Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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165.0000 CHARITABLE ORGANIZATIONS—Regulation 1570

Annotation 165.0066

165.0066 Humane Society. A humane society operates a thrift store which sells used donated clothing. The store has a paid store manager but the rest of the clerks work on a volunteer basis. All profits go to the society to assist in the cost of spaying and neutering animals adopted for pets from the society as well as to pay entirely for those people who could not otherwise afford to have the animals spayed or neutered. Other society activities include destroying stray or unwanted animals, picking up dead and injured animals as well as live animals and birds. The above humane society is not a charitable organization under Regulation 1570 since it has not met any of the conditions set forth in the regulation for the following reasons:

(1) Welfare exemption from property taxation. Property used in instances involving thrift shops qualifies for this exemption if the thrift shop sells property which has been processed in some manner by handicapped persons who are being rehabilitated by a rehabilitation program conducted by the society or the persons being rehabilitated are employed in the operation of the thrift shop. Neither of these conditions are met in this instance. Therefore, the humane society does not qualify for the welfare exemption from property taxation provided by Revenue and Taxation Code section 214.

(2) Engaged in the relief of poverty and distress. The activities of the humane society are not the type of activities which can be classified as the relief of poverty or distress.

(3) Sales must be made principally as a matter of assistance of purchasers in distressed financial condition. Sales made by the thrift shop are not made primarily as a matter of assistance to those in poverty and distress but as a fund raising activity of the humane society. The net income from the thrift shop sales is not reinvested in the operation of the thrift shop but is instead used to fund the society's operations. Because of the type of merchandise it sells, the thrift shop might have the incidental effect of assisting purchasers in a distressed financial condition; however, the sales are not made principally for this purpose. Thus, the thrift shop activities do not fulfill this condition.

(4) The property sold must have been made, prepared, assembled or manufactured by the organization. To fulfill this condition, the property sold by the charitable organization must be gathered together and prepared for sale in the thrift shop. The humane society does not meet this condition.

Since the humane society's thrift shop has not met all of the conditions set forth in Regulation 1570, the sales by the thrift shop are not exempt from tax. 9/1/78.