organizations like this one -- but Tax Law § 1116(b)(1) carves out an important exception: sales made through a "shop or store" stay taxable even for an otherwise-exempt organization. The Department found the Society's regular sales through the "candy store" and thrift shop displays do count as sales through a shop or store, because those are fixed retail locations selling merchandise with real regularity and continuity, even though the Society itself has no ownership or lease interest there and its volunteer "salesperson" isn't compensated. Those sales are taxable, and -- notably -- the store operators and the Society become jointly responsible "co-vendors" for collecting and remitting that tax. In sharp contrast, the Department found the sporadic card-table sales (occurring only a few days each summer) and the occasional word-of-mouth sales from members' homes don't have the regularity, frequency, or continuity to count as a "shop or store" -- so those sales aren't taxable at all.

Because some of the Society's sales are taxable, the second question (how to cancel its sales tax registration) became moot -- it still needs to be registered for the taxable store sales. On the refund question, the Society can seek a refund (using Form AU-11) for tax it collected and remitted on the nontaxable card-table and word-of-mouth sales, but only after first repaying that tax to the customers who paid it and proving that repayment to the Department; alternatively, the customers themselves could file for a refund directly.

What this means for you

Nonprofit and exempt organizations selling merchandise to raise funds

Even a genuinely tax-exempt organization must collect sales tax on merchandise sold through anything that functions as a regular "shop or store" -- a fixed display location selling goods with real regularity, even one you don't own, lease, or operate yourself. Occasional, sporadic sales (a few days a summer, word-of-mouth) fall outside that rule and stay untaxed.

Businesses hosting a nonprofit's consignment items in their store

If you let a nonprofit place merchandise for sale in your store -- even passively, with no commission and no direction over how it's sold -- you become a jointly liable "co-vendor" for collecting and remitting sales tax on those items, right alongside the nonprofit itself.

Organizations seeking a refund of previously collected tax

You must first repay the erroneously collected tax to the customers who actually paid it, and prove that repayment to the Department, before you can claim your own refund via Form AU-11 -- or the customers can file for a refund themselves directly.

Common questions

Q: Is everything a tax-exempt organization sells automatically untaxed?
A: No -- sales through anything that functions as a regular "shop or store" remain taxable even for an otherwise-exempt organization, under the § 1116(b)(1) carve-out.

Q: Does it matter that the exempt organization doesn't own or operate the store itself?
A: No -- a fixed, regularly stocked display location counts as a shop or store regardless of who owns it, and the store operator and the exempt organization both become liable "co-vendors" for the tax.

Q: Are occasional card-table or word-of-mouth sales ever taxable?
A: They can become taxable if they start happening with real regularity and continuity (e.g., a scheduled, ongoing card-table presence), rather than sporadically a few days a year.

Q: How does an organization get back sales tax it mistakenly collected?
A: File Form AU-11 with the Department after first repaying the tax to the customers who paid it (and proving that repayment), or the customers can file their own refund claims directly, within the applicable statutory period.

Q: Does this ruling apply to my organization's fundraising sales?
A: Not automatically. An Advisory Opinion binds the Department only for the taxpayer and facts it was issued to, and it can't be relied on by anyone else.

Citations and references

• Tax Law § 1105(a) (retail sales); § 1116(a)(4) (exempt organizations); § 1116(b)(1) (shop-or-store exception)
• Tax Law § 1101(b)(8)(ii)(A) (co-vendors); § 1139 (refund or credit)
• 20 NYCRR § 526.10(e) (co-vendors); § 529.7(i)(2) (shop or store definition)
• Matter of Jung Foundation for Analytical Psychology, Inc., Adv Op Comm T&F, June 24, 1985, TSB-A-85(24)S
• Matter of Rochester Philharmonic Orchestra, Inc., Adv Op Comm T&F, November 27, 1981, TSB-A-81(56)S
• Matter of St. Pauls G.O. Church, Adv Op Comm T&F, December 10, 1986, TSB-A-86(53)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1997.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a97_36s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-97(36)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S970117A

On January 17, 1997, the Department of Taxation and Finance received a
Petition for Advisory Opinion from Point O’Woods Historical Society, c/o James
M. Bennett, 382 Springfield Avenue, Summit, NJ 07901-2707. Petitioner, Point
O'Woods Historical Society, provided additional information pertaining to the
Petition on March 31, 1997.
The issues raised by Petitioner are as follows.
(1) Whether Petitioner is liable for the collection of sales tax on its retail
sales of tangible personal property pursuant to Section 1116(b) of the Tax Law.
(2) If Petitioner is not liable for the collection of sales tax, what is the
procedure for canceling its registration for sales tax collection in order to end
its tax reporting responsibilities?
(3) Whether, if Petitioner is not liable for the collection of sales tax, it,
or those who purchased items from Petitioner, may obtain a refund of the sales
tax which Petitioner has collected.
Petitioner submitted the following facts as the basis for this Advisory
Opinion.
Petitioner, according to Article I of its Constitution, exists to preserve
and recover the written and pictorial history of the Hamlet of Point O’Woods, New
York, to preserve historical artifacts, to increase community awareness and
knowledge of its history, to work with other societies and scholars to advance
historical knowledge and to develop a library of written, oral and video
histories. Petitioner is exempt from the payment of the New York State and local
sales and use taxes pursuant to Section 1116(a)(4) of the Tax Law, and has been
issued an Exempt Organization Certificate by the New York State Department of
Taxation and Finance.
Petitioner accomplishes its purposes in several ways.
They include
sponsoring exhibitions, lectures and events to educate the Point O’Woods, New
York community about items of historical significance.
Petitioner purchases
plaques and other appropriate items to mark and preserve objects in the community
which are of historical significance.
Petitioner reproduces and preserves
photographs and documents. It also maintains historical artifacts in space made
available to it at a privately-run post office by the Point O’Woods Association,
the corporate owner of the land constituting the Point O’Woods community.
Petitioner does not pay for this space. The Point O’Woods Association has the
right at all times to make Petitioner vacate that space.
Petitioner has no
permanent space which it owns or leases. The Point O’Woods community has 129
houses.

-2­
TSB-A-97(36)S
Sales Tax

To raise money for these objectives, Petitioner does sell items from time
to time. Such items, in the past, have been designed by members of the community
and include artistically drawn community maps, which also have been made into
table place mats, a book with photographs depicting the history of homes in the
community, specially prepared glasses, and an inventory of remaining books
donated by their author (who is one of the members) about the history of Fire
Island. All of the proceeds from such sales go to support the not-for-profit
goals of the Petitioner.
These fundraisers take place on an occasional basis. Point O’Woods is a
summer community and all of the sales are seasonal. The season is from June to
mid-September. When the items are sold out, they are not necessarily replaced
or reproduced.
Sales take place in several ways. Some have been from card tables set up
in front of the community’s privately-run post office.
During the season,
Petitioner may set up a card table once or twice, for several days to a week at
a time. Some summers they may not set up a card table at all, but the sales of
the same items would be made from other places.
Petitioner also makes sales from two other fixed locations. One location
is a store owned by the Point O’Woods Association popularly known as the "candy
store." Petitioner has placed in the "candy store" a small supply of soft-bound
(acetate cover) photographic collections of Point O’Woods homes entitled 100
Years of Beach Houses. The "candy store" displays a sign stating that this work
is available. The sales of these items are not made from a separate table or
booth in the store.
Petitioner’s items are mixed in with the other store
merchandise. The "candy store" collects the proceeds and hands them over to
Petitioner. These proceeds are kept separate. The customer generally writes a
check to Petitioner for Petitioner’s item and pays the store separately for
anything else. The store does not collect sales tax on Petitioner’s items, as
it does for its own items which it sells.
The "candy store" receives no commission on these sales. Petitioner pays
no rent or other fee to the "candy store" for its services; its role with the
"candy store" is entirely passive. Petitioner does not in any way direct the
"candy store" as to how it should go about selling this work.
None of
Petitioner’s directors, officers or members participate in the sales activity.
The Point O’Woods Association has the right at all times to return the remaining
supply at the "candy store" and stop its activities with respect to the work.
Petitioner does not own or lease any space in the "candy store." It does not in
any way operate the "candy store." It is anticipated that when current supplies
of this work run out they will not be replaced, as most homes in Point O’Woods
will have a copy of the work.
The other location is a thrift shop, to which space is made available by
the Point O’Woods Association at a dock house. The arrangement is analogous to
that of the "candy store."
Sales are also made by word-of-mouth from supplies stored in members’ houses.
Occasionally a member will request an item during the winter, and if available
it will be sold out of someone’s house.

-3­
TSB-A-97(36)S
Sales Tax

Applicable Law and Regulations
Section 1105(a) of the Tax Law imposes sales tax on "[t]he receipts from
every retail sale of tangible personal property, except as otherwise provided in
this article."
Section 1116 of the Tax Law provides, in part:
(a)
Except as otherwise provided in this section, any sale or
amusement charge by or to any of the following or any use or
occupancy by any of the following shall not be subject to the sales
and compensating use taxes imposed under this article:
*

*

*

(4) Any corporation, association, trust, or community chest, fund
or foundation, organized and operated exclusively for religious,
charitable, scientific, testing for public safety, literary or
educational purposes . . . .
*
(b)

*

*

Nothing in this section shall exempt:

(1) retail sales of tangible personal property by any shop or store
operated by an organization described in paragraph (4) . . . of this
section.
Section 1139 of the Tax Law provides, in part:
(a) . . . the tax commission shall refund or credit any tax,
penalty or interest erroneously, illegally or unconstitutionally
collected or paid if application therefor shall be filed with the
tax commission (i) in the case of tax paid by the applicant to a
person required to collect tax, within three years after the date
when the tax was payable by such person to the tax commission as
provided in section eleven hundred thirty-seven, or (ii) in the case
of a tax, penalty or interest paid by the applicant to the tax
commission, within three years after the date when such amount was
payable under this article . . .Such application shall be in such
form as the tax commission shall prescribe. No refund or credit
shall be made to any person of tax which he collected from a
customer until he shall first establish to the satisfaction of the
tax commission, under such regulations as it may prescribe, that he
has repaid such tax to the customer . . . .

-4­
TSB-A-97(36)S
Sales Tax

Section 529.7(i)(2) of the Sales and Use Tax Regulations provides, in part:
Retail sales of tangible personal property made by any shop or store
operated by an exempt organization described in section 1116(a)(4),
(5) or (6) are subject to the sales and use tax. A shop or store as
used in this section includes any place or establishment where goods
are sold from display with a degree of regularity, frequency and
continuity as well as any place where sales are made through a
temporary shop or store located on the same premises as persons
required to collect tax . . . (Emphasis added)
Opinion
Petitioner is an exempt organization as described in section 1116(a)(4) of
the Tax Law. To raise money to carry out its not-for-profit purposes, Petitioner
has been selling items of tangible personal property from "time to time" since
its inception several years ago. Petitioner states that the sales take place in
several ways. They have been from card tables in front of a privately-run post
office, from two stores owned and operated by third parties which sell items for
Petitioner and by word-of-mouth from supplies stored in members’ houses.
Sales made by organizations described in section 1116(a)(4) are generally
not subject to tax.
However, if such organizations make sales of tangible
personal property through a shop or store, the exemption does not apply(see
Matter of Jung Foundation for Analytical Psychology, Inc., Adv Op Comm T&F, June
24, 1985, TSB-A-85(24)S).
The term "shop or store" is construed to be any place where goods are sold
from a display with a degree of regularity and continuity. Petitioner’s sales
which are made through the "candy" and thrift stores take place in areas devoted
exclusively to selling tangible personal property. These are sales made from the
premises of persons required to collect tax. The fact that the sales are made
by a representative of Petitioner who receives no compensation for its efforts,
rather than Petitioner itself, is not material (see Matter of Rochester
Philharmonic Orchestra, Inc., Adv Op Comm T&F, November 27,1981, TSB-A-81(56)S).
Accordingly, sales of Petitioner’s items by the "candy" and thrift stores are
taxable. It should be noted that the store operators and Petitioner are acting
as co-vendors pursuant to the provisions of Section 1101(b)(8)(ii)(A) of the Tax
Law and Section 526.10(e) of the Sales and Use Tax Regulations. As such, they
are jointly responsible for the collection and payment of the sales tax on all
sales of Petitioner’s property made from the stores.
In contrast, the other two methods of sale made on behalf of Petitioner,
from the temporary card tables and from members’ houses, fail to occur with the
same regularity, frequency and continuity as the sales made at the stores. Sales
from members’ houses are sporadic and infrequent and are not made from a display,
as described by Petitioner. Therefore, these sales are not considered to be made
through a shop or store within the meaning and intent of Section 529.7(i)(2) of
the Sales and Use Tax Regulations, and are not subject to sales tax (see Matter
of St. Pauls G.O. Church, Adv Op Comm T&F, December 10, 1986, TSB-A-86(53)S).

-5­
TSB-A-97(36)S
Sales Tax

The sales from card tables will not be considered sales from a shop or
store if these sales are sporadic and infrequent, e.g., occurring only a few days
during the summer, as described by Petitioner. However, if Petitioner were to
sell its wares from displays such as the card tables at more continuous and
scheduled intervals or at events where vendors required to collect tax offer
merchandise for sale, such sales would be taxable because each of these locations
would be deemed a shop or store pursuant to the Tax Law (see Rochester
Philharmonic Orchestra, Inc., supra; St. Pauls G.O. Church, supra).
Since it has been determined that some of Petitioner’s sales are taxable,
issue "2" is moot, and need not be addressed in this opinion.
With respect to issue "3", pursuant to Section 1139 of the Tax Law,
Petitioner may claim a refund of tax collected by Petitioner, which has been
remitted to the Department of Taxation and Finance, on any sale not made from a
shop or store, as discussed above. Petitioner must repay such tax to its
customers prior to claiming a refund and establish to the satisfaction of the
Department that it has in fact repaid such tax. A refund or credit of such tax
may be claimed by filing Form AU-11, Application for Credit or Refund of State
and Local Sales or Use Tax. Alternatively, claims for refund may be filed by the
individuals who paid the tax that was erroneously collected by their completing
a Form AU-11 and mailing such form with appropriate documentation to the State
of New York Department of Taxation and Finance, Sales Tax Central Office Audit
Bureau, W.A. Harriman Campus, Albany, NY 12227. Any request for refund must be
made within the applicable period as provided in Section 1139 of the Tax Law.

DATED:

June 25, 1997

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.