LR 8218
Taxability of Items Sold by a Religious Owned Thrift Store
November 23, 2022
Dear Applicant:
This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated September 26, 2022.
The facts as presented in your letter ruling request, phone conversation, and additional materials, are summarized as follows:
Applicant is part of an international religious lay organization with a purpose of helping people grow spiritually by forming friendships and helping those in need, regardless of race, religion, gender or other factors.
Applicant has multiple thrift store locations in the state of Missouri. All profits from the thrift stores are returned into the organization for use towards the stated goals of their mission statement and in furtherance of their charitable functions. The thrift store primarily makes sales of donated goods to customers. The sales of donated goods account for approximately 70% of Applicant's total thrift store sales. The Applicant also makes purchase of new tangible personal property such as mattresses, pillows, bedding, etc. for sale to customers. These new goods sold to customers often have a price markup from the wholesale price. Approximately 30% of total sales are new goods purchased by Applicant to ultimately be sold to customers. All profits from the sales of new, non-donated goods also go back into the organization to further the Applicant's charitable functions.
Additionally, while conducting the outreach described in Applicant's mission statement, volunteers will often identify people in need within the community. In these instances, Applicant's volunteers will give vouchers to the identified community members which act as a credit at the Applicant's thrift stores. These vouchers often range from $100-$800 depending on the needs of the community member. The vouchers account for approximately 9% of their total sales for fiscal year 2022. Staff at Applicant's thrift stores include a combination of paid full or part-time employees and volunteer workers.
ISSUE:
Are Applicant's sales of purchased goods to customers at their thrift store subject to Missouri sales tax?
RESPONSE:
No, Applicant's sales of purchased goods sold to customers at their thrift stores are not subject to Missouri sales tax.
Section 144.020.1, RSMo, imposes a sales tax upon sales of tangible personal property and certain listed taxable services. Section 144.021.1, RSMo, requires sellers of tangible personal property to collect and remit sales tax on the seller's gross receipts, defined as the aggregate amount of the sales price of all sales at retail. Section 144.030.2(19), RSMo, provides an exemption from sales tax for "[a]ll sales made by or to religious and charitable organizations and institutions in their religious, charitable or educational functions and activities[.]"
Applicant is recognized by the Internal Revenue Service as a 501(c)(3) charitable organization. Applicant has also applied for and received a sales and use tax exemption letter from the Department of Revenue that exempts from tax all sales made by Applicant that are conducted with Applicant's functions and activities.
30% of Applicant's thrift stores sell items that they purchase themselves and then mark-up for sale. This is similar in operation to any retail store, therefore putting them in competition with other retail stores. However, in Director of Health v. St. John's Regional Health Center, 779 S.W.2d 588 (Mo. Banc 1989), the Missouri Supreme Court "...[l]ooked beyond consideration of whether competition existed and found that the purpose of the organization in conducting the activity took precedence over any purported competition in determining whether the activity met the requirements of the broadly worded sales and use tax exemption."
Looking beyond Applicant's competition with other retail stores, the purpose of selling items in the thrift store is not to make profits, but to use any income from operation to further the Applicant's charitable functions. Since the primary purpose of the thrift stores is charitable, sales of purchased goods sold at their thrift stores are exempt from Missouri sales tax.
This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.
Should additional information be needed, please contact Legal Counsel J. Ross Shelton, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.
Sincerely,
Wayne Wallingford