Could schools buy trophies, ribbons, and letter jackets tax-free when awarding them to students, and when did an item become a taxable sale instead?

Plain-English summary

A school could give its supplier an exemption certificate and buy trophies and ribbons tax-free when awarding them to students. A school could likewise buy letter jackets tax-free when it awarded them to athletes, but tax had to be collected if the jackets were sold.

The answer for club T-shirts depended on who made the award and how students earned it. If clubs awarded the shirts, the Comptroller needed more information to determine whether those clubs were themselves exempt educational organizations.

The source of the money also mattered. If an individual had to make a contribution to receive a T-shirt or other item, the transfer was a taxable sale rather than an award.

Common questions

Could a school buy trophies and ribbons tax-free for student awards? Yes, with an exemption certificate.

Were club T-shirts automatically treated as tax-free awards? No. The Comptroller needed to know who awarded them, how they were earned, and whether the clubs were exempt educational organizations.

What if a student had to contribute money to receive the item? The letter treated that as a taxable sale, not an award.

Could a school buy letter jackets tax-free? Yes when awarding them to athletes; if the jackets were sold, tax had to be collected.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8608L0750B12

Original ruling text

August 22, 1986

Dear ***:

Thank you for your recent letter which is restated with response below.

Question

1. Are trophies that are purchased by the school and given to the student
   taxable?
   Response
   The school may issue their supplier an exemption certificate in lieu of
   tax.

Question

2. Are ribbons and other similar type awards that are given to the
   student taxable?
   Response
   Same as above.

Question

3. If these items (1 and 2) are nontaxable, then are there any,
   qualifying conditions that would only include awards and would not
   include uniforms such as club T-shirts given as awards (i.e., are
   club T-shirts considered awards)?
   Response
   I assume from the wording in questions 1 and 2 that a school is awarding
   the trophies and ribbons. In this question it appears that the T-shirts are
   being awarded to students by various clubs. Would you please send additional
   written information such as who is actually awarding the T-shirts to the
   students and how the T-shirts are earned? if various clubs are awarding
   the T-shirts we would need to determine that they themselves were exempt as
   educational organizations.

Question

4. Would the source of the monies to purchase awards determine the
   taxable status of the awards (e.g., a fundraiser vs. individual collection
   of the exact purchase price of the award from each student)?
   Response
   Yes, if the individual must make a contribution to receive a T-shirt or
   item, it is a taxable sale and not an award.

I am not familiar with the "end user" rule you mentioned. However,
schools may certainly buy items for their own use tax free by giving
their suppliers an exemption certificate in lieu of tax.

If a school is awarding letter jackets to athletes, the school may
purchase the jackets tax free. However, if the jackets are sold, tax must
be collected.

This opinion is based upon the facts you presented. If there are
additional or different facts, this opinion may change.

Please feel free to contact us if you have additional questions. You may
write us, call toll free 1-800-252-5555 from anywhere in Texas.

Sincerely,

Tax Policy Section
Tax Administration Division