DRS: SN 98(11), Exemption From Sales And Use Taxes Of Sales By Nonprofit Organizations At Fundraising or Social Events

 

STATE OF CONNECTICUT
DEPARTMENT OF REVENUE SERVICES

450 Columbus Blvd
Hartford CT 06103
 
 
 
 
 
 

 
 

This Special Notice has been cited by PS 99(1); PS 2002(2)
and amplified by IP 2002(11)

SN 98(11)

Exemption From Sales And Use Taxes Of Sales By Nonprofit Organizations At Fundraising or Social Events

1997 Conn. Pub. Acts 316, §3


PURPOSE: This Special Notice describes a new exemption from sales and use taxes for sales of tangible personal property by nonprofit organizations at fundraising or social events. The exemption applies to a maximum of five such events of a day’s duration during any calendar year. This Special Notice explains the effect of the new exemption on similar existing provisions of Conn. Agencies Regs. §12-426-17 relating to casual sales.

This Special Notice also explains how an exempt organization may purchase items intended for resale at exempt fundraising or social events.


EFFECTIVE DATE: Applicable to sales occurring on or after June 1, 1997.


STATUTORY AUTHORITY: Conn. Gen. Stat. §12-412, as amended by 1997 Conn. Pub. Acts 316, §3; Conn. Gen. Stat. §12-412(1), (2) and (8); Conn. Gen. Stat. §12-414.


NEW EXEMPTION FOR FIVE ONE-DAY FUNDRAISING OR SOCIAL EVENTS DURING A CALENDAR YEAR: Effective June 1, 1997, the General Assembly exempted sales of tangible personal property by nonprofit organizations at bazaars, fairs, picnics, tag sales or similar events to the extent of five such events of a day’s duration held during any calendar year.

Sales qualifying for this exemption do not include sales at retail establishments operated by nonprofit organizations, such as thrift stores or gift shops. However, nonprofit organizations that operate such retail establishments, or are already registered with the Department to collect sales and use taxes, are not prohibited from using this exemption for their individual fundraising or social events.

The exemption applies only to sales and use taxes. It does not apply to admissions, cabaret and dues tax or any other tax.


DEFINITIONS AND EXPLANATIONS OF TERMS: For purposes of this Special Notice and the exemption described herein, the following definitions and explanations of terms apply:

"Tangible personal property." Because the term "tangible personal property" used in the exemption is not qualified, all items of tangible personal property, including automobiles, vessels, snowmobiles and aircraft, are exempt when sold or leased by nonprofit organizations at fundraising or social events, despite any other provisions of Chapter 219 or the regulations thereunder. Sales of meals and alcoholic beverages are also exempt. Sales of room occupancy and taxable enumerated services are not exempt.

"Nonprofit organizations." Nonprofit organizations include any organization, whether or not incorporated, that is not organized for profit, whose organizing documents contain a provision that no officer, member or employee of the organization will receive or may ever receive any pecuniary profit from the operation of the organization, except reasonable compensation for services in carrying out the purposes of the organization.

Nonprofit organizations also include the United States and its agencies, the State of Connecticut and any Connecticut political subdivision and their respective agencies, and any organization that Connecticut is prohibited from taxing under the constitution or laws of the United States.

"Events." The list of events in the exemption illustrates the types of fundraising or social events usually held by nonprofit organizations, but is not meant to be all-inclusive. Besides bazaars, fairs, picnics and tag sales, events that may qualify for the exemption include but are not limited to telethons, auctions, church suppers, bake sales, dances and casino nights.

Fundraising or social events do not include sales of items of tangible personal property to specific purchasers. For example, if a church sells an automobile to a member of its clergy, the sale does not qualify for the exemption.

"A day’s duration." A day’s duration means either (1) any uninterrupted period of 24 hours or less, whether or not it spans more than one calendar day, or (2) any period or periods that begin and end within a single calendar day (between midnight and midnight).

"Five events of a day’s duration." This term means any total of five days of events of a day’s duration, even if the events are held on consecutive days, and even if the events are considered a single fundraising or social event.

"A calendar year." A calendar year begins on January 1 and ends on December 31. Unused exempt events may not be carried over from one calendar year to the next.

EXAMPLE 1: A nonprofit organization holds a casino night that begins at 6:00 p.m. on Thursday and ends at 2:00 a.m. on Friday. This is one "event of a day’s duration" at which sales of tangible personal property are exempt, because it is an uninterrupted period of 24 hours or less.

EXAMPLE 2: A nonprofit organization holds a telethon that begins at 6:00 p.m. on Friday and runs continuously until 6:00 p.m. on the next Monday. This is three "events of a day’s duration" (three uninterrupted periods of 24 hours) at which sales of tangible personal property are exempt.

EXAMPLE 3: A nonprofit organization holds a bazaar that runs from 8:00 a.m. to 1:00 p.m. and from 4:00 p.m. to 8:00 p.m. on Friday. The bazaar then runs from 8:00 a.m. to noon on Saturday. This is two "events of a day’s duration" at which sales of tangible personal property are exempt. The first day’s duration is the two periods within the calendar day on Friday, and the second day’s duration is the period during the calendar day on Saturday.

EXAMPLE 4: A nonprofit organization holds a tag sale of one day’s duration. Later in the calendar year, the same organization holds a telethon of three days’ duration. Later in the same calendar year, the organization holds a fair of seven days’ duration. Sales of tangible personal property at the one-day tag sale and the three-day telethon are exempt, and sales on one day of the seven-day fair are exempt. Sales on the other six days of the fair and at any subsequent events held by the organization during the same calendar year are not exempt, because the organization reached its annual allotment of five exempt events on the first day of the seven-day fair.

However, the organization may elect not to use its fifth exempt day during the fair, and may reserve that day for another event later in the calendar year. Alternatively, the organization may use its five exempt days in any other combination (such as during only the last five days of the seven-day fair, or nonconsecutively).


PURCHASES OF ITEMS TO BE SOLD AT EVENTS BY NONPROFIT ORGANIZATIONS: An organization described in section 501(c)(3) or (13) of the Internal Revenue Code that holds a valid determination letter from the United States Treasury Department, or any organization holding a valid exemption permit issued by the Commissioner of Revenue Services before July 1, 1995, may purchase items it intends to resell at fundraising or social events exempt from sales and use taxes under Conn. Gen. Stat. §12-412(8) using CERT-119, Certificate for Purchases of Tangible Personal Property and Services by Qualifying Exempt Organizations. Please note that CERT-119, which previously could not be used for purchases of items of tangible personal property or meals to be resold, will be modified to allow such purchases when those items will be resold under the fundraising or social event exemption.

The United States and its agencies, the State of Connecticut and any Connecticut political subdivision and their respective agencies may purchase items they intend to resell at fundraising or social events exempt from sales and use taxes under Conn. Gen. Stat. §12-412(1), using the Governmental Agency Exemption Certificate. Any organization that Connecticut is prohibited from taxing under the constitution or laws of the United States may purchase items it intends to resell at fundraising or social events exempt from sales and use taxes under Conn. Gen. Stat. §12-412(2), using the Governmental Agency Exemption Certificate.

If a nonprofit organization is registered as a retailer with the Department, it may purchase items of tangible personal property to be sold at fundraising or social events on a resale basis under the provisions of Conn. Gen. Stat. §12-410, using the Connecticut Resale Certificate. The organization may not use the items other than for retention, demonstration or display while holding them for sale. When the items are sold at the fundraising or social events under the exemption described herein, they will be exempt from sales and use taxes. To purchase items using a resale certificate, a nonprofit organization must be registered as a retailer with the Department. (See Registration of Nonprofit Organizations, below.)


REGISTRATION OF NONPROFIT ORGANIZATIONS: A nonprofit organization whose purchases are exempt under Conn. Gen. Stat. §12-412(1), (2) or (8) that is not already registered as a retailer with the Department of Revenue Services need not register to avail itself of the exemption for sales at fundraising or social events. However, any organization that is not exempt from sales and use taxes on its purchases under Conn. Gen. Stat. §12-412(1), (2) or (8) must be registered as a retailer if it wishes to purchase items it will sell at fundraising or social events without paying tax on such items.

A nonprofit organization may register with the Department of Revenue Services as a retailer by filing Form REG-1, Application for Tax Registration Number. A nonprofit organization that is so registered must file sales and use tax returns, even if all of its sales are exempt.


FILING REQUIREMENTS: Sales and use tax returns must be filed monthly, except that if an organization’s total tax liability for the twelve-month period that ended on the preceding September 30 was less than $4,000 it may file quarterly returns. If an organization’s total tax liability for the twelve-month period that ended on the preceding September 30 was less than $1,000 it may file an annual return. Questions about registration should be directed to the DRS Registration Unit, at 860-297-4875.


SALES BY AUCTIONEERS AND OTHER VENDORS: Usually, auctioneers are considered retailers of tangible personal property whether or not the auctioneer owns the property being sold, and must charge sales and use taxes on their gross receipts; see Conn. Gen. Stat. §12-407(12)(a).

Therefore, an auctioneer who is paid by a nonprofit organization to conduct an auction must charge sales and use taxes on all sales, even if the auction is a fundraising or social event. The auctioneer is a retailer separate from the nonprofit organization, and the exemption does not apply to the auctioneer’s sales.

However, if an auctioneer volunteers his or her services to a nonprofit organization at no charge, sales by the auctioneer will be considered sales by the nonprofit organization itself, and will qualify for the exemption.

Sales at fundraising or social events by retailers other than nonprofit organizations also do not qualify for this exemption. For example, sales of food at a carnival by a local restaurant or retailer or sales of merchandise by an itinerant vendor at a craft fair are taxable, even if the carnival or fair is held or sponsored by a nonprofit organization.


EFFECT OF NEW EXEMPTION ON EXISTING REGULATIONS: Certain provisions of the sales and use tax regulations are affected by the new exemption:

Conn. Agencies Regs. §12-426-16a. The new sales and use tax exemption described in this Special Notice supplements Conn. Agencies Regs. §12-426-16a(b)(1), listing when the sale of a motor vehicle, snowmobile, vessel or airplane is exempt from sales and use taxes by virtue of the identity of the seller. A nonprofit organization may purchase a motor vehicle, snowmobile, vessel or aircraft without tax, as described herein, if such item will be sold by the organization at an exempt fundraising or social event.

Conn. Agencies Regs. §12-426-17. The provisions of the casual sale rule in Conn. Agencies Reg. §12-426-17, as it applies to sales at fundraising or social events by nonprofit organizations, are no longer in effect and are revoked by the new sales and use tax exemption described in this Special Notice.

Before the effective date of the new exemption, Conn. Agencies Regs. §12-426-17(c)(6) described certain circumstances under which a nonprofit organization could make nontaxable sales (the "casual sale rule"). The casual sale rule limited the number of events to two per calendar year, and specified that nonprofit organizations holding sales tax permits could not avail themselves of the casual sale exemption. In addition, Conn. Agencies Regs. §12-426-17(d)(2) stated that sales of motor vehicles, vessels, snowmobiles or aircraft could never qualify under the casual sale rule.

Conn. Agencies Regs. §12-426-29. The new sales and use tax exemption described in this Special Notice supplements Conn. Agencies Regs. §12-426-29(d)(3), describing the circumstances under which a charitable or religious organization may purchase meals exempt from tax. A nonprofit organization may purchase meals without tax, as described herein, if the meals will be sold at an exempt fundraising or social event.


PURCHASES OF PROMOTIONAL ITEMS AND ITEMS TO BE RAFFLED BY NONPROFIT ORGANIZATIONS: The exemption from sales and use taxes for sales at fundraising or social events described in this Special Notice does not apply to items given away or raffled off by nonprofit organizations.

Organizations that purchase promotional items they intend to give away in appreciation for donations, or use as raffle prizes, are the consumers of such items. Organizations that are exempt from tax on their purchases under Conn. Gen. Stat. §12-412(1), (2), (8) or another statutory provision, may purchase such items without paying tax by using the appropriate exemption certificate. Organizations that are not exempt from tax on their purchases under a specific statutory provision must pay sales or use tax on promotional items they intend to give away in appreciation for donations, or use as raffle prizes, when they purchase such items. A resale certificate may not be used under such circumstances.

Charitable donations in exchange for which promotional items are given, and amounts paid for raffle tickets, are not consideration for the items given away by the organization, and no sales or use taxes apply to such donations or raffle ticket payments.


EFFECT ON OTHER DOCUMENTS: TSSN 38, The State Tax Guide for Nonprofit Organizations, is revoked. Special Notice 95(10), 1995 Legislative Changes Affecting Exempt Purchases by Exempt Organizations, and Policy Statement 96(7), Purchases of Meals or Lodging by Exempt Organizations or Qualifying Governmental Agencies, are modified and superseded in part by this Special Notice.


EFFECT OF THIS DOCUMENT: A Special Notice is a document that announces a new policy or practice in response to changes in State or federal laws or regulations or to judicial decisions. A Special Notice indicates the Department’s informal interpretation of Connecticut tax law and may be referred to for general guidance by taxpayers or tax practitioners.


FOR FURTHER INFORMATION: Please call the Department of Revenue Services during business hours, Monday through Friday:

  • 1-800-382-9463 (toll-free from within Connecticut), or
  • 860-297-5962 (anywhere).
  • TDD/TT (Telecommunications Device for the Deaf) users only call 860-297-4911.

FORMS AND PUBLICATIONS: Forms and publications are available all day, seven days a week:

  • Telephone: use the phone number listed above and select Option 2 from a touch-tone phone;
  • Internet: preview and download forms and publications from the DRS web site: http://www.ct.gov/drs.

SN 98(11)
Sales and Use Tax
Exempt Sales by Nonprofit Organizations
Issued 08/17/98