Sales made by Associated Student Body (ASB) organizations, Parent Teacher Associations (PTA), Parent Teacher Student Associations (PTSA), and Booster Clubs on a regular recurring basis are taxable in the same manner as sales made by regular business operations. These events include, but are not limited to, sales at the student store, concession stands at sporting events, ongoing sales of spirit wear, and weekly or monthly popcorn sales. The Department considers these activities to be the “operation of a regular place of business.” As such, the ASB, PTA, PTSA, or Booster Club must collect sales tax and remit it to the Department of Revenue. In addition, the gross proceeds received by the organization are subject to the business and occupation (B&O) tax under the Retailing classification. For information on registering with the Department of Revenue, visit us online.
The organization may purchase these items for resale without payment of sales tax by providing the vendor with a copy of its reseller permit. The organization may also pay the sales tax to the vendor, then recoup the sales tax by claiming a “Taxable Amount for Tax Paid at Source” deduction under the retail sales tax section of the return when filing with the Department of Revenue.
Qualified fundraising activities
Nonprofit organizations associated with school, such as ASBs, PTAs, PTSAs, and Booster Clubs are generally required to collect and remit retail sales tax and pay business and occupation (B&O) taxes on their sales of goods and retail services from the operation of a regular place of business. However, the law provides limited B&O and sales tax exemptions for certain fundraising activities. (RCW 82.04.3651 and 82.08.02573)
The B&O and sales tax exemptions are limited to:
- fundraising activities
- conducted by qualified nonprofit organizations
- that do not constitute the operation of a regular place of business in which sales are made during regular hours
- where the proceeds of the fundraising are used to further the nonprofit’s goals
ASBs, PTAs, PTSAs, and Booster Clubs are eligible for a B&O tax and retail sales tax exemption for qualifying fundraising activities. A qualifying fundraising event is one where the nonprofit organization (ASBs, PTAs, PTSAs, Booster Club) holds an event specifically for the purpose of soliciting or accepting contributions to fund other activities (and not just funding the event itself) that further the goals of the nonprofit organization. In addition, such events must be periodic as not to be classified as a regular business operation.
Examples of qualifying fundraising activities include:
- The school PTA holds an annual dinner/auction to raise money for new playground equipment at the school
- The ASB holds car washes on several Saturdays in the Spring to raise money for a school dance
- The school PTA holds a raffle for two weeks to raise money for a new school reader board
- The Booster Club sells spirit wear for three weeks in the Fall to raise money for new school sporting equipment
Examples of taxable activities include:
- ASB operates a student store open during lunch every day
- The PTSA operates a concession stand during every home baseball game
- The Booster Club sells spirit wear throughout the year
- The PTA sells popcorn to the students on a weekly or monthly basis
The Department considers these activities to be the “operation of a regular place of business” and not eligible for the fundraising exemptions from B&O tax and sales tax.
See ETA 3096.2009 Fundraising Activities of Public Schools, Associated Study Body Groups and Parent Teacher Associations
Consignment sales in conjunction with a commercial business: Subject to retail sales tax
Sometimes a PTA, PTSA, ASB, or Booster Club agrees to makes sales on behalf of a commercial business to raise funds for their nonprofit organization. If the nonprofit organization collects the sales proceeds from the customers, they must also collect retail sales tax on the gross proceeds of all such sales. The organization must remit the sales tax directly to the Department of Revenue unless they can show that the commercial business they represent are registered with the Department, in which case, they could remit the sales tax to the commercial business.
Any commissions earned by the organization would qualify for the fundraising exemption so that they will not owe B&O tax on the commissions.
Example: The PTA puts on a ski swap event one weekend a year in the high school gym. The PTA uses the funds to support various projects at the school. The PTA arranges for local businesses that sell ski equipment and individuals to provide new and used ski equipment for sale during the event.
In this case, the PTA is making consignment sales for the owners of the goods. The PTA must collect retail sales tax on the gross proceeds of all sales. While the PTA qualifies for the fundraising exemption from the B&O tax on the commission it receives, the sales themselves are not exempt from sales tax.
Under these circumstances the PTA will then take the following steps:
Remit the retail sales tax collected from the sale of product on behalf of the businesses to the Department or to the business if the business is registered with the Department of Revenue. The businesses are then required to remit the retail sales tax to the Department when they file their excise tax returns.
Remit the retail sales tax collected from the sale of product on behalf of individuals to the Department. The PTA will remit this when filing its excise tax return.
Report the gross proceeds from all sales under the Retailing B&O tax section of the excise tax return. The PTA will then take a deduction for the entire amount under the Retailing B&O section as “consignment sales.” The PTA will not report the amount of commission received under the Service and Other Activities B&O tax section because the commission qualifies for the fundraising exemption.
- Report the gross proceeds from all sales under the Retail Sales Tax section of the excise tax return. The PTA will then take a deduction for the amount of equipment sales attributable to the businesses as “Sales tax remitted by registered consignors.” After taking this deduction, the amount of equipment sales remaining should equal the amount of equipment sales attributable to individuals. The PTA will remit the retail sales tax based on this amount to the Department.
For more information, see our Special Notice, Tax Reporting for Consignment Sales.
Online sales in conjunction with a commercial business: Subject to retail sales tax
Sales of yearbooks, school rings, and spirit wear are often made through online stores of commercial businesses. The student, parent, guardian, etc., will purchase these items directly from the business. The nonprofit organization receives a commission from these sales. In this case, the commercial business is making retail sales directly to the purchaser and must collect retail sales and pay the retailing B&O tax on the gross proceeds, if the business has nexus in Washington. The business is not eligible for the qualified fundraising activity exemptions from B&O tax and sale tax.
The ASB or PTA receiving the commission is exempt from the B&O tax, assuming the activity is periodic in nature. If the sales occur on a regular basis, then the commission income received by the ASB or PTA is subject to the B&O tax under the Service and Other Activities classification.
Donations to ASBs, PTAs, PTSAs, and booster clubs
- Cash donations (gifts or contributions) are not subject to B&O tax or retail sales tax as long as the donor does not receive any significant goods or services in exchange for the donation.
- If the donor receives significant goods or services, then the donations are subject to B&O tax and sales tax, if applicable, based on the activity or service provided by the ASB, PTA ,etc. to the donor.
Donated goods and services
- Nonprofit organizations are exempt from use tax on items donated to them.
- Use tax does not apply to goods donated or bailed by a nonprofit organization to a person who uses it for the purpose for which it was originally donated.
- Persons who donate goods to nonprofit charitable organizations or state or local government entities are exempt from use tax if they have had no intervening use of the goods. (RCW 82.12.02595)
Example: A sign maker donates a new reader board for the football field and the labor to install it to the PTA. The PTA does not owe use tax on the sign itself or the labor to install the sign. The PTA then donates the sign to the local high school. The school is also exempt from use tax on the sign and installation labor.