A 501(c)(3) organization planned to sell taxable items at a Texas convention spanning two days. Does that use up both of its allowed one-day tax-free sales for the year, or does it still count as just one?

Plain-English summary

A 501(c)(3) organization planned to sell taxable items at a convention in Texas in April 2000. The Comptroller's Exempt Organizations Section had already confirmed the group's tax-exempt status, and the Tax Policy Division wrote to explain how the exemption interacts with its planned sale.

The rule: a Texas-exempt 501(c)(3) organization may hold two one-day, tax-free sales each calendar year. Items to be sold at a one-day tax-free sale can themselves be purchased tax-free by the organization, using an exemption certificate stating the items will be resold at the one-day tax-free sale. No sales tax permit is required for the sale as long as the organization doesn't make other taxable sales during the year. The same two-sales-per-year allowance applies separately to each bona fide chapter of the qualifying organization.

The catch for this convention: the organization planned to sell over a two-day period. Because the sale spans two days, the Comptroller held that it uses up both of the organization's one-day tax-free sale allowances for the year at once — it isn't treated as a single one-day sale.

What this means for you

Nonprofits planning a fundraising sale or auction

If your 501(c)(3) organization is entitled to two one-day tax-free sales per year, be careful about scheduling a sale that runs across two calendar days (like a two-day convention or festival) — the Comptroller treats that as consuming both of your annual one-day allowances, not just one.

Multi-chapter organizations

Each bona fide chapter of a qualifying organization gets its own separate two-sales-per-year allowance — the limit is per chapter, not just per parent organization.

Accountants and tax professionals

A clean, narrow confirmation of how the "one-day" limit in the tax-free sale exemption is applied literally by calendar day: a two-calendar-day event counts as two one-day sales, even if it's really one continuous event.

Common questions

Q: How many tax-free sale days does a 501(c)(3) organization get per year in Texas?
A: Two one-day tax-free sales per calendar year, and the same allowance applies separately to each bona fide chapter.

Q: If our sale runs for two days at one event, does that count as one sale or two?
A: Two. A two-day sale uses up both of the organization's annual one-day tax-free sale allowances.

Q: Do we need a sales tax permit for the one-day sale?
A: No, as long as the organization doesn't make other taxable sales during the year.

Q: Can I rely on this letter for my own organization's event?
A: No. This opinion is based on the facts presented, and other similar facts may provide a different result; it can be relied on only by the taxpayer it was issued to.

Citations and references

Rules:

• 34 Tex. Admin. Code Rule 3.322 (Exempt Organizations — one-day tax-free sale provisions)
• Comptroller Bulletin #94-122, "Texas State Tax Exemptions for Non-Profit Organizations" (referenced in the letter)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200002063L

Original ruling text

February 18, 2000

Dear **:

This is in regard to your organization's selling of taxable items at a
convention to be held in **, Texas in April, 2000. Ms. ****,
forwarded a copy of your exempt letter from our Exempt Organizations Section.

Your organization has been granted Texas sales tax exemption as a 501(c)(3).
As such, your organization may hold two one-day, tax-free sales each calendar
year. Items to be sold at the one-day, tax-free sale may be purchased tax-free
by issuing an exemption certificate to the seller. The certificate must state
that the taxable items are to be resold at the one-day, tax-free sale. A sales
tax permit is not required for the sale if the organization does not make other
sales of taxable items during the year. This provision also applies to each
bona fide chapter of the qualifying organization.

I am also enclosing our Bulletin (#94-122) Texas State Tax Exemptions for
Non-Profit Organizations and Rule 3.322 "Exempt Organizations," for your
review.

I understand that you would be selling the items over a two-day period.
Because the sales will take place over a two-day period, this will constitute a
use of both of your one-day tax-free sales.

This opinion is based on the facts presented. Other facts though similar may
provide a different result. I hope this information answers your questions.
If you need additional information, please call me toll-free at 1-800-531-5441,
extension 3-4502. The direct line is 512/463-4502. You may also write to Tax
Policy Division, Comptroller of Public Accounts. You may also e-mail our tax
help section at:

Sincerely,

Gilbert Zamora
Tax Policy Division