Could a business donate uniforms, equipment, prepared food, and disposable serving items to tax-exempt organizations without owing sales tax?

Plain-English summary

A business donated uniforms and equipment to children's sports teams and food to civic organizations. The Comptroller said an item bought under a valid exemption certificate could be donated without sales tax to an organization exempt under Texas Tax Code § 151.309 or § 151.310(a)(1) or (a)(2). That applied to uniforms and equipment purchased for donation.

For prepared-food donations, the restaurant's unprocessed grocery ingredients were not taxable when purchased. Taxable items removed from tax-free inventory—such as paper cups, eating utensils, napkins, and ice—had to be documented as donations. A letter of appreciation from the exempt organization specifying the donated items was an acceptable record.

What this means for you

Exempt-organization donations required both a qualifying recipient and records supporting what was bought or removed from inventory for donation. The letter specifically recommended itemized acknowledgment from the recipient for taxable serving items.

Common questions

Could uniforms and equipment be purchased under an exemption certificate for donation? Yes, when donated to an organization exempt under the cited Texas Tax Code provisions.

Were unprocessed grocery ingredients taxable when purchased for prepared-food donations? No.

How could the business document donated cups, utensils, napkins, and ice? With a letter of appreciation from the exempt organization specifying the items donated.

Citations and references

• Texas Tax Code § 151.309 — exempt organization provision cited by the letter
• Texas Tax Code § 151.310(a)(1) and (a)(2) — additional exempt organization provisions cited by the letter
• 34 Tex. Admin. Code Rule 3.287 — exemption certificates

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9104L1098C10

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TX 78774

JOHN SHARP
Comptroller April 8, 1991

Dear *:

This is in response to your recent letter requesting tax exempt
status for items your organization donates to support and sponsor
local children's team sports and other civic organizations such as
the Kiwanis, etc.

You specifically mentioned uniforms and equipment provided for the
teams and food for groups such as the ** .

Sales tax is not due when an item purchased under a valid
exemption certificate is donated to an organization exempt from
tax under Texas Tax Code, Sections 151.309 or 151.310(a)(1) or (a)(2).
This would apply to uniforms and equipment your business purchases
and donates to an exempt organization. See the enclosed Rule
3.287 on Exemption Certificates.

When your business donates food to an exempt entity, which your
restaurant has prepared, the unprocessed grocery items used to
prepare the food was not taxable at the time of purchase. Taxable
items such as paper cups, eating utensils, napkins, ice, etc.,
taken from your tax free inventory and donated to an exempt entity
should be documented in your records. An acceptable way to
document such donations would be a letter of appreciation from the
exempt entity which specifies the items donated.

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 additional information, you may
call me toll free at 1-800-531-5441, extension 5-0330. The
regular number is 512/463-4600, or write me at Tax Administration
Division.

Sincerely,
Bettie U. Peterson
Tax Administration Division