Does a tax-exempt nonprofit have to collect sales tax on casual door-to-door product sales run by its student program?

Plain-English summary

Junior Achievement of Western New York is a nonprofit that gives young people business experience. In its "JA Companies" program, groups of about 15–20 students form small "companies," sell "stock," make products and sell them door-to-door on a casual basis during the school term, using the nonprofit's vendor ID and issuing receipts that show payments go to the nonprofit. Because the students act for the organization, these are the organization's sales. It asked whether it must collect sales tax on them.

The Department held the casual door-to-door sales are exempt.

• Exempt-organization sales are generally not taxed. Sales by a qualifying exempt organization aren't subject to sales or use tax (§ 1116(a)), and Junior Achievement qualifies under § 1116(a)(4).
• Three exceptions in § 1116(b). The exemption does not cover (1) sales through a shop or store the organization operates, (2) food or drink sold through a restaurant/tavern it operates, or (3) (in New York City) parking/garaging services.
• Door-to-door isn't a "shop or store." A shop or store requires sales "with a degree of regularity, frequency and continuity" (20 NYCRR 529.7(i)(2)). Casual door-to-door selling doesn't meet that test, so those sales stay exempt.
• Result. Door-to-door product sales are not taxable; sales that fall within the § 1116(b) exceptions would be taxable. And the organization's services — other than NYC parking — are exempt in all events.

What this means for you

A qualifying nonprofit's incidental fundraising sales usually aren't taxable — until they look like a store or restaurant. The line New York draws is operational: casual, occasional selling stays exempt; running a regular shop, store, or eatery flips those sales into taxable territory.

"Regularity, frequency and continuity" is the trigger. A one-off table, a door-to-door drive, or a seasonal push generally isn't a "shop or store." A staffed booth or stand that operates continuously can be.

Services get broader protection than goods. For an exempt organization, sales of services (other than NYC parking/garaging) are exempt in all events — the shop/store and restaurant exceptions apply to tangible goods and food/drink, not to general services.

Common questions

Q: Our nonprofit's members sell products door-to-door to raise money. Do we collect sales tax?
A: On these facts, no. Casual door-to-door sales aren't made through a shop, store, or restaurant, so they fall within the exempt-organization exemption.

Q: When would our sales become taxable?
A: If you sell through a shop or store you operate (one with regularity, frequency and continuity), sell food or drink through a restaurant/tavern you operate, or (in NYC) provide parking services.

Q: Does it matter that students, not staff, made the sales?
A: No. Because the students act under the organization's vendor ID and the receipts show payment goes to the organization, the sales are treated as the organization's own sales.

Citations and references

Statutes:

• Tax Law § 1116(a) — sales by exempt organizations not subject to tax
• Tax Law § 1116(a)(4) — qualifying exempt organizations
• Tax Law § 1116(b) — shop/store, restaurant/tavern, and NYC parking exceptions

Regulations:

• 20 NYCRR 529.7(i)(2) — definition of "shop or store"
• 20 NYCRR 529.7(i)(3) — definition of "restaurant, tavern or other establishment"

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1984.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a84_13s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-84(13)S
Sales Tax
April 9, 1984

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S831206B

On December 8, 1983 a Petition for Advisory Opinion was received from Junior
Achievement of Western New York, Inc., 495 Pearl Street, Buffalo, New York 14202.
The issue raised is whether sales tax must be collected on sales made by "JA Companies" (a
program of the Petitioner.)
Petitioner is a non-profit corporation affiliated with Junior Achievement, Inc., a national
organization. Petitioner provides young people with business and economic experience through
various programs. One such program, "JA Companies," involves students in the operations of their
own small businesses. Each "company" is comprised of approximately 15 to 20 students who elect
officers, sell "stock" (although the company is not actually incorporated), manufacture products and
market such products, or market services. Sales are conducted on a casual door-to-door basis
throughout the school term. The students involved in the program are issued membership cards by
Petitioner, make tax-free purchases through the use of Petitioner's vendor identification number, and
issue receipts to customers which indicate that the payments for property or services go to Petitioner.
It is clear, thus, that the activities of the students in making sales constitute activities of the
Petitioner.
Section 1116(a) of the Tax Law provides that sales by organizations described therein shall
not be subject to the sales or compensating use tax. This exemption is applicable to Petitioner, which
satisfies the criteria set forth in Tax Law, §1116(a)(4). However, such exemption is not applicable
to (1) sales made by such an organization when made by a shop or store operated by such
organization, (2) sales of food or drink in or by a restaurant, tavern or other establishment operated
by such organization and (3) sales (in the City of New York) of the service of parking, garaging and
storing motor vehicles provided by such organization operating a garage (other than one which is
part of premises occupied solely as a private one or two family dwelling), parking lot or similar place
of business. Tax Law, §1116(b).
Section 529.7(i)(2) of the Sales and Use Tax Regulations defines the term "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." 20 NYCRR 529.7(i)(2)
Section 529.7(i)(3) of the Sales and Use Tax Regulations defines the terms "restaurant, tavern
or other establishment" as including "any dining room, bar and barroom, or concession stand
operated with a degree of regularity, frequency and continuity as well as any place where sales are
made through a temporary restaurant, tavern, or other establishment located on the same premises
as persons required to collect tax. It is immaterial whether or not the restaurant, tavern or other
RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-84(13)S
Sales Tax
April 9, 1984
establishment is located on the premises of the exempt organization or whether or not the use of such
facilities is restricted to the members of the organization." 20 NYCRR 529.7(i)(3).
Accordingly, the sales of tangible personal property described by Petitioner, where made on
a door-to-door basis, would not be subject to tax. Sales made under circumstances described in Tax
Law, §1116(b), summarized above, would be subject to tax. It is to be noted that sales of services
by an exempt organization such as Petitioner, other than the parking, garaging and storing services
described in Tax Law, §1116(b)(3), would in all events be exempt from tax.

DATED: March 20, 1984

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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