Can a nonprofit fraternal order buy hotel rooms, meals, and printed programs tax-free for its annual meeting?

Plain-English summary

The Missouri Department of Revenue renewed a prior exemption ruling for a 501(c)(10) non-profit fraternal order, confirming that its purchases of hotel rooms, meals, printing and distribution of meeting programs, and related miscellaneous expenses for its annual and special meetings remain exempt from state and local sales tax.

Missouri generally taxes hotel rooms, meals, and drinks under Section 144.020.1(6), RSMo. But Section 144.030.2(20), RSMo exempts "all sales made by or to not-for-profit civic, social, service or fraternal organizations" -- including organizations recognized under IRC Section 501(c)(8) or (10) -- for their civic or charitable functions and activities. The Department had already recognized the organization as a civic organization with a limited exemption letter, and this renewal confirmed its scope and facts hadn't changed since the prior 2021 ruling. Because the organization itself directly pays the hotel for officers', special guests', and representatives' rooms and meals, and directly pays the printing vendor for meeting programs and charitable-institution reports discussed at its annual meeting -- all for meetings devoted to its charitable, educational, and fraternal purposes -- these costs fall within its exempt civic functions and activities.

What this means for you

Fraternal, civic, social, and service organizations recognized under 501(c)(8) or (10)

If your organization holds (or previously held) a Missouri sales/use tax exemption letter for its civic or charitable functions, purchases you make directly and pay for -- hotel rooms, meals, printing, and similar meeting expenses -- for your annual or special meetings devoted to your exempt purposes are exempt from state and local sales tax. Keep your organization's exempt-status letter current and be ready to renew it if your scope or activities haven't materially changed.

Organizations renewing a prior letter ruling

This ruling shows the Department will renew an earlier exemption letter on essentially the same terms when the organization confirms its exempt status and the scope of its activities are unchanged -- useful precedent for other organizations facing a renewal after several years.

Accountants and tax professionals serving nonprofits

Confirm the organization directly pays vendors (rather than reimbursing individual attendees, which could raise different issues) and that expenses are tied to genuine organizational business (charitable, educational, or fraternal purposes discussed/decided at the meeting) before relying on this exemption.

Common questions

Q: Does every nonprofit's meeting expenses qualify for this exemption?
A: No. The organization needs recognized exempt status (here, a Missouri civic-organization exemption letter tied to 501(c)(8)/(10) status under Section 144.030.2(20), RSMo) and the expenses must be within its civic, charitable, or fraternal functions -- not just any organizational expense.

Q: Does it matter that the organization paid the hotel and printer directly, rather than reimbursing attendees?
A: The ruling's facts emphasize that the organization made all reservations and paid the hotel and printing vendor directly for these expenses -- this direct-payment structure supported treating the purchases as made by the exempt organization itself.

Q: Can another fraternal or civic organization rely on this ruling?
A: No. A Missouri letter ruling binds the Department only as to the requesting Applicant, only for three years, and only while the facts and law don't change. Another organization would need its own exemption letter and should confirm its specific facts match this pattern.

Citations and references

Statutes:

• Section 144.020.1, RSMo (imposition of sales tax on retail sales)
• Section 144.020.1(6), RSMo (four percent tax on hotel rooms, meals, and drinks regularly served to the public)
• Section 144.030.2(20), RSMo (exemption for sales by/to not-for-profit civic, social, service, or fraternal organizations in their civic or charitable functions, including 501(c)(8)/(10) organizations)

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8315

Original ruling text

Dear Applicant:

This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your request received July 15, 2024.

The facts as presented in your letter ruling request and communications with the Director's counsel are summarized as follows:

Applicant has received previous letter rulings regarding the taxability of purchases of hotel rooms and other items within its exempt functions and activities. Applicant is applying for a renewal of the most recent letter ruling issued on August 21, 2021.  Applicant's exempt status and the scope of its civic functions and activities have not changed since that ruling was issued.

Applicant is a 501(c)(10) non-profit organization and fraternal order devoted to charitable, educational, and fraternal purposes. The Department of Revenue has recognized Applicant as a civic organization and has issued Applicant a limited exemption letter from sales and use tax on purchases and sales made within its civic functions and activities.

Applicant purchases hotel rooms for officers, special guests, and authorized representatives, as well as meals, costs of printing and distributing programs, and other miscellaneous expenses to conduct its various activities in Missouri. Specifically, Applicant makes these purchases for its annual and special meetings of the organization. The purpose of these meetings is to discuss and make decisions regarding its charitable, educational, and fraternal purposes.

Applicant makes all reservations for the officers, special guests, and authorized representatives, and it pays the hotel directly for their expenses, including meals. Additionally, Applicant pays the printing costs directly to the vendor prior to the annual meeting.  This printing consists of the "Program of Events" for the meeting, and "Reports of the Charitable Institutions", and any resolutions, decisions, and edicts related to Applicant and its charities that are to be discussed or voted at the annual meeting.

ISSUE :

Are Applicant's purchases of hotel rooms, meals, printing and distributing of programs and materials, and miscellaneous related expenses for its annual and special meetings exempt from state and local sales tax?

RESPONSE :

Yes. Applicant's purchases of hotel rooms, meals, printing and distributing of programs and materials, and miscellaneous related expenses for its annual and special meetings are exempt from state and local sales tax because the purchases are made within Applicant's exempt civic functions and activities.

Section 144.020.1, RSMo, imposes a sales tax "[u]pon every retail sale in this state of tangible personal property[.]"  Section 144.020.1(6), RSMo, imposes "[a] tax equivalent to four percent on the amount of sales or charges for all rooms, meals and drinks furnished at any hotel [...] in which rooms, meals or drinks are regularly served to the public."

Section 144.030.2(20), RSMo, exempts from state and local sales tax and state and local use tax "[...] all sales made by or to not-for-profit civic, social, service or fraternal organizations, including fraternal organizations which have been declared tax-exempt organizations pursuant to Section 501(c)(8) or (10) of the 1986 Internal Revenue Code, as amended, in their civic or charitable functions and activities[.]"

The Department of Revenue has recognized Applicant as a civic organization and has issued Applicant a limited exemption letter from sales and use tax on purchases and sales made within its civic functions and activities. Applicant purchases hotel rooms for officers, special guests, and authorized representatives, as well as meals, costs of printing and distributing programs, and other miscellaneous expenses to conduct its various activities in Missouri. Applicant makes all reservations for the officers, special guests and authorized representatives, and it pays the hotel directly for their expenses, including meals.  Additionally, Applicant pays the printing costs directly to the vendor prior to the annual meeting.  This printing consists of the "Program of Events" for the meeting, and "Reports of the Charitable Institutions," and any resolutions, decisions, and edicts related to Applicant and its charities that are to be discussed or voted at the annual meeting. These purchases are made for annual and special meetings of the organization whereby it discusses and makes decisions regarding its charitable, educational, and fraternal purposes. Therefore, Applicant's purchases for its meetings are exempt from sales tax because they are paid for by Applicant and are within its civic functions and activities.

This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals.  If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change.  For this reason, the interpretation set forth above should be reviewed on a regular basis.  Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

Should additional information be needed, please contact Senior Counsel, Benjamin C. Slawson, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (Telephone 573-751-0961), or me.

Sincerely,

Wayne Wallingford