Does a nonprofit friends-of-a-cemetery group have to charge sales tax on books, T-shirts, and mugs it sells from a counter display during seasonal cemetery tours?

Plain-English summary

The Friends of Mt. Hope Cemetery is a 501(c)(3) organization formed to support and promote a historic cemetery owned by the City of Rochester. It sells a cemetery guide book ($19.95), a photography book ($35), children's magazines about historic figures buried there ($5), and cemetery-branded mugs and T-shirts. Sales happen from a counter display in one room of the group's headquarters — a former cemetery office building — during the May-through-October tour season, on Sundays after the group's public tours and at additional Saturday theme tours. The same room doubles as a board meeting space, an exhibit area, and a newsletter-assembly workspace; the group's total annual revenue (memberships, donations, tours, and merchandise combined) has never topped $19,000.

Ordinarily, sales by a charitable/educational 501(c)(3)-type organization are exempt from New York sales tax under § 1116(a)(4). But that exemption has a specific carve-out: retail sales made through a "shop or store" operated by the organization stay taxable. The regulations define a shop or store as any place where goods are sold from display with regularity, frequency, and continuity — and give the example of a church selling religious articles from a counter for just two hours a week as still qualifying.

The Department found the cemetery group's counter sales met that bar: merchandise is displayed and sold every Sunday (regularity), continuously from May through October (continuity), at least once a week (frequency). That's enough to make it a "shop or store" regardless of the group's overall nonprofit status or modest total revenue. The group must obtain a Certificate of Authority and collect sales tax on these sales. One partial break: T-shirts priced under $110 are exempt from the 4% New York State sales tax under the statewide clothing exemption, but remained subject to the local Monroe County sales tax as of the ruling's date.

What this means for you

Nonprofits, museums, and historic-site operators

Being a 501(c)(3) doesn't exempt your gift-shop or souvenir sales — regular, recurring sales from a display counter are taxed the same as a commercial gift shop, no matter how small the volume or how closely tied the merchandise is to your charitable mission.

Volunteer/friends groups running seasonal sales

Even seasonal or part-time sales (one day a week, six months a year) can meet the "regularity, frequency, and continuity" test. There's no minimum-revenue or minimum-hours safe harbor in this ruling — the schedule alone was enough.

Accountants and tax professionals

Remember the layered clothing exemption: items under $110 escape the 4% state rate under § 1115(a)(30), but local sales tax (here, Monroe County's) can still apply — check Publications 718 and 718C for the applicable local rate.

Common questions

Q: Does a nonprofit's tax-exempt status cover its gift shop or souvenir sales?
A: Not automatically. Sales by an exempt organization are generally tax-free, but retail sales made through a "shop or store" the organization operates are specifically carved out and remain taxable.

Q: How often do sales have to happen to count as a "shop or store"?
A: There's no fixed threshold in the statute, but the regulations' own example — a counter open just two hours a week — shows the bar is low. Weekly, seasonal sales met it here.

Q: Are vending-machine sales treated the same way?
A: No, not by themselves — vending machines alone don't count as a shop or store, unless they're located within a defined area otherwise devoted to selling merchandise.

Citations and references

Statutes and regulations:

• Tax Law § 1105(a) (retail sales tax)
• Tax Law § 1115(a)(30) (clothing/footwear under $110 exemption)
• Tax Law § 1116(a)(4) (exemption for charitable/educational organizations)
• Tax Law § 1116(b)(1) (shop-or-store carve-out)
• 20 NYCRR § 529.7(i) (shop-or-store definition and examples)
• Publication 718 (Sales and Use Tax Rates by Jurisdiction); Publication 718C (Local Rates on Clothing and Footwear)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2003.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a03_18s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-03(18)S
Sales Tax
April 4, 2003

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S020809A

On August 9, 2002, the Department of Taxation and Finance received a Petition for Advisory
Opinion from The Friends of Mt. Hope Cemetery, 791 Mt. Hope Avenue, Rochester, New York,
14620-2752.
The issue raised by Petitioner, The Friends of Mt. Hope Cemetery, is whether its sales of
tangible personal property constitute sales by a shop or store operated by Petitioner.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is an exempt organization as described under Section 501(c)(3) of the Internal
Revenue Code and is duly registered as an exempt organization under Section 1116(a)(4) of the Tax
Law. Petitioner was formed to support and promote an historic cemetery which is owned and
operated by the City of Rochester. To this end, Petitioner intends to sell books and merchandise to
further the understanding and appreciation of the cemetery. For example, Petitioner will sell a
cemetery guide book that retails for $19.95, a book of photography of the cemetery that retails for
$35, and children's magazines about historic figures interred in the cemetery that retail for $5.00.
Petitioner will also sell merchandise that refers to and promotes the cemetery such as mugs and
T-shirts. Petitioner will conduct these sales at a building known as the North Gate House, which
is situated within the boundary lines of the cemetery. The gate house is a 1,725 square foot building,
constructed in 1878 for use as an office by the cemetery. It is no longer used for cemetery
operations and now serves as Petitioner’s headquarters.
The gate house consists primarily of an entrance foyer and four main rooms. All rooms in
the gate house are used by Petitioner for various purposes. One room is used as a board meeting and
reception room in which the sales in question will occur. Another room is used exclusively for
exhibits. The two remaining rooms are used by Petitioner as offices.
The 530 square foot board meeting and reception room is used throughout the year as a
reception area for public events; as a room for Petitioner’s monthly board meetings, annual meeting
and committee meetings; as a work space to fold, label and assemble Petitioner’s newsletter for
mailing; and, from May through October, as a staging area for tours of the cemetery. The room
contains permanent exhibits and finished wall boards for changing exhibits, a large conference table
used for meetings and to serve free refreshments after tours, a long counter used to register visitors
for tours and distribute free Petitioner literature such as tour schedules, pocket guides and
membership brochures plus literature from sister organizations, and benches for public seating. The

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April 4, 2003

books and merchandise offered for sale will be displayed at one end of the counter occupying a
small area of the available counter space. Books and merchandise will be sold by Petitioner’s staff
from this area throughout the tour season from the first of May until the end of October. Tours
occur every Sunday at 2:00 and 3:00 P.M., plus an additional 12 special Saturday theme tours from
May through October. Petitioner’s total revenues for a full fiscal year have never exceeded $19,000,
including proceeds from memberships, donations, interest income, tour fees and merchandise sales.
Applicable Law and Regulations
Section 1105 of the Tax Law provides, in part:
On and after June first, nineteen hundred seventy-one, there is hereby
imposed and there shall be paid a tax of four percent upon:
(a) The receipts from every retail sale of tangible personal property, except
as otherwise provided in this article.
Section 1115(a)(30) of the Tax Law provides an exemption from the sales and compensating
use tax for:
Clothing and footwear for which the receipt or consideration given or
contracted to be given is less than one hundred ten dollars per article of clothing, per
pair of shoes or other articles of footwear or per item used or consumed to make or
repair such clothing and which becomes a physical component part of such clothing.
Section 1116 of the Tax Law provides, in part:
(a) Except as otherwise provided in this section, any sale or amusement
charge by or to any of the following or any use or occupancy by any of the following
shall not be subject to the sales and compensating use taxes imposed under this
article:
*

*

*

(4) Any corporation, association, trust, or community chest, fund, foundation,
or limited liability company, organized and operated exclusively for religious,
charitable, scientific, testing for public safety, literary or educational purposes, or to
foster national or international amateur sports competition (but only if no part of its
activities involve the provision of athletic facilities or equipment), or for the
prevention of cruelty to children or animals, no part of the net earnings of which
inures to the benefit of any private shareholder or individual, no substantial part of
the activities of which is carrying on propaganda, or otherwise attempting to
influence legislation, (except as otherwise provided in subsection (h) of section five
hundred one of the United States internal revenue code of nineteen hundred

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fifty-four, as amended), and which does not participate in, or intervene in (including
the publishing or distributing of statements), any political campaign on behalf of any
candidate for public office . . . .
*

*

*

b) Nothing in this section shall exempt:
(1) retail sales of tangible personal property by any shop or store operated by
an organization described in paragraph (4) . . . of subdivision (a) of this section . . . .
Section 529.7(i) of the Sales and Use Tax Regulations provides, in part:
Sales by exempt organizations. (1) Except as provided in paragraphs (2)
through (4) of this subdivision, sales of tangible personal property and services by
exempt organizations are exempt from the sales and use tax.
(2) Retail sales of tangible personal property made by any shop or store
operated by an exempt organization described in section 1116(a)(4), (5) or (6) are
subject to the sales and use tax. A shop or store as used in this section includes any
place or establishment where goods are sold from display with a degree of regularity,
frequency and continuity as well as any place where sales are made through a
temporary shop or store located on the same premises as persons required to collect
tax. Vending machines alone do not constitute a shop or store. However, where
vending machines are located in a defined area devoted to selling tangible personal
property, then sales from such vending machines constitute sales from a shop or
store.
*

*

*

Example 2: An exempt organization operates a gift shop and book store.
Sales made by such shop or store are taxable.
Example 3: A counter is placed in an enclosed area at the back of a church
for the purpose of displaying religious articles for sale. The counter is open
for business each week for two hours on a specific day at which times a clerk
is present. The counter is in a separate area used solely to display tangible
personal property for sale and, thus, is a shop or store.
*

*

*

(6) An exempt organization making taxable sales is required to register as a
vendor, collect the appropriate tax, and file timely sales tax returns.

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Opinion
Petitioner asks if its sales of books, T-shirts and mugs constitute sales made by an exempt
organization through a shop or store operated by the organization, and, therefore, require Petitioner
to register for sales tax purposes and collect sales tax on its sales.
Pursuant to Section 1116(b) of the Tax Law, sales by organizations described in Section
1116(a)(4) of the Tax Law, such as Petitioner, are exempt from sales tax unless such sales are retail
sales of tangible personal property made by any shop or store operated by such an organization.
Section 529.7(i)(2) of the Sales and Use Tax Regulations describes a “shop” or “store” as
any place or establishment where goods are sold from display with a degree of regularity, frequency
and continuity as well as any place where sales are made through a temporary shop or store located
on the same premises as persons required to collect tax. Section 529.7(i)(2) provides that vending
machines alone do not constitute a shop or store. However, where vending machines are located in
a defined area devoted to selling tangible personal property, then sales from such vending machines
constitute sales from a shop or store.
Petitioner states that sales are conducted throughout the tour season from the first of May
till the end of October. During this period, tours occur every Sunday at 2:00 and 3:00 P.M., plus an
additional 12 special Saturday theme tours. After the individual tour is completed, tour patrons are
invited to partake of free refreshments in the board meeting and reception room, where free
literature promoting the cemetery and merchandise for sale are displayed. Patrons of the tour have
a reasonable expectation that, either before or after the tour, free literature and merchandise for sale
will be made available to them from the counter top display.
Petitioner’s merchandise is sold from a counter display. These sales as described by
Petitioner are clearly not sales from vending machines. Petitioner’s merchandise is sold with the
degree of regularity (every Sunday), continuity (from May through October) and frequency (at least
once a week) required by Section 529.7(i)(2) of the Sales and Use Tax Regulations in order for such
sales to be considered sales by a shop or store. Therefore, Petitioner is required to obtain a
Certificate of Authority and collect sales tax on such sales.
Petitioner’s sales of clothing items (i.e., T-shirts) for less than $110.00 per item are exempt
from the statewide sales tax (4%) but subject to the Monroe County sales tax (4%) as of this date.

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For additional rate information, see New York State Sales and Use Tax Rates by Jurisdiction,
publication 718, and Local Sales and Use Tax Rates on Clothing and Footwear, Publication 718C.

DATED: April 4, 2003

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.