TR 22: Fund Raising

Charitable organizations that are properly licensed in Boulder are exempt from paying sales tax on the purchase of any items to be raffled off or given away (e.g. door prizes) at fund-raising events. These gifts, prizes and other like items are "used in the conduct of the organization's regular activities to foster its religious or other express charitable purpose" (subsection 3-2-7(b), BRC, 1981). Items donated for raffles or to be given away at fund-raising events are subject to sales/use tax to be paid by the donor of the item.

Items purchased for auctions are exempt from sales/use tax, but sales tax must be collected from the purchaser on the price paid at auction. All items purchased to be resold at retail by fund-raisers are exempt from sales/use taxes when purchased (e.g. t-shirts, books, bumper stickers) but, sales tax must be collected on the full sale price of these items when resold. The tax must be separately stated. It can not be included in the selling price (subsection 3-2-4(b), BRC, 1981).

The Boulder Revised Code states at section 3-4-1 "that every person who pays to gain admission to any place or event in the city that is open to the public shall pay and every person, whether owner, lessee, or operator, who charges or causes to be charged admission to any such place or event shall collect the tax imposed by this chapter" (see section 3-4-2, BRC, 1981 for rate). Admissions tax must be collected for any fund-raising event charging a fee or a contribution to enter an event unless the fund-raiser holds a City of Boulder Exempt Tax License .  The tax may be included in the ticket price, but then the fund-raiser must deduct the tax from the ticket price and remit it to the City.  Any complimentary food served at the event, such as hors d'oeuvres, would be subject to food service sales/use tax to be paid by the fund-raiser, on the cost of the food, unless the fund-raiser holds a City of Boulder Exempt Tax License (see TR9: "Charitable, Religious & Government Exemptions").

Fund-raising tickets that include a meal are subject to food service tax for the portion of the ticket price that is applicable to the customary selling price of the meal. The tax can be included in the ticket price. "Cover charges, admission or entrance fees, and mandatory service or service-related charges shall be included as part of the purchase price of such food.  However, if the full amount of the service charge (tip or gratuity) is passed on to the employees of the food service establishment who have provided direct service to each person paying the charge, and if all federal and state income and other applicable taxes due on such charge have been withheld by the food service establishment and paid to the appropriate government, the mandatory charge is not taxable. (See TR18: "Eating and Drinking Establishments" for more detail) (see subsection 3-2-5(b), BRC, 1981 for food service tax rate).

Examples:

1. A Boulder, properly licensed, exempt organization sells tickets for two different fund-raising events.  The first event is a silent auction where hors d'oeuvres, purchased by the exempt organization, are served and there is an admissions charge of $25.00.   The second event is a dinner.  The price of the ticket is $100.00, $25.00 dinner value and a $75.00 donation.  For the first event, the fund-raiser does not collect admissions tax on the $25.00 for the silent auction, and will not pay sales/use tax on the purchase price of the hors d'oeuvres, because it is properly licensed as an exempt organization.  For the second event, the fund-raiser must collect food service tax on the $25.00 dinner value. (Note:  the $25.00 charge for food service may include the sales and food service taxes.)
2. A properly licensed, Boulder exempt organization purchases a set of wine glasses, a cappuccino machine and a microwave to be given away as door prizes at its annual auction.  A local houseware store donates a set of gourmet cookware to also be given away as a door prize.  The ticket price to attend the auction is $50.00.  Hors d'oeuvres will be served and there will be a cash bar.  The organization is exempt from paying sales/use tax on both the door prizes and on the price paid for the hors d'oeuvres.  It is also exempt from collection of admissions tax on the $50.00 ticket. Sales tax must be collected on the amount paid for the auction items and food service tax must be collected on the drinks sold through the cash bar.  The houseware store must pay use tax on the cost of the cookware donated to the fund-raiser.

Last Updated on Tuesday, 10 July 2012 15:57