Which admissions, catered-food, volunteer food-and-drink, merchandise, alcohol, parking, and vendor sales were taxable at a nonprofit fundraising event?

Plain-English summary

The admission portion of event tickets was nontaxable while the nonprofit was the event “provider” under Rule 3.298(a)(4). Any ticket portion covering food catered by an outside party was taxable.

Food and drink sales could be exempt at one annual fundraising event lasting no more than a week when a nonprofit volunteer organization exclusively sponsored it, did not use a caterer or prepared-food retailer, used volunteers for all preparation and service, operated noncommercially, and did not compete at the event with a taxable food retailer.

Alcoholic beverages, T-shirts, arts and crafts, gifts, and parking were taxable. The promoter had to ensure vendors held active sales-tax permits; otherwise the nonprofit became liable for their tax. Multiple similar events did not multiply the food exemption—only one annual event qualified.

Records had to separate exempt and taxable amounts. The organization also paid tax on taxable items it bought for event use unless they were resold or otherwise exempt, because fundraising did not itself relate to the exempt activities for which the organization was formed.

Common questions

Were admissions taxable? Not while the nonprofit was the event provider under the stated rule.

Was catered food included in that result? No. The catered-food portion was taxable.

Could volunteer food and drink sales be exempt? Yes, for one qualifying annual event meeting all stated conditions.

What sales remained taxable? Alcohol, merchandise, arts and crafts, gifts, parking, and taxable vendor sales.

What if a vendor lacked a permit? The promoter could be liable for the tax.

Citations and references

• 34 Tex. Admin. Code Rule 3.298(a)(4) — event-provider definition.
• 34 Tex. Admin. Code Rule 3.293(f)(3) and Rule 3.298(f)(1) — organization-use purchase rules cited 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/8605L0727E06

Original ruling text

May 9, 1986

Dear ***:

Thank you for your recent letter regarding your organization's
responsibilities in collecting sales tax on various items sold at
the ***.

The admissions portion of the ticket sales to this event are not taxable
as long as the *** is the "provider" of the event, as defined in
the enclosed Rule 3.298 (a)(4). If part of the ticket price covers a charge
for food catered by an outside party, this portion is taxable.

Sales tax is not due on sales of food and drinks (i.e., iced tea, sodas,
coffee) at a fund-raising function such as this show if the following
criteria are met:

• The function is an annual event.

• The function does not exceed one week.

• The function must be a fund-raising project and exclusively sponsored
  by a non-profit, volunteer organization.

• The food and drinks cannot be purchased from a caterer or other type
  of prepared-food retailer.

• The food and drink sales must be noncommercial in every respect; no
  one shall be hired to prepare or serve the food and drinks. Every
  aspect of the sale must be on a volunteer basis except the purchase of
  the foods and drinks for further preparation.

• Under no circumstances is the exemption to apply if the volunteer
  sales are in competition with a retailer who is required to collect tax
  on food and drink sales at the same function.

Any sales of alcoholic beverages are not covered by this exemption.
Neither are sales of T-shirts, arts and crafts, gift items, etc. Charges
for motor vehicle parking are also taxable. As the promoter of the event,
your organization needs to insure each vendor has an active sales tax permit
under which to report his/her sales. If not, your organization is liable
for this tax and must report it on its return.

The food-and-drink exemption applies only to one annual event. If multiple
events of a similar fund-raising nature are held during the year, only
one would qualify for exemption.

In order to claim either of the above-outlined exemption. your records
must clearly establish what amounts raised cover sales in the exempt category
versus the taxable categories.

Incidentally, although many items purchased for your organization's use
are exempt, tax must be paid on taxable items purchased for the ***
that are not resold or that are not otherwise exempt (please see section (f)(3)
of the enclosed Rule 3.293 and section (f)(1) of Rule 3.298). This is because
fund-raising, although necessary to help finance your operations, does not
relate to the exempt activities for which your organization was formed.

This opinion is based on the facts presented. If there are additional or
different fact, the opinion may change.

If you have any questions or need more information, please call us at
1-800-242-5555 toll free from anywhere in Texas. You may write us at the
Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division