Can Booster Clubs buy tax-free as exempt organizations or hold tax-free sale days, can a school issue an exemption certificate for cheerleader uniforms bought through the school, and can a teacher buy classroom supplies tax-free if reimbursed later?

Plain-English summary

This document is not a taxpayer-specific letter ruling. It's an internal August 10, 1995 memo from Comptroller staffer Bettie Peterson (Tax Administration, E40) to Ron Watkins (Manager, 2H05), titled "Taxability School Related Organizations." It answers four internal Q&A items about how sales tax exemptions apply to schools, booster clubs, and teachers, despite the filename/metadata this record was scraped under mistakenly suggesting it's only about teacher-purchased school supplies.

The four questions and answers are:

1. Can Booster Clubs (athletic, band, etc.) qualify to make tax-free purchases as an exempt organization? Only if the Booster Club has both (a) received a 501(c)(3) determination letter from the IRS, and (b) applied for and received a letter from the Comptroller's Exempt Organizations Section. Even then, the exemption only covers items purchased and used directly and exclusively in pursuit of the organization's exempt purpose as stated in its bylaws or articles of incorporation.
2. Can Booster Clubs qualify to conduct a one-day, tax-free sale twice each calendar year? Same dual-qualification rule as above — only Booster Clubs with both the IRS 501(c)(3) letter and the Comptroller's Exempt Organizations Section letter may conduct tax-free sales.
3. Can a school issue an exemption certificate for cheerleader uniforms when individual cheerleaders are paying for their own uniforms and merely purchasing them through the school to avoid sales tax? No. Schools can only make tax-free purchases for the school's own use, or present a resale certificate for items purchased for resale. Once cheerleading uniforms become the property of the individual cheerleaders, the school cannot purchase them tax-free — even if the cheerleaders "reimburse" the school for all or part of the cost.
4. Can a teacher who buys classroom supplies with personal money (to be reimbursed later by the school) use an exemption certificate? No. Teachers cannot issue exemption certificates on items used in classrooms, even when the school later reimburses them. A teacher may issue an exemption certificate in lieu of tax only if (a) the teacher is purchasing as the school's purchasing agent, or (b) the teacher purchases the items and then donates them to the school.

The memo notes it supersedes/updates a previous STAR accession, Number 9508401L.

What this means for you

Booster clubs and school parent/athletic/band organizations

Simply being a nonprofit-sounding organization tied to a school isn't enough to buy or sell tax-free. Your Booster Club needs two separate approvals: an IRS 501(c)(3) determination letter, and a letter from the Texas Comptroller's Exempt Organizations Section. Without both, purchases are taxable, and you cannot hold a tax-free one-day sale (even the two-per-year tax-free sale day allowance requires the same dual qualification).

Schools handling uniform or equipment purchases for students

Don't issue a sales tax exemption certificate for items — like cheerleader uniforms — that will become the personal property of an individual student, even if the student (or their family) is reimbursing the school for the cost. The exemption certificate is only valid for items the school itself will use or that the school is legitimately reselling under a resale certificate.

Teachers buying their own classroom supplies

If you're a teacher fronting your own money for classroom supplies and expecting reimbursement from the school later, you generally cannot use a tax exemption certificate at the time of purchase — that reimbursement arrangement does not qualify. The only ways to buy tax-free in this scenario are to purchase explicitly as the school's designated purchasing agent, or to buy the items and donate them outright to the school.

Accountants and tax professionals advising school-affiliated clients

This memo is useful background on the Comptroller's general position on school-related exempt-purchase questions from the mid-1990s, but as an internal staff memo it carries no reliance protection for any particular taxpayer and should be checked against current Comptroller rules (e.g., Rule 3.322 on exempt organizations) before being used to support a client's position today.

Common questions

Q: Is this a binding letter ruling I can rely on?
A: No. It is an internal Comptroller staff memo answering general policy questions, not a response to a specific taxpayer's facts, and it carries no letter-ruling reliance protection under 34 Tex. Admin. Code Rules 3.1 and 3.10.

Q: What does a Booster Club need to buy or sell tax-free?
A: Both an IRS 501(c)(3) determination letter and a letter from the Comptroller's Exempt Organizations Section. The exemption only covers items used directly and exclusively for the club's exempt purpose.

Q: Can a school buy cheerleader uniforms tax-free if the cheerleaders pay the school back?
A: No. Once the uniforms become the individual cheerleaders' property, the school cannot buy them tax-free, even with reimbursement from the cheerleaders.

Q: Can a teacher use a tax exemption certificate when buying classroom supplies with personal funds to be reimbursed later?
A: No, not in that scenario. A teacher can only use an exemption certificate for classroom items if acting as the school's purchasing agent, or if the teacher purchases the items and donates them to the school.

Q: Does this memo cite any statutes or rules?
A: No. The memo states policy positions without citing specific Tax Code sections or Comptroller rules.

Citations and references

No statutes, rules, or case law are cited in this document.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9508L1365B02

Original ruling text

DATE: August 10, 1995

TO: Ron Watkins, Manager, 2H05

FROM: Bettie Peterson, Tax Administration E40

SUBJECT: Taxability School Related Organizations

1. Do Booster Clubs (athletic, band. etc.) qualify to make
   tax-free purchases as an exempt organization?

Response: Only Booster Club's that have received a 501(c)(3) determination
letter from the Internal Revenue Service and have applied for and received
a letter from Exempt Organization's Section may purchase items tax-free.
The exemption applies to items purchased and used directly and exclusively
in pursuit of the exempt purpose (as outlined in the bylaws or articles of
incorporation) of the organization.

2. Do Booster Clubs (athletic, band, etc.) qualify to conduct a
   one-day, tax-free sale twice each calendar year?

Response: Only Booster Club's that have received a 501(c)(3) determination
letter from the Internal Revenue Service and have applied for and received
a letter from Exempt Organization's Section may conduct tax-free sales.

3. Can a school issue an exemption certificate for the purchase
   of cheerleader uniforms even if the individual cheerleaders are
   paying for their uniforms and merely purchasing them through the
   school to avoid paying the sales tax?

Response: Schools may only make tax-free purchases of items for the school's
own use. Schools must present a resale certificate in lieu of tax on items purchased
for resale by a school. When cheerleading uniforms become the property of the
cheerleaders, a school may not purchase cheerleading uniforms tax-free even when
the cheerleaders "reimburse" the school for the cost of the uniforms (or a portion
of the cost).

4. Can a teacher who is purchasing supplies to be used only in
   the classroom make the purchases tax-free using an exemption
   certificate when the purchase is made using the teacher's money
   that will be reimbursed at a later time?

Response: Teacher's cannot issue exemption certificates in lieu of tax on items
that are used in classrooms, even when the school reimburses the teacher for the
expense. A teacher may only issue an exemption certificate in lieu of tax on items
used by the school under the following circumstances:

a. The teacher is purchasing items as an agent for the school, or

b. The teacher purchases items and donates the items to the school.

NOTE: Previous Accession Number 9508401L