96-100
Response
June 27, 1996
Request
Utah
State Tax Commission
Attention:
XXXXX
210
North 1950 West
Salt
Lake City, Utah 84134
Re:
Request for Opinion on Sales Tax
Issue
in XXXXX Fund Raiser
Dear
XXXXX
I
am involved with a local troop of the XXXXX, sponsored by a local congregation
of a church which, I am informed by the church, is a 501 (3)(c) exempt
organization. We are formulating plans to undertake a fund raising activity and
the question came up as to whether we would need a sales tax license in
connection with the activity. I will outline the factors of our activity below.
I request that you consider these factors and then let us know whether we are
required to have a sales tax license and to collect and remit sales tax on this
fund raising activity.
We
will undertake the following activity four (4) times per year. The XXXXX troop will
take pre-orders from residents in our neighborhood (consumers) for the purchase
and installation of bags of water softener salt into the residents' water
softeners. The XXXXX troop will then purchase the bags of water softener salt
from a supplier and deliver the bags of water softener salt to and install in
the water softeners of the consumer, stacking bags of extra salt ordered by the
consumers next to their water softeners. The price paid by the consumers to the
XXXXX troop will give the troop a profit of XXXXX to XXXXX on each bag
delivered.
Much
interest has been shown by the members of the neighborhood where most of the
XXXXX reside, as a very large number are widows, widowers and retirees who,
because of age, find it difficult to carry and maneuver bags of water softener
salt.
The
funds raised from this project will go into the XXXXX troop's checking account
and are used for the purchase and maintenance of XXXXX troop equipment and to
pay for summer camp fees. The plan is that every couple of years, an analysis
of needs will be done, and any excess monies will be donated to some charity or
utilized by the XXXXX troop in providing some sort of service to the community,
perhaps being used with XXXXX projects.
I
would appreciate your providing us with some direction as to whether we shall
be required to obtain a sales tax license, as soon as possible, as we are
excited to continue forward with this project. We intend to hold off, however,
until we hear from you.
Sincerely,
XXXXX
XXXXX
Re: Sales Tax Exemption for XXXXX
Fund Raiser
Dear
XXXXX:
We received your letter requesting
information on whether your XXXXX fund raiser was tax exempt. The following two points should answer your
question.
I. Does your troop qualify as a religious or
charitable organization?
Under Utah law, sales by religious
or charitable organizations are exempt from sales tax if they make the sales in
the regular religious or charitable conduct or function of the
organization. See Utah Code Section 59-12-104.1. This brings up two points; first, does the
organization qualify as an exempt religious or charitable organization, and
second, are the sales part of the regular religious or charitable conduct or
function of the organization.
There are two ways that your troop
may qualify as an exempt organization.
First, if your troop qualifies as a 501(c)(3) organization itself with
the IRS, it may apply for its own exemption number issued by the Tax
Commission. Second, your troop may fall
under the umbrella of an exempt organization.
Both the XXXXX and the XXXXX are exempt organizations. If these organizations extend their exempt
status to sales of water softener salt by your troop, the fund raiser sales may
be exempt. In our experience, however,
the XXXXX Councils have not authorized use of their exempt status by XXXXX
troops, and the XXXXX policies may preclude sales of this nature. We urge you to explore this issue with these
organizations.
Even if your troop qualifies for exemption,
if your troop generates income from sales that are unrelated to the qualifying
organization’s religious or charitable purpose, the sales will be taxable. Utah Administrative Rule R865-19S-43 ties
the term “unrelated trades or businesses” to section 513 of the IRS Code. Therefore, if your organization is required
to include receipts from some of its sales in its taxable income for federal
income tax purposes, the activities that generated those receipts are
ineligible for the sales tax exemption unless another exemption applies.
II. Applying for a sales tax license and
wholesale exemption.
If you do not qualify as an exempt
organization or a subunit of an exempt organization, your troop is responsible
for collecting sales tax on these sales. You can apply for a sales tax license by submitting form TC-69
(enclosed). Furthermore, if the Tax
Commission does not recognize your troop as an exempt organization, you may
purchase the water softener salt tax free for resale. Utah Code Subsection 59-12-104(28) provides a sales tax exemption
for property purchased for resale in this state. To claim this exemption you must have a sales tax licence and
complete an exemption form (TC-721 enclosed) for your vendor’s tax records.
We hope that this information
answers your questions. Please contact
us again if you have any further questions.
For the Commission,
Alice Shearer,
Commissioner