Give-aways for monetary donations/gifts verses yard sales/vendor tables?

Asked over 1 year ago - Wood Dale, IL

To my knowledge, individuals who hold yard sales/ garage sales at their homes/churches/etc do not pay a sales tax on items sold. At least I certainly have not met anyone who claims their yard sale/lemonaid stand/craigslist earnings when filing taxes. This brings me to a question about raising funds for upcoming events. If I can hold a sale like such without being subjected to taxes or having to register as a business or organization, would I be able to accept gifts/donations for a specific fund raiser and "give away" items to those who give monetary gifts toward my event? I know that oftentimes individuals will send out support letters asking for funds to help cover expenses on a mission trip or youth event, without giving back to the givers. Can this be done?

Attorney answers (3)

  1. James H Sutton Jr.

    Contributor Level 13

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    Answered . Surprisingly complicated question. Regarding yard sales, most states have some type of occasional sale exemption that allows someone or a business to sell something outside their ordinary course of business without having to collect sales tax. This is primary reason why you don't see sales tax collections at a yard sale. Most states allow have a threshold that would require sales tax collection if more than a certain number of these 'occasional sales' happen within a twelve month period. In Florida, the magic number is 2 (after which you would have to start collecting if you hit 3).

    As far as organization being able to hold fund raisers without sales tax implications, this is usually because they have qualified as a not for profit organization federally. Most states allow not for profit organizations a lot of leeway to receive and give away items without sales tax concerns.

    Even if you are not a not for profit, most states also have an exemption for gifts. You are allowed to receive a gift without sales tax because sales tax is imposed on the exercise of your right to transfer ownership of property for value (a sale). Gifts are simply outside the scope of sales tax in most jurisdictions. Just don't get too creative and decide you can receive a gift and give something back without sales tax consequences.

    I hope this answers your question.

    James Sutton, CPA, Esq.
    www.FloridaSalesTax.com

  2. Bruce Givner

    Contributor Level 19

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    Answered . If you hold a fundraiser for a tax-exempt entity (charity), only do it in conjunction with the charity. The charity will not want you to do something that will tarnish its name and reputation. You will then be able to do so without sales tax because you are acting in conjunction with a charity.

  3. Christopher Michael Larson

    Contributor Level 19

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    Answered . With sales taxes, you have to be in the business of selling the items to be subject to sales tax. However, it sounds like you would be in such a business if this church were purchasing goods for the purpose of sale. The goods at your garage sale were not purchased with sale in mind and that is why they are not taxable. If you hold a "garage sale" every weekend where you just happen to be selling new goods, and you will be subject to sales tax.

    Just because something is non-profit on a state level, or tax exempt on a federal level, doesn't mean they don't have to pay sales taxes on goods sold. And the whole "I give you money and you give me a 'gift'" can be seen as a sale if specific procedures are not followed.

    You need to speak with a local attorney before you try to set something up claiming it isn't subject to sales taxes. You are generally personally liable for those and it isn't worth messing up because you had a "theory" that sounded plausible.

    Christopher Larson
    Insight Law
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