LR 8243
Taxability of Sales by Charitable Organization
May 26, 2023
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 March 27, 2023.
The facts as presented in your letter ruling request are summarized as follows:
Applicant is a nonprofit corporation recognized by the Internal Revenue Service as a charitable organization under section 501(c)(3) of the Internal Revenue Code. Applicant also possesses a continuing charitable exemption letter issued by the Department of Revenue for all purchases and sales conducted with Applicant's exempt charitable functions and activities. The Department issued Applicant the exemption letter on December 1, 2014.
Applicant's mission is to create permanency in foster children's lives by recruiting and supporting foster and adoptive families in a metropolitan region. Applicant's charitable functions and activities include finding permanent homes for children in foster care and to support foster/adoptive families in the area. Applicant operates a resale/thrift store where it sells clothing and fashion accessories at a significant discount from retail pricing.
Foster and adoptive families can purchase clothing items throughout the year at an additional 90% discount. All items sold by Applicant at its store are donated by the public through charitable donations. All proceeds pay the operating costs of the store and generate additional revenue to support the charitable activities of Applicant. Sixty percent of the store is operated by volunteers.
ISSUE:
Is Applicant required to collect and remit sales tax on the items sold at its resale/thrift store?
RESPONSE:
No. Applicant is not required to collect and remit sales tax on the items sold at its resale/thrift store.
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 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 within Applicant's functions and activities. Applicant's sales at its store directly and indirectly serve its charitable functions and activities. Part of Applicant's mission is to help support and serve adoptive and foster families within the area. One of the ways Applicant accomplishes this mission is to provide a place where those families can purchase clothing for their children at a minimal cost.
Unlike a typical retail store, Applicant's store does not purchase its own inventory, but receives it in the form of donations made to serve Applicant's charitable purpose. Additionally, all profits will be used to support Applicant's charitable functions. In other words, Applicant is not in competition with other retail stores. See St. John's Medical Center, Inc. v. Spradling, 510 S.W.2d 417 (Mo. 1974). Therefore, Applicant is not required to collect and remit sales tax on the items sold at its stores.
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