Which purchases, dues, meals, events, booth charges, mailing lists, advertising, and fundraisers of a nonprofit chamber of commerce were taxable?

Plain-English summary

The Comptroller addressed a range of transactions involving nonprofit Section 501(c)(6) chambers of commerce.

A nonprofit chamber representing at least one Texas city, county, or geographic locality could buy, lease, or rent taxable items without tax when the chamber or its authorized agent paid and gave the vendor an exemption certificate. Its membership dues, fees, and assessments remained exempt.

Lunches at monthly meetings were nontaxable when purchased and paid for by the chamber or its authorized agent with an exemption certificate, but taxable when individual members paid. Exhibit-booth space was not taxable, although a separate sale or rental of tangible personal property could be. The food portion of an annual-banquet ticket was taxable when the meal was served at a restaurant, hotel, or similar business or catered by an outside party.

Casino Night admission was an amusement service, but no sales tax was due when the service was provided exclusively by the nonprofit chamber. The chamber could hire a for-profit producer without losing the exemption if the chamber held itself out as the amusement-service provider.

Mailing-list sales were taxable information services. Newsletter or membership-directory advertising was not taxable. A chamber did not qualify for the special one-day tax-free sale or auction allowed to specified religious, educational, and charitable organizations. The letter separately described a tax-free annual banquet or other food sale available to all-volunteer nonprofits only when it was not professionally catered, not held in a restaurant or hotel, not competing with a tax-collecting retailer, and the members prepared, served, and sold the food.

What this means for you

Chambers of commerce

Exempt status did not make every revenue stream nontaxable. Track who pays for meals, what a ticket includes, whether the chamber is the service provider, and whether the transaction includes property or taxable information.

Event organizers and vendors

Separate booth-space charges from rentals or sales of property, and separate taxable banquet food from other ticket components.

Accountants and tax professionals

The STAR page now carries a later alert about the definition of a “place of business.” Verify current rules before applying the 1992 food-sale and local-business concepts.

Common questions

Were chamber membership dues taxable? No.

Were monthly meeting lunches taxable? Not when the chamber paid with an exemption certificate; yes when individual members paid.

Was exhibit-booth space taxable? No, but related property sales or rentals could be.

Was Casino Night admission taxable? Not when the nonprofit chamber exclusively provided the amusement service under the conditions stated.

Were mailing lists taxable? Yes. Advertising in the chamber's newsletter or directory was not.

Could a chamber hold a one-day tax-free sale under the special nonprofit rule? No. The letter limited that rule to specified religious, educational, and charitable organizations.

Citations and references

• Internal Revenue Code § 501(c)(6) (business leagues and chambers of commerce)
• 34 Tex. Admin. Code Rule 3.298(g)(1)(A) and (3) (amusement services)
• 34 Tex. Admin. Code Rule 3.342(b)(3) (mailing lists as information services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9201L1157D01

Original ruling text

Alert: As of 01/15/2015, a place of business is defined as "an established outlet, office, or location operated by a seller for the purpose of selling taxable items to those other than employees, independent contractors, and individual persons affiliated with the seller."

January 24, 1992

Dear ***:

Your letter concerning the applicability of sales and use taxes to Chambers of Commerce or similar organizations classified as Section 501(c)(6) under the Internal Revenue Code has been assigned to me for review and response. I appreciate your patience and apologize for the delay in responding.

Section 501(c)(6) organizations include Chambers of Commerce. You asked that we confirm or correct the following statements:

1) Purchases made by such organizations are exempt from sales tax.

Response: The purchase lease or rental of a taxable item to a non-profit chamber of commerce, representing at least one Texas city, county, or geographic locality, is exempt from tax when the organization or an authorized agent pays for the taxable item and provides the vendor an exemption certificate in lieu of tax.

2) Annual dues payable to such organizations remain exempt from sales tax.

Response: Correct. Membership dues, fees and assessments continue to be exempt for a Section 501(c)(6) nonprofit organization.

Additionally, you asked that we address the taxability of amounts collected by a Chamber of Commerce for the following transactions:

1) Charges for lunches at monthly membership meetings.

RESPONSE: Nontaxable when purchased by the Chamber and the Chamber or an authorized agent pays for the charge and provides the vendor an exemption certificate. Taxable when the lunches are paid for by the individual members.

2) Charges to exhibitors at trade fairs, health fairs, and similar events;

RESPONSE: Charges for exhibit booth space are not taxable. However, charges for the sale or rental of tangible personal property may be taxable.

3) Tickets for attendance at an annual banquet.

RESPONSE: If part of the ticket price covers a charge for food served at a restaurant, hotel or similar place of business, or catered by an outside party, that portion of the ticket is taxable.

4) Tickets for participation in a Casino Night or other fund raising function.

RESPONSE: The charge for admission to a Casino Night function is an amusement service. However, sales tax is not due on the sale of an amusement service provided exclusively by a nonprofit Section 501(c)(6) organization. A Chamber of Commerce, that is a nonprofit Section 501(c)(6) organization, may hire a for-profit organization to produce the Casino Night, without loss of the exemption, if the Chamber holds itself out as the provider of the amusement service. See subsections (g)(1)(A) and (3) of the enclosed Rule 3.298, Amusement Services.

5) Charges for mailing lists, advertising in a newsletter or membership directory.

RESPONSE: The sale of mailing lists is taxable as the sale of an information service in accordance with section (b)(3) of the enclosed Rule 3.342, Information Services. A Chamber of Commerce or similar organization is not exempted from collecting tax on its sales of taxable items. A charge made to business' allowing them to advertise in a Chamber newsletter or membership directory is not taxable.

6) Is a Chamber of Commerce type organization entitled to the one day/one event per year fund raising exemption to which certain types of nonprofit organizations are entitled?

RESPONSE: No, only religious, educational, and charitable organizations exempted under the Sales Tax Law are authorized to hold a tax-free sale or auction one day each calendar year.

However, all volunteer, non-profit organizations may hold a tax-free annual banquet or other food sale provided the affairs are not professional catered, are not held in a restaurant, hotel, or similar place of business, are not in competition with a retailer required to collect tax, and the food is prepared, served and sold by members of the organizations.

I am also enclosing a copy of our publication entitled Tax-Exempt Organizations, for your information.

This opinion is based on the facts presented. Other facts though similar may provide a different result.

If you have other questions or need more information, you may call 512/463-4600, or 1-800-252-5555 from outside Austin. You may write to Tax Administration Division.

Sincerely,

Gilbert Zamora

Tax Administration Division