How many one-day tax-free sales can a 501(c)(3), (4), (8), (10), or (19) nonprofit and its chapters hold each year in Texas?

Subject

Two One — Day Tax Free Sales Or Auctions Allowed To 501(C)(3),(4),(8),(10),(19) And Bona Fide Chapters — Definition And Guidelines

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9402016L

Plain-English Summary

The Texas Comptroller confirmed how many one-day tax-free sales a qualifying nonprofit organization and its chapters can hold each calendar year. Under the Texas Tax Code, a nonprofit organization exempt as religious, charitable, or educational may hold one one-day tax-free sale during a calendar year. Effective August 30, 1993, that exemption was expanded to also cover organizations classified by the IRS as 501(c)(3), (4), (8), (10), or (19).

The ruling also addresses chapters of a qualifying exempt organization: as of August 30, 1993, each chapter of a qualifying exempt organization may hold two one-day tax-free sales during a calendar year (rather than just one). In the letter, the Comptroller's staff noted that its records showed a 501(c)(8) group exemption for the requesting organization and all of its branches, which is why the two-sale-per-chapter rule applied.

The organization decides which of its sales days during the year will be the tax-free ones, but it must designate those days in advance so the public knows sales tax won't be collected on taxable items sold that day.

What This Means For You

If you run a qualifying nonprofit (religious, charitable, educational, or IRS 501(c)(3), (4), (8), (10), or (19)): You can hold one one-day tax-free sale or auction per calendar year, where you don't have to collect sales tax on taxable items sold that day.

If your organization has bona fide chapters or branches with a group exemption: Each individual chapter may hold up to two one-day tax-free sales per calendar year, not just one — as long as the chapter structure is legitimate (the ruling here relied on Comptroller records showing a 501(c)(8) group exemption covering the organization and its branches).

Plan ahead: You must decide and designate your tax-free sale day(s) in advance of the sale, so customers and the public are aware in advance that sales tax won't be charged on that particular sale day.

Facts matter: As the Comptroller noted, this opinion is based on the facts presented, and a different fact pattern (for example, a group without a legitimate chapter/branch structure) could lead to a different result.

Q&A

Q: How many one-day tax-free sales can a qualifying nonprofit hold per year?
A: One one-day tax-free sale per calendar year for a nonprofit exempt as religious, charitable, or educational, or one classified by the IRS as 501(c)(3), (4), (8), (10), or (19).

Q: Can individual chapters of a nonprofit each hold their own tax-free sale days?
A: Yes. Effective August 30, 1993, each chapter of a qualifying exempt organization may hold two one-day tax-free sales during a calendar year.

Q: Does the organization need to announce which day is tax-free in advance?
A: Yes. The exempt organization must designate its tax-free sale days in advance so the general public knows sales tax won't be collected on taxable items sold on those days.

Original ruling text

February 3, 1994

Dear **:

I have received your letter regarding your organization's qualification to hold
two one-day tax-free sales per calendar year.

The Texas Tax Code allows a nonprofit organization that is exempt as religious,
charitable, or educational to hold a one-day tax-free sale during a calendar
year. Effective August 30, 1993, the exemption was expanded to include exempt
organizations classified by the IRS as 501(c)(3), (4), (8), (10), or (19). [Our
records show a 501(c)(8) group exemption for the ** and all its
branches.] In addition as of August 30th, each chapter of a qualifying exempt
organization may hold two one-day tax-free sales during a calendar year.

It is up to the exempt organization to designate which sales during the
calendar year are exempt. Such sales should be designated in advance so the
general public will be aware that sales tax will not be collected on sales of
taxable items.

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

If you have any questions, please don't hesitate to write the Tax
Administration Division or call one of our tax specialists toll free at
1-800-252-5555.

Sincerely,

Joan Hale
Tax Administration Division