Does a nonprofit civic organization (and the nonprofit/school booster groups selling food in its festival concession area) have to collect sales tax on food and beverages sold as an annual fundraiser?

Plain-English summary

A nonprofit civic organization asked the Comptroller about sales tax on food sold by a Cub Pack (a nonprofit/school booster group) in the food concession area of its annual heritage festival. The concession area was limited to nonprofit and school booster organizations, and most of the food — hamburgers, hot dogs, chili pies, "pork-a-bobs," and beverages like iced tea, soda, and coffee — was prepared on site for sale to festival patrons.

The Comptroller confirmed that nonprofit organizations can hold an annual food sale or banquet without collecting sales tax on the food and beverages sold, as long as all of the following are true:

• The food sale is an annual event (not more frequent).
• It does not exceed one week.
• It is a fund-raising project run exclusively by volunteers of the participating nonprofit organizations.
• It is noncommercial in every respect — the food and beverages cannot be prepared or served by a caterer, restaurant, or similar prepared-food retailer; only unpaid volunteers of the participating nonprofits can prepare and serve it.
• The participating nonprofits cannot sell tax-free if doing so competes with a retailer at the same event who is required to collect tax on its own food and beverage sales.

This tax-free treatment applies only to food and beverages — it does not extend to alcoholic beverages or other taxable items such as arts, crafts, or T-shirts sold at the same event. It's also a separate, distinct policy from the two one-day tax-free sale days that religious, educational, charitable, and certain 501(c)(3), (4), (8), (10), or (19) exempt organizations are allowed each calendar year.

What this means for you

Nonprofit and school booster organizations running festival food concessions

If your group's annual fundraising food sale meets all five criteria above — annual, one week or less, all-volunteer, fully noncommercial, and not undercutting a taxable competitor at the same event — you don't need to collect sales tax on the food and beverages you sell.

Organizations selling non-food items at the same event

Don't assume the exemption covers everything at your booth. Alcoholic beverages, arts and crafts, T-shirts, and other taxable merchandise remain taxable even at an otherwise-exempt annual food sale.

Organizations that also qualify for the one-day tax-free sale days

Keep the two policies separate. The annual food-sale exemption described here is unrelated to — and does not replace or duplicate — the two one-day tax-free sales available each year to qualifying religious, educational, charitable, and certain 501(c)(3)/(4)/(8)/(10)/(19) organizations.

Common questions

Q: Do we have to collect sales tax on food and drinks sold at our nonprofit organization's annual festival booth?
A: No, if the sale is an annual event of one week or less, run entirely by unpaid volunteers, entirely noncommercial (no caterer or restaurant involved), and not competing tax-free against a retailer who must collect tax at the same event.

Q: Does this exemption cover alcohol, crafts, or T-shirts sold at the same festival?
A: No. The policy applies only to food and beverages; alcoholic beverages and other taxable items remain taxable.

Q: Is this the same as the "two one-day tax-free sales" for exempt organizations?
A: No. It's a separate policy specifically for an annual food sale or banquet, distinct from the two one-day tax-free sale days available to qualifying exempt organizations each calendar year.

Q: Can a caterer or restaurant prepare the food for our nonprofit's tax-free annual sale?
A: No. The sale must be noncommercial in every respect — food and beverages must be prepared and served by unpaid volunteers of the participating nonprofit organizations, not by a caterer, restaurant, or similar prepared-food retailer.

Q: Can we rely on this letter for our own organization's event?
A: This opinion was based on the specific facts submitted by the requester; other facts, though similar, may yield different results, and STAR letters generally protect only the taxpayer to whom they were issued.

Citations and references

No specific Tax Code sections or Comptroller rules are cited in the body of this 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/9602013L

Original ruling text

February 15, 1996

Dear **:

Thank you for your letter concerning the sale of food by your Cub Pack at the
** Heritage Festival.

Based on the information you provided, the ** Heritage Festival is a
nonprofit
civic organization that allows only nonprofit and school booster organizations
into the food concession area. Most of the food is prepared on site, such as
hamburgers, hot dogs, chili pies, pork-a-bobs, etc., and beverages, for sale to
the festival patrons.

We allow nonprofit organizations to hold an annual food sale or banquet without
having to collect sales tax on the sale of food and beverages (i.e., iced tea,
sodas, coffee) if the following criteria are met:

The food sale is an annual event.

The food sale does not exceed one week.

The food sale must be a fund-raising project exclusively provided by the
volunteers of the participating nonprofit organizations.

The food sale must be noncommercial in every respect. The food and beverages
cannot be prepared or served by a caterer, restaurant, or any similar type of
prepared food retailer. Any food and beverages must be prepared and served by
the volunteers (without pay) of the participating nonprofit organizations.

The participating nonprofit organizations cannot sell food and beverages tax
free if in competition with a retailer who must collect tax on food and
beverage sales at the same event.

This policy regarding the annual food sale or banquet does not apply to sales
of alcoholic beverages or taxable items (i.e., arts, crafts, T-shirts) other
than food and beverages. It has nothing to do with the two one-day tax free
sales that religious, educational, charitable, and 501(c)(3), (4), (8), (10),
or (19) exempt organizations may hold each calendar year.

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

You may call me toll free at 1-800-531-5441, ext. 5-0030. The direct line is
512/475-0030. You may also write to Tax Policy, Comptroller of Public
Accounts.

Sincerely,

David Somerville
Tax Policy Division