Did nonprofit craft centers have to collect tax on craft and artwork sales and on consignment fees charged to artists?

Note -- partly obsolete historical guidance. DRS marks this ruling "not current" and states that it was obsoleted in part by Announcement (AN) 2000(8).

Plain-English summary

Connecticut's historical nonprofit exemption covered sales to nonprofit charitable and religious organizations. It did not generally exempt sales by those organizations, although the cited regulation allowed two one-day events per calendar year without charging sales tax.

Nonprofit craft centers therefore had to collect tax when selling crafts or artwork. They could purchase that merchandise for resale without paying tax by issuing valid resale certificates to the artists.

Consignment created an additional taxable charge. When a nonprofit craft center sold an artist's merchandise on consignment, DRS treated the center's consignment fee as a taxable sales-agent service.

What this means for you

The historical ruling separated a nonprofit's exempt purchases from its taxable retail activity. Nonprofit status did not automatically exempt customer sales or the center's compensation for selling another person's merchandise.

Common questions

Were all nonprofit sales taxable? The ruling notes a regulatory allowance for two one-day events in a calendar year.

Could a craft center buy artwork tax-free for resale? Yes, with a valid resale certificate.

Why was the consignment fee taxed? DRS classified it as payment for sales-agent services.

Citations and references

• Conn. Gen. Stat. §§ 12-412(8) and 12-407(2)(i)(U).
• Conn. Agencies Regs. § 12-426-17(6).
• 1989 Conn. Pub. Acts 251.
• Announcement (AN) 2000(8) -- identified by DRS as partly obsoleting this ruling.

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 90-21

Original ruling text

Ruling 90-21, Sales by Nonprofit Organizations / Sale by Agent

This information is not current and is being provided for reference purposes only

Ruling 90-21

Sales by Nonprofit Organizations

Sale by Agent

This Ruling has been obsoleted in part by  AN 2000(8)

Connecticut General Statute 12-412(8) provides a sales and use tax exemption for sales to nonprofit charitable and religious organizations. However, sales by nonprofit organizations are not exempted from the sales and use tax. You should also be aware that Conn. Agencies Reg. 12-426-17(6) allows nonprofit organizations to have two one day events in any calendar year without charging sales tax.

The nonprofit craft centers must apply sales and use tax to the sales of crafts or other artwork. The craft centers may purchase crafts and artwork for resale without payment of sales and use tax by issuing valid resale certificates to the artists. However, nonprofit craft centers that sell merchandise on consignment must apply a sales tax on the consignment fees that they charge the artists, because consignment services are considered to be sales agent services pursuant to section 12-407(2)(i)(U) of the Connecticut Statutes as amended by Public Act 89-251.

LEGAL DIVISION

February 13, 1990