Which purchases by a Texas-exempt 501(c)(4) club were tax-free, including meals, office supplies, plaques, member gifts, and door prizes?

Plain-English summary

The Texas Comptroller distinguished purchases for the exempt club's own operations and meetings from personal gifts and prizes.

Name tags and office supplies could be bought tax-free. Meals paid for by the club at its weekly breakfast meetings or special speaker meal could also be purchased tax-free with an exemption certificate. Meals bought by individual members were taxable.

A plaque given to a past president, flowers or pajamas sent to a hospitalized member, and flower centerpieces or other taxable items awarded to individuals as door prizes were taxable because they were not primarily for the organization's own use and benefit.

What this means for you

The club's exemption did not cover every purchase made with club funds. Operating items and club-paid meeting meals qualified under the letter; items primarily benefiting particular individuals did not.

Common questions

Were name tags and office supplies exempt? Yes.

Were meals paid for by the club exempt? Yes, with an exemption certificate.

Were meals paid for by individual members exempt? No.

Were plaques and member gifts exempt? No.

Were door prizes exempt? No.

Citations and references

• Comptroller Rule 3.322 — exempt organizations.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8702L0799B02

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

February 20, 1987

Dear **:

Thank you for your letter of February 4, 1987 concerning purchases
made by the ******, a 501(c)(4) organization,
which has been granted exemption from the payment of sales tax on
items related to the purpose of the organization.

The answers to your questions are as follows:

1. The club purchases name tags and office supplies for its
   operation. May an exemption certificate be issued by the
   club for these purchases?

Answer: Name tags and office supplies may be purchased tax free.

2. The club shows its appreciation for its past President by
   giving him a plaque. May an exemption certificate be issued
   for the plaque purchased by the club?

Answer: The plaque is not primarily for the organization's own
use and benefit, and is therefore taxable.

3. As the club's name implies, the club meets weekly for a
   breakfast meeting at which a business, civic, professional, or
   government speaker gives a presentation. A breakfast is provided
   to the members and other persons present. The club pays for the
   meal. The restaurant would normally charges a sales tax on the
   meals provided. May an exemption certificate be issued by the
   club in this instance?

Answer: Meals paid for by, the club may be purchased tax free with an
exemption certificate. Meals purchased by individual members of the
club are taxable.

4. On occasion a member of the club is in the hospital. The club
   generally sends flowers or pajamas to the member. May an exemption
   certificate be issued for the flowers or pajamas purchased by the club?

Answer: Gifts for members of the club are taxable.

5. The club has a special meal at which members' wives and guests are
   invited. A business, civic, professional, or governmental speaker
   gives a presentation. A meal is provided to all present. The club
   pays for the meals. A drawing is held for flower centerpieces which
   the club pays for. May an exemption certificate be issued for meals
   and centerpieces purchased?

Answer: Meals paid for by the club are not taxable. The flower center-
pieces or other taxable items given to individuals as door prizes are
taxable.

I have enclosed a copy of Rule 3.322 Exempt Organizations for your
reference.

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

If you have any questions or need more information, please call me at
l-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. 'You may write me at the Tax Administration Division.

Sincerely,
Julie Pesl
Tax Policy Section
Tax Administration Division