When were craft-show sales by senior citizens or nonprofit organizations exempt, and when did an individual seller need a Texas sales-tax permit?

Plain-English summary

Nonprofit status alone generally did not exempt an organization's sales. The organization ordinarily needed a sales-tax permit and had to collect tax on taxable items unless a specific exception applied.

The senior-citizen-group exception applied only if all four conditions were met: every taxable item was made exclusively by people age 65 or older; the sale was part of a fundraiser held or sponsored by a nonprofit created solely to assist elderly people; all net proceeds went to that organization or the person who made the item; and the organization conducted no more than four separate sales totaling no more than 20 days in the calendar year. If any condition failed, the sales were taxable.

The letter also described a separate occasional-sale exemption for someone not in the business of selling taxable items. One or two sales transactions a year could qualify, but one or two craft shows did not: the Comptroller counted each customer transaction. On the third taxable-item sale within 12 months, the person became a seller who needed a permit and had to begin collecting tax.

A craft-show sponsor could choose to obtain a permit and report tax collected by participating individuals who lacked their own permits.

What this means for you

The historical senior-group exemption was narrow and required every condition. Individual makers could not treat an entire craft show as one occasional sale when they made many customer transactions there.

Common questions

Were all nonprofit craft sales exempt? No.

Did every item have to be made by a senior citizen? Yes. Every taxable item had to be produced exclusively by someone age 65 or older.

How many fundraiser sales could the organization conduct? No more than four separate sales totaling no more than 20 days per calendar year.

Did one craft show count as one occasional sale for an individual? No. Each sales transaction counted.

When did the individual need a sales-tax permit? On making the third taxable-item sale within a 12-month period under the letter.

Citations and references

• Texas Comptroller Rule 3.322, exempt organizations and the senior-citizen-group sales exemption
• Texas Comptroller Rule 3.316, occasional sales
• Texas Comptroller Rule 3.286, who must obtain a sales-tax permit

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8710L0857B01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

October 5, 1987

The Honorable John T. Montford
The Texas Senate
P.O. Box 12068
Austin, Texas 78711

Dear Senator Montford:

Thank you for your letter requesting information on the sales tax
requirements for craft shows.

As a general rule, sales made by nonprofit organizations are not exempt
from
sales tax. With certain specific exceptions, these organizations are
treated
just like any other seller. They must get a sales tax permit and collect
tax
from their customers on sales of taxable items.

The sales tax law does contain a specific exemption for sales made by
senior
citizens groups if all the following qualifications are met:

(1) all of the taxable items sold are produced exclusively by persons 65
years old or older;
(2) the sale is part of a fund-raising drive held or sponsored by a
nonprofit
organization created for the sole purpose of providing assistance to
elderly
persons;
(3) all net proceeds from the sale go to either the organization or the
person
who produced the taxable item sold; and
(4) the organization has not conducted more than four separate sales each
calendar year for a total of more than 20 days per year.

This exemption, which was added to the law by the legislature in 1981, is
very limited. If all of the qualifications are not met, the sales are
taxable.

There is no other specific exemption for sales of craft items by senior
citizens. There is an exemption for "occasional sales" made by a person
who
is not in the business of selling taxable items. The law defines an
occasional
sale as one or two sales of taxable items a year. That does not mean one
or
two craft shows a year, but rather one or two sales transactions a year.
A
person might make 40 or 50 sales at each craft show. Under the sales tax
law, when a person makes the third sale of a taxable item in a twelve
month
period, he is considered a seller and must get a sales tax permit and
begin
collecting tax on his sales.

A sponsor of a craft show may choose to get a sales tax permit and report
the tax collected by individuals selling at the show who do not have a
permit.

I am enclosing a copy of several rules that might be helpful to you. Rule
3.322 on exempt organizations contains information on the exemption for
sales
by senior citizen organizations. Rule 3.316 explains the occasional sale
exemption, and Rule 3.286 contains general information about who is
required
to get a sales tax permit. I am also sending you a brochure about sales
by
exempt organizations.

Please let me know if you have additional questions. You may write me,
call
toll free 1-800-252-5555 from anywhere in Texas or phone 512/463-4654.

Sincerely,
Mona Ezell Shoemate
Tax Policy Division