Are T-shirt sales taxable in Kansas if all the profits go to charity, and must consignment sellers collect the tax too?

Plain-English summary

A business wanted to run a fundraiser selling T-shirts, with all the profits going to the United Way Fund in New York City, and asked the best way to sell the shirts so that all the profit reaches the fund — and what its sales-tax obligation would be. Other local businesses would also display and sell the shirts to make it a community effort. The Department's answer: the sales are taxable, and every seller must collect the tax.

Charity destination does not change the tax. The Department quoted K.S.A. 79-3603(a), which imposes retailers' sales tax on the "gross receipts received from the sale of tangible personal property at retail within this state." T-shirts are tangible personal property, so selling them at retail is taxable — regardless of where the profits go.

The organizing business must collect the tax. The Department said the business "would be obligated to collect, report and remit state and local sales tax based on the selling price for each T-shirt sold by your business at retail." The tax is figured on the selling price of each shirt.

So must every other seller — including consignment sellers. The Department extended the same duty to the other participating businesses: they "would likewise be obligated to collect, report and remit state and local sales tax on the selling price for each T-shirt sold at retail, whether selling on a consignment basis or from inventory." It cited K.A.R. 92-19-8 (the consignment regulation). Whether a shop sells the shirts on consignment or buys them into inventory first, it must collect and remit the tax on its retail sales.

Bottom line: a charitable purpose is not a sales-tax exemption. Every business that sells the fundraiser T-shirts at retail in Kansas must collect state and local sales tax on the selling price and remit it — the community-effort, consignment structure does not change that.

What this means for you

Anyone running a for-charity merchandise sale

Selling goods to raise money for a cause is still a taxable retail sale in Kansas. Collect state and local sales tax on the selling price of each item; the fact that the profits go to charity does not exempt the sale. Build the tax into your pricing and plan so the charity still nets what you intend.

Consignment and multi-location sales

If several businesses sell the items — on consignment or from inventory — each selling business is a retailer that must collect, report, and remit the tax on its own sales. Coordinate so every seller knows they are responsible; K.A.R. 92-19-8 governs the consignment situation.

State and local tax both apply

The Department referred to state and local sales tax. Collect at the combined rate in effect at the point of each sale, since Kansas local sales taxes are administered together with the state tax.

Common questions

Q: Do we have to charge sales tax on charity fundraiser T-shirts?
A: Yes. The Department ruled that under K.S.A. 79-3603(a) the seller must collect, report, and remit state and local sales tax on the selling price of each T-shirt, even though the profits go to charity.

Q: What about the other stores that sell the shirts for us?
A: They must also collect and remit the tax on the shirts they sell at retail, whether on consignment or from their own inventory (see K.A.R. 92-19-8).

Q: Does the charitable destination of the profits create an exemption?
A: No. The charitable purpose does not exempt the retail sale; the tax is due on each shirt's selling price.

Citations and references

• K.S.A. 79-3603(a) — imposes Kansas retailers' sales tax on the gross receipts from retail sales of tangible personal property; T-shirts sold at retail are taxable regardless of the charitable use of the profits.
• K.A.R. 92-19-8 — the consignment regulation the Department cited in requiring the other businesses to collect and remit tax on the shirts they sell, whether on consignment or from inventory.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2001-102

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

September 17, 2001

XXXXX
XXXXX
XXXXX
XXXXX

Dear XXXXXX:

In your e-mail dated September 17, 2001 you made the following inquiry:

We are wanting to do a fund raiser with the profits to go to the United Way Fund in New York City. We are inquiring to the best way to sell or present to the public the sale of these shirts so that all the profits will go to the fund.

What would our sales tax obligation be on the sales? We are going to have other local business' displaying and selling these shirts also to make it a community effort.

K.S.A. 79-3603(a) imposes retailers’ sales tax on the “gross receipts received from the sale of tangible personal property at retail within this state.” Your business would be obligated to collect, report and remit state and local sales tax based on the selling price for each T-shirt sold by your business at retail. For other businesses displaying and selling the shirts, they would likewise be obligated to collect, report and remit state and local sales tax on the selling price for each T-shirt sold at retail, whether selling on a consignment basis or from inventory. See K.A.R. 92-19-8.

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

Sincerely,

Richard L. Cram, Director
Office of Policy & Research

Date Composed: 09/19/2001 Date Modified: 10/11/2001

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