Does a nonprofit/volunteer group have to collect sales tax on food and beverages sold at its annual fund-raiser, and can it get a refund of tax it already paid on two past fund-raisers?

Plain-English summary

A nonprofit or volunteer organization asked the Comptroller whether sales tax was due on food and beverages sold at its fund-raiser, and whether it could get a refund of tax paid on its 1994 and 1995 Chili Supper fund-raisers.

The Comptroller explained that non-profit civic or other volunteer groups are not required to collect sales tax on food and beverages (like iced tea, sodas, or coffee) sold during an annual fund-raising event, as long as the members themselves prepare, sell, and serve the food, and all of the following are true:

• The food sale is an annual event.
• The food sale does not run longer than one week.
• The food sale is a fund-raising project run exclusively by volunteers of the participating nonprofit organization(s).
• The food sale 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 nonprofit can prepare and serve it.
• The nonprofit cannot sell food and beverages tax-free if doing so would put it in competition with a retailer at the same event who is required to collect tax on its own food and beverage sales.

This exemption does not cover alcoholic beverages or other taxable items (such as arts, crafts, or T-shirts) sold at the same event — only food and beverages. In addition to the annual fund-raiser, the organization may also hold two separate one-day, tax-free sales each calendar year.

On the refund question, the Comptroller clarified that the office generally can't refund tax to a seller unless the seller first refunds the tax to the purchaser (procedures for this are in Rule 3.325(a)-(b), meant to prevent the seller from being unjustly enriched). However, if the organization did not represent to purchasers — for example, via a tax-paid receipt or a "tax included" statement on the ticket — that tax was collected on the ticket or admission price, then the organization never actually collected tax on that admission price in the first place. In that case, a refund of the tax remitted in error on the nontaxable admission price can be obtained by submitting a cover letter describing the situation, a copy of the ruling letter, and amended reports for 1994 and 1995.

The Comptroller noted this opinion is based on the facts presented, and could change if the facts are different.

What this means for you

Nonprofits and volunteer groups running an annual fund-raiser

You don't have to collect sales tax on food and beverages sold at your annual fund-raising event, provided the event lasts a week or less, is run entirely by unpaid volunteers of your organization (no caterer or restaurant involved), and doesn't undercut a taxable competitor selling similar food at the same event. Remember this exemption doesn't extend to alcohol or non-food items like crafts or T-shirts — those remain taxable.

Groups that also want extra tax-free sale days

Beyond the annual food/beverage fund-raiser, you're allowed two separate one-day tax-free sales per calendar year for other items.

Organizations that already paid tax on ticket/admission sales and want a refund

Check whether you told purchasers that tax was included in the ticket or admission price (e.g., a tax-paid receipt or a "tax included" statement). If you didn't, you likely didn't actually collect tax from the purchaser on that admission price, and you may be able to get a refund of the tax you remitted in error by submitting a cover letter, a copy of this letter, and amended reports for the relevant years. If you did collect tax from purchasers, you'd generally need to refund that tax to them first before the Comptroller's office will refund you, per the procedures in Rule 3.325(a)-(b).

Common questions

Q: Do we have to collect sales tax on food and drinks sold at our nonprofit's annual fund-raiser?
A: No, as long as it's an annual event lasting a week or less, run exclusively by unpaid volunteers (no caterer/restaurant), and not undercutting a taxable competitor selling similar food at the same event.

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

Q: Can we hold other tax-free sales during the year besides the annual food fund-raiser?
A: Yes, the organization may hold two separate one-day, tax-free sales each calendar year.

Q: We already paid tax on our 1994 and 1995 fund-raiser admissions — can we get it back?
A: Possibly. If you didn't tell purchasers that tax was included in the ticket/admission price (e.g., no tax-paid receipt or "tax included" statement), you can request a refund by submitting a cover letter, a copy of the ruling letter, and amended reports for those years. If you did represent that tax was included, you'd need to refund the purchasers first.

Q: Can we rely on this letter if our facts are different?
A: No. The Comptroller noted this opinion is based on the facts presented, and the outcome could change with different facts.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code Rule 3.325 (subsections (a) and (b) — procedures for a seller to obtain a refund of tax remitted in error)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9602L1407G11

Original ruling text

February 21, 1996

Dear **:

Thank you for your letter of February 8, 1996. You
asked whether sales tax is due on the ** fund-raiser.

Non-profit civic or other volunteer groups are not
required to collect sales tax on the sale of food and beverages (i.e., iced
tea, sodas, coffee) during an annual fund-raising event when the members
prepare, sell, and serve the meals and 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.

In addition to this fund-raiser, your organization
may hold two one-day, tax-free sales each calendar year.

You also asked if you could obtain a refund of tax
paid on the 1994 and 1995 Chili Supper fund-raisers. When we spoke about this
issue on the phone, I feel like I gave you an incomplete answer. Please accept
my apology.

In general, tax may not be refunded by this office
to a seller unless the seller first refunds the tax to the purchaser. The
procedures for obtaining a refund are detailed in Subsections (a) and (b) of
Rule 3.325. These procedures are to prevent unjust enrichment of a seller.

However, if the ** did not represent to
the purchaser (i.e., provide a tax paid receipt or a "tax included" statement
on the ticket) that tax was collected on the ticket or admission price, then
the **** did not collect tax on the sale price of the admission. A
refund of tax remitted in error on the nontaxable sales price of admission may
be obtained from this office. You may submit a cover letter describing the
situation, a copy of this letter, and amended reports for 1994 and 1995 to
obtain the refund.

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

You may call me toll free at 1-800-531-5441, ext.
5-0037. The direct line is 512/475-0037. You also may write to Sales Tax
Policy Division, Comptroller of Public Accounts.

Sincerely,

Lindey Osborne
Sales Tax Policy Division

NOTE: Previous Accession Number 9602157L