Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2017
Sales and Use Tax Annotations
390.0000 NONPROFIT ORGANIZATIONS
390.0083 Fund-Raising Organization Supplies and Premiums. A fundraising organization sells goods through student groups and operates in a manner which makes it the retailer of the goods sold through the student solicitors. In connection with these fund-raising activities it provides the following category of goods:
(1) Catalogs, posters and other such items which it ships from its California warehouse to its employees for distribution to school groups.
(2) Samples of prizes and merchandise.
(3) Envelopes, mailing labels and flyers which are shipped from the California warehouse directly to the school groups. (4) Prizes which are awarded to students and sponsors .
All this property has been purchased ex-tax either under a resale certificate or from out of state.
The fund-raising organization is responsible for the tax on these items as follows:
(a) It is the consumer of catalogs, posters and other such items provided to the school groups for the solicitation of sales. While the total amount it receives for its sales includes the reimbursement of the cost of these items, there is no specific consideration paid for these goods. The school groups pay only for merchandise sold. If no items are sold or the event is canceled, the school groups pay nothing.
Since the fund-raising organization is the consumer of these items, it may not purchase them under a resale certificate. The fund-raising organization is liable for sales tax on the sale of the items to it if at the time of purchase it issued the resale certificates and it knew it would not resell the items. Otherwise, it owes use tax on its purchase price of any such consumed items mistakenly purchased under resale certificates. In addition, it must immediately cease purchasing the property it will consume under resale certificates.
In addition they are responsible for use tax on the items purchased out of state and shipped to in state employees for redelivery to in state schools. Items purchased out of state and sent to employees out of state or delivered to school groups out of state are not subject to tax under the provisions of section 6009.1. This is because the gift of the merchandise to the school groups is considered to take place outside the state.
(b) The fund-raising organization is the consumer of the samples. While the samples were used for demonstration and display, they are not held for sale in the regular course of business. The evidence is that upon obsolescence the samples are destroyed or given away. They were purchased in small lots for the limited purpose of being used as samples.
(c) The fund-raising organization is liable for tax on the flyers, mailing labels and envelopes in the same manner as the catalogs, etc., except that the section 6009.1 exclusion is not available. The property was sent directly to the student groups. The gift took place in California when the property was deposited in the mail. Accordingly, there was a "use" in California and the property is subject to tax, not withstanding any subsequent out-of-state shipment.
(d) The fund-raising organization is the retailer of the prizes, since the award of such prizes was dependent upon the volume of sales made by the participants or the achievement of other goals. Prizes shipped out of state are exempt as sales in interstate commerce. The in state deliveries of prizes are subject to tax measured by the stated value of the prize. If there is no stated value, the organization's cost will be presumed to be the selling price. 4/26/90. (Am. M99–1).