Generally, sales tax is due on the sale of tangible personal property and taxable services in Texas.
There is an exception for religious, educational and charitable organizations qualifying for sales tax exemption, and for organizations exempt under Internal Revenue Code Section 501 (c)(3), (4), (8), (10) or (19).These organizations can hold two one-day, tax-free sales or auctions each calendar year. During each one-day sale, the organization does not need to collect sales tax. See Tax Code Section 151.310(c) and Rule 3.322(h)(2).
But, when an exempt organization contracts with a for-profit fundraising firm to sell taxable items, the fundraising firm is considered the seller, and the sales are taxable.
Our office has consistently held that nonprofit organizations receiving compensation (such as a commission or share of the proceeds) for taking orders through a fundraising firm's brochures and sales forms are representatives of that firm. The fundraising firm is the actual seller of the items and is responsible for reporting and remitting the sales tax on the items sold. We formalized this policy effective July 11, 2010, in Rule 3.286 (related to seller's and purchaser's responsibilities).
The fundraising firm should provide to the nonprofit organization instructions and information regarding the proper collection of tax. For example, the fundraising firm may advertise in the sales brochure or state on each invoice that tax is included, or require that tax be calculated and collected based on the selling price of each taxable item.
Because the nonprofit organization is not the seller, it will not issue resale or exemption certificates and will not need to use one of its two tax-free sale days. The qualifying exempt organization's two tax-free sale days can be used for other events such as holding an auction.
Regarding local sales tax, the primary location of the nonprofit organization determines the tax rate that should be collected from customers and which local taxing jurisdictions are entitled to revenue from those sales. Under this scenario, the nonprofit organization is operating on behalf of the seller a place of business as that term is defined in Tax Code Section 321.002.
