Does a tax-exempt religious organization owe Texas sales tax on books it publishes and sells, mostly at religious services and meetings?

Subject

Religious Writings/Periodicals/Books — Published And Distributed By Religious Organization/Church

Plain-English summary

A nonprofit religious organization, exempt from federal income tax under IRC 501(c)(3), asked whether Texas sales tax applies to books it publishes and sells. The organization's president, an ordained minister, wrote the books, and the organization itself owns the copyrights.

The Comptroller identified several relevant facts: the books do not include any nonexempt items such as film, video cassettes, computer software, bookmarks, clothing, posters, artwork, photographs, novelties, or souvenirs; the organization is not an educational organization; and the majority of sales occur at religious services and meetings.

Based on those facts, the Comptroller ruled that the sale or distribution of these books by the nonprofit 501(c)(3) religious organization is not subject to sales tax under Texas Tax Code § 151.312 and Rule 3.299. As with other STAR letters, the ruling notes it is based on the facts presented, and other facts, even if similar, may produce a different result.

What this means for you

Religious organizations that publish and sell books

If your organization is a nonprofit exempt under IRC 501(c)(3), and you sell books written by your own clergy or leadership (with the organization holding the copyright) mainly at religious services and meetings, this letter suggests such sales can be treated as exempt from Texas sales tax, so long as the books do not bundle in nonexempt items like software, video, clothing, or novelties.

Accountants and tax professionals advising nonprofits

The exemption in this letter rests on a combination of facts, not just the organization's 501(c)(3) status alone: authorship and copyright ownership by the exempt organization, the absence of nonexempt add-on items in the publication, the organization not being an educational organization, and sales occurring predominantly at religious services and meetings. Changing any of those facts could change the analysis.

Common questions

Q: Does a religious organization's 501(c)(3) status alone make its book sales exempt from Texas sales tax?
A: Not by itself. This letter's conclusion also depended on the organization owning the copyrights, the books containing no nonexempt items, the organization not being an educational organization, and most sales happening at religious services and meetings.

Q: What kinds of items would make a similar publication taxable?
A: The letter lists examples of nonexempt items that, if bundled into the publication, could affect the analysis: film, video cassettes, computer software, bookmarks, clothing, posters, artwork, photographs, novelties, and souvenirs. The books at issue here contained none of those.

Q: Who wrote the books in this ruling?
A: The taxpayer's president, an ordained minister, wrote the books, and the exempt religious organization owned the copyrights to all of them.

Q: Can another organization rely on this exact letter?
A: No. Under Texas rules, a STAR letter can be relied on only by the taxpayer it was issued to, and the Comptroller notes that other facts, even if similar, may produce a different result.

Citations and references

Statutes and rules:

• Texas Tax Code § 151.312
• 34 Tex. Admin. Code Rule 3.299

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9607L1417A04

Original ruling text

July 23, 1996

Dear ***:

This is in response to your request for a ruling on the taxability of
books published and sold by a religious organization exempt from federal
income tax under IRC 501(c)(3).

Additional Facts:

The taxpayer's president, an ordained minister, wrote several books.
The copyrights to all of the books are owned by the exempt religious
organization.

The books do not include any nonexempt items such as film, video
cassettes, computer software, bookmarks, clothing, posters, are
work, photographs, novelties, or souvenirs.

The organization is not an educational organization.

The majority of sales occur at religious services and meetings.

You are requesting if the sale of these books are exempt from sales tax
under Texas Tax Code 151.312 and Rule 3.299.

Response: The sale or distribution of these books, by the non-profit
501(C)(3) religious organization, is not subject to sales tax.

This opinion is based on the facts presented. Other facts though
similar may provide a different result.

You may call me toll-free at 1-800-531-5441, extension 3-4502. The
direct line is 512/463-4502. You may also write to Tax Policy
Division, Comptroller of Public Accounts. My Internet address is:
[email protected].

Sincerely,

Gilbert Zamora
Tax Policy Division

NOTE: Previous Accession Number 9607333L