Could a nonprofit corporation sell its own books, magazines, newsletters, and other writings without Texas sales tax?

Plain-English summary

A nonprofit corporation asked whether it had to collect sales tax on materials it published and sold after a statutory amendment effective August 28, 1989.

The Comptroller explained that Rule 3.299 exempted writings published and distributed by certain nonprofit historical, scientific, charitable, philanthropic, and religious organizations, including organizations with I.R.C. § 501(c)(3) status.

The exemption specifically excluded educational organizations. Rule 3.299(d)(6) defined that term to include public and private schools, colleges, universities, and similar institutions organized to disseminate knowledge systematically through a formal instructional program.

If the corporation was nonprofit and did not fall within that educational-organization definition, its sales of books, magazines, newsletters, and other writings were not taxable under the provision described in the letter.

What this means for you

Nonprofit status alone did not resolve the writings exemption. An organization that fit the rule's formal-education definition was excluded even though other nonprofit publishers could qualify.

Common questions

Did the exemption include every nonprofit publisher? No.

Which organizations were specifically excluded? Educational organizations as defined in Rule 3.299(d)(6).

What institutions did that definition cover? Schools, colleges, universities, and similar formal instructional institutions.

Citations and references

• 34 Tex. Admin. Code Rule 3.299(d)(6) — educational-organization definition for the writings exemption
• I.R.C. § 501(c)(3) — one nonprofit classification included in the exemption described by 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/9107L1133A14

Original ruling text

July 9, 1991

Dear **:

Thank you for your letter regarding your corporation's requirement
to collect sales tax on materials it sells.

As you mentioned in your letter, the statute was amended effective
August 28, 1989. Enclosed is a copy of Rule 3.299: Newspapers,
Magazines, Publishers, Exempt Writings, which explains the new
exemption.

Basically, the new exemption applies to writings published and
distributed by certain non-profit organizations - historical,
scientific, charitable, philanthropic, religious and including those
with a 501(c)(3) exemption from the IRS. But the statute and rule
specifically exclude educational organizations. Books and magazines
published and distributed by educational organizations are not exempt
under this provision. Section (d)(6) of the Rule 3.299 defines
"educational organization" (for purposes of this rule) as
"all public and private schools, colleges and universities, and
other similar institutions which are organized for the systematic
dissemination of knowledge through a formal program of instruction."

Therefore, if your organization is non-profit and does not come under
the above-referenced definition of "educational organization",
tax will not be due on the sale of books, magazines, newsletters
and other writings that are published and distributed by your
corporation.

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

If you have any questions, please don't hesitate to call toll free
at 1-800-252-5555.

Sincerely,

Joan Hale
Tax Administration Division