Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2016
Sales and Use Tax Annotations
280.0000 GIFTS, MARKETING AIDS, PREMIUMS AND PRIZES— Regulation 1670
280.0187 Contributions for Gifts. A nonprofit organization with IRS section 501(c)(3) status is embarking on a solicitation campaign. Each contributor will be offered a selection of various gifts determined by the amount of contribution. That is, the larger the contribution, the larger the "gift." The gift will be delivered by a representative in California to the contributor.
Generally, items furnished for a suggested donation are regarded as sold for purposes of sales and use tax. (See Annotation 495.0370 (10/16/72).) However, under certain circumstances where there is a significant disparity between the amount of the contribution and the retail value of the property received, only part of the amount of the contribution will be included in the measure of tax. For example, when (1) a person makes a contribution and receives tangible personal property upon making the contribution, (2) the primary purpose of the contribution is to make a donation to support the charity, and (3) there is a significant disparity between the amount of the contribution and the retail value of the property received in connection with the contribution, there is a sale of tangible personal property, but the measure of tax is the sales price of the property to the nonprofit organization. If the nonprofit organization had paid sales tax reimbursement or use tax on its purchase of the property, no further tax would be due. If the nonprofit organization purchased the property for resale, the sales tax is due on the nonprofit organization's purchase price of the property when it resells it. The nonprofit organization may collect sales tax reimbursement from its contributors if the contract of sale so provides. 3/7/96.