Our nonprofit 501(c)(3) garden club association prints instructional brochures and sells them at no profit to local garden clubs in Texas -- do we owe sales tax on those sales?

Subject

Texas State Garden Club — Nonprofit Organization — Sale Of Brochures Published Or Distributed By The Club Is Exempt

Plain-English summary

A nonprofit garden club association (ABC Garden Clubs, Inc.), which operates under IRC 501(c)(3) status and holds a Texas tax-exempt number, asked the Comptroller whether it owes sales tax on brochures it prints at its own office and sells to local garden clubs across Texas. The brochures are used to instruct local clubs on how to apply for various Garden Club Awards, and the association makes no profit on the sales.

The outcome is exempt, not taxable. The Comptroller ruled that the sale of brochures published or distributed by the nonprofit 501(c)(3) organization is exempt from sales tax under Texas Tax Code Sec. 151.312. The letter is short and unqualified on this point -- it does not condition the exemption on the no-profit fact, but that fact was part of what the association described in its request.

The Comptroller also noted, as is standard in these letters, that the ruling is based on the facts presented and that other facts, though similar, may produce a different result.

What this means for you

Nonprofit state or regional associations that print and sell materials to local chapters

If your organization holds 501(c)(3) status and a Texas sales-tax exemption, and you publish or distribute brochures (or similar printed materials) that you then sell to your own local chapters or member clubs, Sec. 151.312 can exempt those sales from Texas sales tax, per this ruling.

Local garden clubs (or similar local chapters) purchasing instructional materials

The exemption described here runs to the sale by the nonprofit publisher; the ruling doesn't separately address the purchasing club's own tax obligations beyond confirming the sale itself isn't taxed.

Anyone relying on this letter

This is a fact-specific letter ruling addressed to one taxpayer. The Comptroller's own text cautions that "other facts though similar may provide a different result," so confirm your organization's exempt status and the nature of the materials before assuming the same treatment applies.

Common questions

Q: Does our garden club association owe sales tax on brochures we sell to local clubs?
A: No. Per this ruling, brochures published or distributed by a nonprofit 501(c)(3) organization are exempt from sales tax under Texas Tax Code Sec. 151.312.

Q: Does it matter that the association doesn't make a profit on the brochures?
A: The association mentioned it made no profit on the sales as part of the facts submitted, but the Comptroller's response cites only the organization's nonprofit 501(c)(3) status and Sec. 151.312 as the basis for the exemption; the letter does not state that profitability is a condition of the exemption.

Q: What kind of organization does this apply to?
A: The ruling applies to a nonprofit organization operating under IRC 501(c)(3) status, holding a Texas tax-exempt number, that publishes or distributes brochures.

Q: Can we rely on this letter for our own organization?
A: Only if you were the taxpayer who requested it. Per the Comptroller's standard disclaimer, other STAR letters can be relied on by third parties only informationally, not as a detrimental-reliance defense, and this letter itself notes that similar facts may lead to a different result.

Citations and references

Statutes and rules:

• Texas Tax Code Sec. 151.312 (exemption for sale of brochures published or distributed by a nonprofit 501(c)(3) organization)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9701252L

Original ruling text

January 16, 1997

Dear **:

This is in response to your request for a ruling the taxability of brochures
which ABC GARDEN CLUBS, INC. prints in its CITY A office and sells to the local
garden clubs in Texas. There is no profit made by ABC, and the brochures are
used to instruct clubs in how to apply for various Garden Club Awards?

ABC operates under the IRC 501(c)(3) status, and your tax exempt number is
**.

Response: The sale of brochures that are published or distributed by your
nonprofit 501(c)(3) organization are exempt from sales tax under Texas Tax
Code Sec. 151.312.

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