Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales And Use Tax Court Decisions

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Institute in Basic Youth Conflicts, Inc. v. State Board of Equalization . . . (1985)

Sales Made by Nonprofit Religious Organization in the Course of Its Free Exercise of Religion Subject to Use Tax

Plaintiff, a nonprofit religious corporation exempt from federal and state income taxation, conducted religious seminars throughout the United States. In addition to charging a fee for the seminar, a separate fee was charged for printed syllabus notebooks used to help follow the seminar, and they were only available to individuals who attended the seminars. Plaintiff also sold religious books and pamphlets through the mail which were not directly related to the seminars. The Board assessed sales tax against plaintiff on the sale of syllabus notebooks and sales and use tax on the sale of other religious literature. After paying the taxes under protest, plaintiff applied for a refund on the grounds that the distribution of the syllabus notebooks to seminar participants was incidental to the rendition of seminar services, notwithstanding a separately stated charge, and that the imposition of sales and use taxes upon the sale of religious literature was a violation of the free exercise clause of the United States Constitution.

The Court of Appeal held that the application of the state sales tax law to plaintiff's activities was constitutionally infirm. The court held that the sales tax law operated as a privilege or occupation tax imposed upon the privilege of selling tangible personal property at retail, and that the state's interest in raising revenue thereby could not justify such a tax as a condition of engaging in constitutionally protected activity, i.e., the sale of religious materials. [But see Jimmy Swaggart Ministries v. Board of Equalization of California (1990) 493 U.S. 378; 107 L.Ed.2d 796.] It held, however, that, plaintiff was liable for use taxes due with respect to its sales under Revenue and Taxation Code sections 6202 and 6203. Institute in Basic Youth Conflicts, Inc. v. State Board of Equalization (1985) 166 Cal.App.3d 1093.