Are meals a charity buys to honor its volunteers exempt from Connecticut sales tax if the charity pays and takes no reimbursement?

Plain-English summary

A charitable organization that holds a Connecticut exemption permit (issued under Conn. Agencies Regs. § 12-426-15) held an annual luncheon to inspire and encourage the volunteers running its upcoming fundraising campaign. The organization paid the entire cost itself, by check from its own account, and did not ask attendees to reimburse it — even though many attendees were themselves donors. It asked whether it owed sales tax on the meals.

DRS said the meals are exempt. Sales to charitable and religious organizations are exempt under Conn. Gen. Stat. § 12-412(8), and the regulation (§ 12-426-15(f)) confirms that a tax-exempt organization owes no tax on purchases made with its own funds and exclusively for its exempt purposes — but does owe tax when it buys something for the convenience of its officers, employees, members, or other individuals.

Why this luncheon qualifies:

• It is bought for, and in furtherance of, the organization's exempt purposes (motivating the fundraising volunteers), not for anyone's personal convenience.
• It is not a "fundraiser." Although DRS's Bulletin No. 34 lists fundraisers as nonqualifying (taxable) events, a meal the organization wholly pays for to honor or encourage its volunteers or employees — with no direct or indirect solicitation to reimburse the cost — is not a fundraiser.

The strict conditions. The exemption depends on the organization paying with its own funds by check drawn on its own account (per Bulletin No. 34 and TSSN-42), and taking no reimbursement — by donations, ticket sales, or otherwise — from the people who eat the meals.

What this means for you

An exempt organization's own-funded volunteer/staff appreciation meals can be tax-free

If your charity or religious organization buys meals purely to honor or motivate its volunteers or employees, pays for them itself, and doesn't recoup the cost from attendees, those purchases fall within the exemption — they serve the exempt mission, not personal convenience.

The line is "fundraiser" vs. "furthering the mission"

A fundraiser — where attendees pay or are solicited to cover the cost — is a taxable event. A mission-furthering appreciation meal the organization simply pays for is exempt. What flips the result is whether attendees are asked, directly or indirectly, to reimburse the cost.

Pay by check from the organization's account, and don't collect reimbursement

The exemption is conditioned on paying with the organization's own funds by check and taking no reimbursement. Personal payment/reimbursement or ticketing can convert an otherwise-exempt meal into a taxable one, so keep the payment and the no-reimbursement facts clean and documented.

Common questions

Q: Does a charity owe sales tax on a luncheon to thank its volunteers?
A: Not if it pays with its own funds by check for its exempt purposes and takes no reimbursement from attendees — DRS ruled such meals are exempt under Conn. Gen. Stat. § 12-412(8).

Q: Isn't a meal event a taxable "fundraiser"?
A: Only if attendees pay or are solicited to cover the cost. A meal the organization wholly pays for to honor or encourage volunteers or employees, with no reimbursement, is not a fundraiser.

Q: What are the conditions for the exemption?
A: The organization must use its own funds, pay by check drawn on its own account, and neither seek nor accept any direct or indirect reimbursement from the people consuming the meals.

Q: What if attendees are asked to chip in for the meal?
A: Then it looks like a fundraiser (or a purchase for individuals' convenience), and the exemption would not apply.

Citations and references

Statutes, regulations, and guidance:

• Conn. Gen. Stat. § 12-412(8) (sales to charitable and religious organizations exempt)
• Conn. Agencies Regs. § 12-426-15(f), (g) (own-funds/exempt-purpose rule; seller's certificate and no-reimbursement requirement)
• Bulletin No. 34 (June 1987, rev. Nov. 1990); TSSN-42 (Jan. 1991) (payment by check from the organization's own account)

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 92-5

Original ruling text

Ruling 92-5, Sales and Use Taxes / Charitable and Religious Organizations

Ruling 92-5

Sales and Use Taxes Charitable and Religious Organizations

ISSUE:

Whether purchases of meals by a charitable or religious organization that has been issued an exemption permit pursuant to Conn. Agencies Regs. §12-426-15 at a luncheon or dinner that is held by the organization to honor or encourage its volunteers are exempt from sales and use taxes where the organization pays for the meals entirely with its own funds and neither seeks nor accepts reimbursement, direct or indirect, from the volunteers for the cost of the meals.

FACTS:

A charitable organization (hereinafter, "the organization") that has been issued an exemption permit pursuant to Conn. Agencies Regs. §12-426-15 holds an annual luncheon for the volunteers who will be working in its upcoming fundraising campaign. The purpose of the luncheon is to inspire and encourage the campaign leaders and volunteers. The organization pays for the luncheon wholly with its own funds and by check drawn on its checking account. While many of those in attendance may themselves contribute to the organization's fundraising campaign, there is no solicitation, direct or indirect, of such individuals, at the luncheon or thereafter, to reimburse the organization for the cost of the meal.

DISCUSSION:

Conn. Gen. Stat. §12-412(8) provides for exemption from sales and use taxes for sales of tangible personal property or services to charitable and religious organizations.

Conn. Agencies Regs. §12-426-15(f) provides that "[a] tax-exempt organization which purchases taxable goods and/or services shall not owe the Sales and Use Tax if it uses its own funds and if the purchase is made exclusively for the purposes for which the organization was established. If the tax-exempt organization makes a purchase for the convenience of its officers, employees, members or other individuals, the Sales and Use Tax shall be due and owing."

Conn. Agencies Regs. §12-426-15(g) provides that, unless the seller takes a certificate "substantially in the form prescribed below," the burden of proving "that a sale of tangible personal property or service is not a taxable sale at retail is upon the seller...." The certificate provides that, if sales of meals to a tax-exempt organization are involved, that the organization "neither has been nor will be reimbursed in any manner, by donations, sales of tickets or otherwise, by the consumers of the meals for the price of such meals."

Bulletin No. 34, which was issued by the Department in June 1987 and revised in November 1990, restates the requirements of Conn. Agencies Regs. §12-426-15 and further requires that a charitable or religious organization pay for meals or lodging that are furnished to it by check drawn on the organization's checking account. TSSN-42, which was issued by the Department in January 1991, clarifies that all purchases (other than purchases for $10 or less) of tangible personal property or services by a charitable or religious organization must be paid for by check drawn on the organization's checking account.

Bulletin No. 34 lists fundraisers as nonqualifying taxable events. However, a luncheon or dinner that is held and wholly paid for by a charitable or religious organization to honor or encourage its volunteers or employees and for which no direct or indirect solicitation is made to reimburse the organization for the cost of the meal is not a fundraiser, as the term is used therein. Purchases of such meals by the organization are made for, and in furtherance of, the exempt purposes of the organization, and are not made for the convenience of the organization's officers, employees, members or other individuals.

RULING:

Purchases of meals by a charitable or religious organization that has been issued an exemption permit pursuant to Conn. Agencies Regs. §12-426-15 at a luncheon or dinner that is held by the organization to honor or encourage its volunteers or employees are exempt from sales and use taxes where the organization pays for the meals entirely with its own funds and by check drawn on its own checking account and neither seeks nor accepts reimbursement, direct or indirect, from the volunteers for the cost of the meals.

LEGAL DIVISION

March 31, 1992