How did Texas tax fundraising products, video yearbooks, and advertising sold through schools and organizations?

Plain-English summary

The Comptroller confirmed several sales-tax rules for a seller supplying schools and organizations with fundraising products and video yearbooks.

Cookies and summer sausage were exempt food products, so a certificate was unnecessary if those were the only items sold to an organization. Candy was not treated as food and was exempt only in the specific fundraising situations described in the attached 1984 letter. The seller's resale and exemption certificates also needed to contain the information required by the versions of Rules 3.285 and 3.287 revised in 1987.

A Girl Scout Council was treated as an exempt educational organization with the same sales-tax requirements as a school. A school could buy taxable video yearbooks for resale by giving the producer a resale certificate, with tax due on the price charged to students. A separate $20 fee for advertising space, including the artwork for a magazine-style ad, was not taxable.

Common questions

Were cookies and summer sausage taxable? No. The letter treated them as exempt food products.

Were video yearbooks taxable? Yes. A school could buy them for resale, and tax was due on the selling price to the student.

Was the advertising-space fee taxable? No. The $20 fee for placing an advertisement and preparing its artwork was not taxable.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9004L1019G08

Original ruling text

April 25, 1990

Dear *****:

Thank you for your letter dated April 17, 1990, concerning the
products that you sell to schools and other organizations for
fund-raising projects and the video yearbooks that you produce for
schools.

The information provided to you in **'s letter dated
April 5, 1984, and my letter dated March 13, 1987, is still
correct. However, your summary of this information, "Texas Tax
Status", is not correct. For example, food products such as
cookies and summer sausage are not taxable. It is not necessary
for you to have a resale or exemption certificate on file if this
is the only item that you sell to an organization.

Candy is not a food product. As stated in **'s letter,
candy is exempt only under certain circumstances, which he listed.
The resale and exemption certificates which you are using are not
current. These certificates were revised November 24, 1987.
Certificates for transactions occurring after this date should
include all of the information required by Rule 3.285 on resale
certificates and Rule 3.287 on exemption certificates.

The Girl Scout Council is considered an exempt educational
organization. The tax requirements for sales by the Girl Scouts
are the same as for a school.

Sales of the video yearbooks should be handled like sales of other
taxable items that schools purchase for resale to students. The
school may issue a resale certificate to **. The tax
is due on the selling price of the video yearbook to the student.

In our telephone conversation on April 23, you said that an
advertiser may pay a $20.00 fee for having an advertisement placed
in the yearbook. *** does the necessary artwork for
the ad, which is similar to an ad in a magazine or newspaper. The
$20.00 fee for advertising space is not taxable.

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 me if you have any additional
questions. You may write me, call toll free 1-800-252-5555 (Ext.
3-4685) from anywhere in the United States or phone 512/463-4685.

Sincerely,

Julie Pesl
Tax Correspondence

April 17, 1990

Ms. Julie Pesl
Tax Policy Section
Tax Administration Division
Comptroller of Public Accounts
State of Texas
Austin, TX 78774

Dear Ms. Pesl:

*** is engaged in the solicitation of
wholesale sales of tangible personal property to schools, clubs and other
organizations in connection with fundraising projects. All orders are
received in and are subject to acceptance at our sole location in
Nashville, Tennessee and all merchandise is shipped to the clubs and
organizations directly from our sole warehouse in Nashville.

Our current products are candy, summer sausage, cookies, Christmas
ornaments, flower bulbs, cookbooks, suntan oil, candles and some other
gift items.

If we made sales of product for resale of a Girl Scout Council in your
state, would the state tax requirements be any different than those for
schools?

Our new division is producing Video Yearbooks for schools. What is the tax
requirement for yearbooks sold direct to schools for distribution to
students. Also, for a special one-time production charge for including an
advertisement on the Video Yearbook?

We will appreciate written confirmation of your sales tax laws. If you
have any questions about this request, please call or write.

Sincerely,

April 5, 1984

Dear ***:

Thank you for your March 12, 1984 letter regarding the taxability of items sold
to organizations for fund raising projects.

I understand from your letter that *** is
engaged in the solicitation of wholesale sales from schools, clubs, and other
organizations in connection with fund-raising projects. All orders are
received in and are subject to
acceptance at our sale location in *****, Tennessee and all merchandise is
shipped to the clubs and organizations directly from our sale warehouse in
Nashville.

The product sold are hard candy, spices, cookies, popcorn, Christmas ornaments,
stationary, flower bulbs, cookbooks, suntan oil, and candles.

Organizations which have qualified for exemption under the sales tax law are
allowed of purchase items for their own use; tax free if the items are
necessary to the exempt
function of the organization and are paid for with the organization's funds.
Only under certain circumstances are exempt organizations allowed to sell items
tax free.

The packaged cookies, spieces and popcorn (without a candy coating) are exempt
from sales tax as food products. The other items listed are normally subject to
sales tax. The candy is exempt from sales tax if it is:

1. sold by religious organizations.

2. sold or served by public or private schools, school districts,
   students organizations, or parent-teacher associations in elementary
   or secondary schools during the regular school day under an agreement
   with the proper school authorities.

3. sold by a parent-teacher association during a fundraising
   sale if the proceeds do not go to the benefit of an individual; or

4. sold by a person under 18 years of age who is a member of a
   nonprofit organization devoted to the exclusive purpose of education,
   physical or religious training, and a group associated with public or
   private elementary or secondary schools as a part of a fundraising
   drive sponsored by the organization for its exclusive use.

If you sell candy to an organization that qualifies for one of these
exemptions, the candy is not taxable. The organization should issue an
exemption certificate to you explaining the reason the exemption is being
claimed.

An organization which qualifies for exemption as a religious, charitable or
educational is not required to collect sales tax on sales of the other items
you listed (Christmas ornaments, candles, etc.) if the items are sold at a
sale or auction held by the organization only once a year and which lasts
only one day. The organization should issue an exemption certificate to
you explaining that this is the exemption being claimed.

Other types of organizations are not authorized by law to hold a one-day
tax-free sale. To purchase the items you listed tax free, the organizations
must issue a resale certificate to you. The resale certificate must contain
the organization's sales tax permit number.

You may refund the tax collected on a sale if the customer later provides you
with a resale or exemption certificate. After you have refunded the tax to
your customer, you may obtain a refund or credit from the Comptroller's
office. These are two procedures by which you may obtain the credit or refund.
You may include the amount of the sale on which you refunded the tax in
deductions on your next sales tax return. This procedure is acceptable as
long as your deductions do not exceed your gross sales. Alternately, you may
submit an amended return for the reporting period in which you originally
reported the sale. The Statute of Limitations on refunds is four years.

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 me if you have additional questions. You may write
me or call 512/475-1931.

Sincerely,

Kevin W. Flegal
Sales Tax Division

March 13, 1987

Dear ***:

Thank you for your recent letter concerning wholesale sales of tangible
personal property to schools, clubs and other organizations.

The information provided to you in Kevin Flegal's letter of April 5, 1984 is
still correct. You should obtain a properly completed resale certificate from
a Girl Scout Council purchasing taxable items for resale. Food products, such
as cookies and summer sausage are exempt. Candy is exempt only in the four
situations outlined in Mr. Flegal's letter.

Your Texas tax permit number is 16211472390, not 68 SU 12694.

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

If you have any questions or need more information, please call me at
1-800-252-5555 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