Do a school organization's two allowed one-day tax-free sales reset each school year, or are they limited to one calendar year?

Subject

Two One — Day Tax Free Sales Or Auctions — During Calendar Year And Not School Year

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9401L1285E13

Plain-English Summary

A PTO (parent-teacher organization) asked the Comptroller to refund sales tax it had collected on a sale it believed qualified as a tax-free sale. Texas allows qualifying organizations two one-day tax-free sales or auctions, but the Comptroller explained that the exemption is counted per calendar year (January 1 through December 31) — not per school year.

Because the PTO's sale in question took place on August 20, 1993, the Comptroller noted that if the PTO had already held a tax-free sale earlier that same calendar year — even if that earlier sale happened during "the last part of the last school year" — the August 20, 1993 sale would not qualify as the group's second exempt sale, since it would fall within the same January-to-December period as the earlier one.

The letter also addressed the mechanics of a refund: before the state can refund sales tax to the school, the tax must first be refunded to the customers from whom it was originally collected. The Comptroller enclosed Rule 3.325 (on refunds) and Texas Tax Code § 151.704 for the PTO's reference.

What This Means For You

If you run a school PTO, PTA, or similar exempt organization holding fundraising sales: Track your two allowed one-day tax-free sales by calendar year (January 1 – December 31), not by school year. A sale held near the end of one school year and another held at the start of the next school year may both fall within the same calendar year and only count as one exemption's worth of tax-free treatment for that year, not two.

If you collected tax on a sale you believe should have been tax-free: Before the Comptroller will refund tax to your organization, you must first refund the tax to the individual customers who paid it. You cannot receive a refund on tax the organization never actually returned to the buyers.

If you're unsure how many tax-free sales your organization has already used in a calendar year: Check your records against the January 1 – December 31 window, not the academic calendar, before scheduling another tax-free sale or auction.

Q&A

Q: Do the two allowed one-day tax-free sales reset with each new school year?
A: No. The Comptroller states the exemption applies to two sales in a calendar year (January 1 through December 31), not the school year.

Q: If our PTO held a tax-free sale before August 20, 1993, during the tail end of the prior school year, does an August 20, 1993 sale qualify as our second exempt sale?
A: Not necessarily. If that earlier sale fell within the same calendar year as the August 20, 1993 sale, the August 20, 1993 sale would not qualify, because both sales would be within the same January-to-December period.

Q: Can our organization get a refund of sales tax collected on a sale that should have been tax-free?
A: The state can refund the tax to the school, but only after the tax has first been refunded to the persons from whom it was originally collected.

Citations

• Tex. Tax Code § 151.704 (referenced regarding refunds, along with Comptroller Rule 3.325)

Original ruling text

January 28, 1994

Dear**:

This is in response to your letter dated January 18, 1994, requesting a refund
of sales tax from a sale that qualified as a tax-free sale.

If the PTO held a tax-free sale before August 20, 1993 (during the last part of
the last school year) then the August 20, 1993 sale does not qualify. Keep in
mind that the exemption applies to two sales in a calendar year (January 1
through December 31).

Before the state may refund the tax to the school, the tax must first be
refunded to the persons from whom the tax was collected.

I am enclosing Rule 3.325 on refunds and Texas Tax Code 151.704 for your
reference.

This opinion is based on the facts presented. Different facts, though similar,
might lead to different answers. If you have any questions or need more
information, please write or call me toll free at 1-800-531-5441, extension
50330, or 512-475-0330.

Sincerely,

Bettie Peterson
Tax Administration Division

NOTE: Previous Accession Number 9401041L