96-081

Response May 15, 1996

Request

April 17, 1996

To: Utah State Tax Commission

Please send us a written statement concerning the following question:

We are starting a vending business dealing with small gum ball-type machines. We understand that we are liable for sales tax on the profit we make from the business, but a part of the business will be dealing with fund raisers for several local school PTAs and the proceeds donated to the schools. Our question is should these proceeds also be taxed?

Your immediate response is appreciated. Thank you!

XXXXX

May 15, 1996

XXXXX

Re: Sales Tax on Fundraisers

Dear XXXXX

During the 1996 legislative session, the legislature amended the school fundraising exemption to apply as follows:

An exempt fundraising sale is a sale by a private or public elementary or secondary school or a student in grades K-12 (and not a private vendor) where the purpose of raising funds is to purchase equipment or materials for the school or to provide transportation in relation to school activities. The sales must be part of an officially sanctioned school activity that is conducted in accordance with a formal policy which is adopted by the school or school district to govern and supervise fundraising activities. The revenues may not directly or indirectly compensate a teacher or other school employee by direct payment, commission or payment in kind, and the revenues must be deposited in a dedicated account controlled by the school or school district.

The amended fundraising policy takes effect July 1, 1996. The key to the exemption will be the formal fundraising policy adopted in each school district. The Office of Education is working with school district representatives to develop a model policy that conforms with the legislative intent. So far the policy is still in the drafting stages, but it should be finalized prior to July 1st. Once it is completed, the schools that you deal with should be able to help you determine how to structure your transactions to fit within the policy.

Any sales prior to July 1, 1996 must conform to the current fundraising rule. That is,

1. the sales must be under the direction of a school, school association or teacher;

2. the sales must be made by the students; and

3. the revenues must be used purchase equipment and materials for the school.

With regard to your sales, sales of items from vending machines are exempt for sales tax on each transaction in which the proceeds of each sale do not exceed $1 so long as you report and remit sales tax calculated on an amount equal to 150% of your cost of items purchased for resale in the machines.

Please contact us again if you have any other questions.

For the Commission,

Alice Shearer,

Commissioner