Could a 501(c)(3) organization building homes for low-income people buy construction materials without Texas sales tax?

Plain-English summary

The Comptroller's records showed that the organization's branches had federal 501(c)(3) exemption. The letter therefore treated them as exempt from Texas sales tax under Tax Code § 151.310 and allowed purchases consistent with their exempt purpose without sales tax.

Because the organization's exempt purpose was building homes for low-income people, it could buy building materials tax free even when constructing a building that would be turned over to a client under a lump-sum contract.

What this means for you

The material purchases qualified because they directly served the organization's stated exempt purpose. The lump-sum construction arrangement did not change the conclusion on these facts.

Common questions

Could the organization buy all items tax free? The letter limited the exemption to items consistent with its exempt purpose.

Did building a home for transfer to a client disqualify the materials? No, even under a lump-sum contract.

What statutory exemption did the letter use? Texas Tax Code § 151.310.

Citations and references

• Texas Tax Code § 151.310

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9203L1161B13

Original ruling text

March 24, 1992

Dear **:

Thank you for your recent letter requesting information on the
tax exempt status of **.

Our records show that all branches of ** have exemption
from the IRS as 501(C)(3) organizations. Accordingly they are
exempt from sales tax under Tax Code Section 151.310. This allows
them to purchase items that are in keeping with their exempt purpose
sales tax free. **** is unique in that its exempt
purpose is building homes for low income persons. Accordingly,
they may purchase building materials tax free even though they
are constructing a building to be turned over to a client under
a lump sum contract.

This opinion is based on the facts you presented. Other facts,
though similar, may yield different results.

If you have questions or need more information, please call or
write. You may reach me by calling toll free, (800) 531-5441.
My direct line number is (512) 475-0900. You may write to me in
care of Tax Administration Division.

Sincerely,

Al Van Allen
Tax Administration Division