Multistate Tax Commission/Association of Fund-Raising Distributors & Suppliers   Tennessee

Agency: Tennessee Department of Revenue

Contact Person/Department: Taxpayer Services Division

Tel. No.: (800) 342-1003 Nashville & Out of State: 1-615-253-0600

Fax No.: (615) 253-6299

E-mail: tn.revenue@state.tn.us

1.  If your State exempts fundraising sales by certain groups from sales or use taxes, please indicate which of the following are exempt in your State.

Exempt for Fundraising purposes

Public Schools (K-12) exempt*

Private Schools (K-12) exempt*

School Groups (e.g., clubs, bands, teams) exempt*

PTAs exempt*

PTOs exempt*

Other parent groups (please identify) exempt*

Church Groups exempt**

Youth Sports League exempt**

501 (c)(3) organizations exempt**

501 (c)(6) organizations exempt**

Other (specify:__________________)

* The public or private school or school support group willl pay Tennessee sales or uses tax on tangible personal property purchased for sale at the fundraising event, but the resale of such property at the fundraising event is exempt from sales tax, so the school or school support group will not collect sales tax from the consumer. A school or school support group must obtain an exemption certificate from the Department of Revenue in order to make tax exempt purchases of tangible personal property for their own use. However, an exemption certificate should not be used to make tax exempt purchases of tangible personal property for resale at fundraising events (See Tenn. Code Ann. (67-6-102(28)(h) and Tenn. Comp. R. & Regs. 1320-5-1-09)

**Fundraising sales by these organizations, or any organization would be exempt from Tennessee sales tax if the tangible personal property is not regularly sold by the organization or is sold only during a temporary (30 consecutive days or less) sales period that occurs not more than 2 times each year. In such a case, the organization will pay sales tax on the purchase price of tangible personal property that it purchases for resale at the fundraising event. If the tangible personal property is regularly sold by the organization, or if the organization holds more than 2 temporary fundraising events each year, then all fundraising sales made by the organization during the year are subject to sales and use tax. (See Tenn. Code Ann. 67-6-102(8)(B) and Tenn. Comp. R. & Regs. 1320-5-1-09 and 1320-5-1-51(2)

1a .  Are local sales and use taxes in your State applied to these groups in the same manner as State sales and use taxes are applied to these groups?

Yes

1b.   Please set forth any comments including a list of groups not listed above whose fundraising activities are exempt from sales and use taxation in your State.

Sales by fundraising organizations on behalf of any organizations qualifying for an exemption, in an attempt to raise money for the exempt organization and earn a profit for the fundraising organization, are subject to Tennessee sales and use tax unless the fundraising organization is clearly an agent of the organization qualifying for exemption (See Gehl Corporation v. Johnson 991 S.W.2d 246 (Tenn. App. 1998).

2.   If your State exempts fundraising sales of certain products from sales and use tax, please indicate which of the following products are exempt.

Candies and Confections - not exempt

Cookies and Other Baked Goods - not exempt

Cheese Products - not exempt

Meat Products - not exempt

Nuts, popcorn and other snack food - not exempt

Other edible items (please identify) - not exempt

Magazine subscriptions - Exempt ***

Paper products (e.g., calendars, cards stationery, books, gift wrap) - Not exempt

Decorative tins, baskets, other containers - Not exempt

Decorative novelties (mugs, ornaments) - Not exempt

Sundry items (please specify item below) - Not exempt

Clothing and accessories - Not exempt

Jewelry - Not exempt

Plant and seeds - Exempt ****

Other hard good items - Not exempt

***Sales of magazines and books distributed and sold to consumers by U.S. Mail or common carrier are excempt if the only activities of the seller or distributor in Tennessee are those activities connected with the printing, storage, labeling and / or delivery to the U.S. mail or common carrier of such magazines or books, or the maintenance of raw materials with respect to such activities, notwithstanding that such seller or distributor maintains in Tennessee employees solely in connection with such production and quality control of such printing, storage, labeling and / or delivery in connection with news gathering and reporting (See Tenn. Code Ann. 67-6-329(a)(16)

****Note 2b: Sales of Seeds, seedlings, plants grown from seed and liners (cuttings) which will produce food or fiber, including tobacco, for human or animal consumption are exempt from Tenneessee sales and use tax (See Tenn. Code Ann 67-6-329(a)(3)

2a.   Are local sales and use taxes in your State applied to these products in the same manner as State sales and use taxes are applied to these products?

Yes

2b.  Please set forth any comments including a list of products not listed above that are exempt from sales and use taxation for fundraising purposes in your State.

There are other product exemptions, such as prescription drugs and certain medical products, but it would be highly unlikely that the products exempted would be sold in fundraising events.

3.  If some or all fundraising groups or products qualify for exemption from sales and use tax in your State, please indicate any exceptions to or limitations on such exemptions.

Limits on the number of fundraising events per year (see footnote to question 1)
Limits on the duration of fundraisers (see footnote to question 1)

4.   If some or all-fundraising groups qualify for exemption from sales and use tax in your State, please set forth the procedure through which a group may establish its qualification for the exemption. Attach relevant statutes, regulations, procedures, etc.

If audited by the Tennessee Department of Revenue, the organization would need to show that it qualifies as a school or school support group, church, church group IRC 501(c) organization, etc. and that its fundraising event met the requirements of applicable statutes and rules such as: Tenn Code Ann. 67-6-102(28)(h) and 67-6-102(3)(b) and Tenn. Comp. R & Regs. 1320-5-1-09 and 1320-5-1-51(2). The organization would also need to show that sales tax was paid on the purchase price of the tangible personal property from the seller.

5.   If some or all-fundraising products qualify for exemption from sales and use tax in your State, please set forth the procedure for establishing a product’s qualification for the exemption. Attach relevant statutes, regulations, procedures, etc.

If audited by the Tennessee Department of Revenue, the organization would need to show that the products sold at its fundraising event met the exemption requirements of applicable statutes such as: Tenn. Code Ann 67-6-329(a)(3) and (16)

6.   In instances where a fundraising product or group is not exempt from sales or use tax, please indicate who bears the responsibility for collecting and remitting the tax.

The fundraising group (e.g. school, PTA, church)*
The company distributing goods to the fundraising group
**

*All vendors that make sales without collecting sales tax when there is no documentation for proper exemption are liable for the uncollected tax.

**If the seller is provided an exemption certificate or a resale certificate by the organization holding a fundraiser, then the organization, rather than the seller, is liable for teh sales tax.

7.   In instances where a fundraising product or group is not exempt from sales or use tax, what is the basis for calculating the sales/use tax?

Price paid by fundraising group to distributor *
Price paid by consumer to fundraising group
**

* A public or private school or school support group will pay Tennessee sales or use tax on its purchase price of tangible personal property that it purchases from a distributor for resale at a fundraising event, but the resale of such property at the fundraising event is exempt from sales tax, so the school or school support group will not collect sales tax from the consumer.

** If the tangible personal property is regularly sold by the organization, or if the organization holds more than 2 temporary fundraising events each year, then all fundraising sales made by the organization during the year are subject to sales and use tax. In such a case, the organization making fundraising sales should provide the seller with a resale certificate and collect and remit sales tax on teh resale of the tangible personal property to the consumer.

Last Updated - September 2005