Sales Tax

Purchases
Booster Clubs that are organized as 501(c)(3) organizations under IRS guidelines may apply for state tax exempt status through the Texas Comptroller’s Office for sales tax on purchases and state hotel occupancy tax.

Sales
Determining if a sale is taxable or non taxable

Step 1.

When determining whether a fundraiser or other type of sale is taxable or non taxable, the first consideration is whether the item is a taxable product. The following chart depicts examples of taxable and non taxable items. If the item is classified as non taxable, no sales tax should be assessed. Continue to Step 2 if the item is taxable.

Step 2.

The next consideration is whether your booster club qualifies for sales tax exemptions according to State sales tax laws as stated below:

Each booster club designated as a 501(c)(3) organization under IRS guidelines may apply for sales tax exemption through the Texas Comptroller’s office. If granted the exemption status, the organization may hold two, one-day tax-free sales or auctions in a calendar year. During each one-day sale, the organization does not need to collect sales tax. For purposes of the exemption, one day is counted as 24 consecutive hours. To qualify for a tax-free sale, the organization must receive products deemed for sale in one shipment. Any items received after the initial shipment must be taxed. The exemption does not apply to items sold for more than $5,000 unless the item is manufactured by the organization and not sold back to the donor.

Step 3.

If the sale is considered taxable and the booster club has received sales tax exemption status, then the organization may deem the sale as one of its two, one-day tax-free sales. Beyond the two tax-free sale days, sales tax must be collected for all other taxable sales.

The one-day tax -free sale provision, available twice per year, can only be used when the booster club is the “seller” (see definition below). For sales in which the booster club is considered an “agent”, the one-day tax-free sale provision cannot be used.

Seller- the booster club serves as the “seller” when it purchases inventory from a vendor and then resells the items at its own profit or loss. Examples of this would be candy bar sales, t-shirts, etc.

Agent- the booster club servers as an “agent” when it takes orders for the vendor and then receives a commission or a percentage of the sales revenue. Example of this would be catalog/brochure sales. In “agent” relationships, the vendor is the responsible party for payment of sales tax to the Comptroller’s office. However, the booster club would be responsible for collecting the tax.

Booster clubs are encouraged to work with the vendor for the “agent” sales and request that the sale price include tax or provide a chart for sales tax to help with calculations. If the vendor cannot include sales tax in the selling price, then sales tax would have to be calculated and collected for each taxable item sold and then submitted to the vendor along with payment for the products.

Comptroller’s Office – Exempt Organizations: Sales and Purchases

Comptroller’s Office – Clarification Letter on 24-hour Tax-Free Day

The campus/student group shall collect sales tax on all taxable sales when applicable.

Seller- the campus/student group serves as the “seller” when it purchases inventory from a vendor and then resells the items at its own profit or loss. Examples of this would be candy bar sales, t-shirts, etc.

Agent- the campus/student group servers as an “agent” when it takes orders for the vendor and then receives a commission or a percentage of the sales revenue. Examples of this would be book fairs, student pictures, and catalog/brochure sales. In “agent” relationships, the vendor is the responsible party for payment of sales tax to the Comptroller office. However, the campus/student group would be responsible for collecting the tax.

The one-day tax free sale provision, available twice per year, can only be used when the campus/student group is the “seller”. To determine if your club is eligible for the one-day tax free sales provision, review fundraising-sales tax guidelines.

For sales in which the campus/student group is considered an “agent,” the one-day tax free sale provision cannot be used.

Campus/student groups are encouraged to work with the vendor for the “agent” sales and request that the sale price include tax or provide a chart for sales tax to help with calculations. If the vendor cannot include sales tax in the selling price, then sales tax would have to be calculated and collected for each taxable item sold and then submitted to the vendor along with payment for the products.

When imposing sales tax, the school has the option of:

1. Adding the tax to the item’s selling price – thus, if the selling price of an item were $2.00 and the tax rate were 7.25%, the school would collect $2.15 ($2.00 x 1.0725) from the buyer for each item sold.
2. Absorbing the tax in the item’s selling price – thus if the item sold for $2.00 including tax, the school would retain $1.86 and remit $0.14 for sales tax. If this method is used, divide the total sales by 1.0725 (assuming a tax rate of 7.25%) to find the taxable sales. To determine the sales tax amount, subtract the taxable sales from the gross sales.

All sales tax collected by the school shall be remitted monthly to the district’s accounting office unless contractual agreements with a vendor stipulate that such taxes should be remitted to the vendor (school picture and book fair sales, and catalog/brochure fundraising sales).

Schools must submit a sales tax report by the 5th working day following the previous month’s collections to the Accounting Department. This report must show the gross sales, taxable sales, and the amount of tax due. Decentralized campuses must submit the Deposit Summary and the Tax Due on Receipt reports.

Schools must file a sales tax report, even if no taxable sales are made in a given reporting period as all non-taxable sales must be reported. This would include vending and food sales. Campuses should not report textbooks fines, cash overages/shortages, student picture sales, etc. in the gross sales figure. Gross sales should only include those amounts which represent actual sales by the campus.

View Campus Sales Tax Rates

Determining if a sale is taxable or non taxable
Step 1
When determining whether a fundraiser or other type of sale is taxable or non taxable, the first consideration is whether the item is a taxable product. The following chart depicts examples of taxable and non taxable items. If the item is classified as non taxable, no sales tax should be assessed.

Step 2
The next consideration is whether the school group is considered a bona fide chapter according to State sales tax laws as stated below:

A bona fide chapter is a group that must be organized for some business or activity other than instruction or a participatory group. Essentially, any student group that is recognized by the school and is organized by electing officers (not just participatory captains), holding meetings, and conducting business are bona fide chapters of the school and each group may have two, one-day tax-free sales in a calendar year.

Groups meeting for classroom instruction or team sports are not categorized as bona fide chapters and do not qualify for the tax-free day sales. For example:

• The school district qualifies for a tax-free day
• The school-wide fundraiser qualifies for a tax-free day
• The Basketball Club qualifies, but the basketball team does not
• The Cheerleader Club qualifies, but not the cheerleader team
• The Debate Club qualifies, but debate teams and classes do not
• The French Club qualifies, but the French classes do not
• The Senior Class qualifies, but not one particular class that has senior in it

Step 3
If the sales is considered taxable and the school group is considered a bona fide chapter, then the organization may deem the sale as one of its two, one-day tax-free sales.

• Each school district, each school and each bona fide chapter of each school is allowed to have two, one-day tax-free sales each calendar year. To qualify for a tax-free sale, the organization must receive products deemed for sale in one shipment. Any items received after the initial shipment must be taxed. During these tax-free sales, the organization may sell any taxable item tax-free when the price of the item is $5,000 or less. There is no limit on the number of bona fide groups at a school or school district.

Exceptions:

• Book Fairs-The school shall collect sales tax on all taxable sales. If the school assumes responsibility for the activity and/or sales, the school is responsible for insuring the tax is paid. Schools may purchase books tax free for their own use because educational organizations have a statutory exemption. However, when students or other individuals purchase books, the purchase price is taxable and sales tax should be collected at the time of the sale. Sales tax is due regardless of whether the company makes the sale or the school makes the sale for a company on consignment.
• Catalog/Brochure Sales- For sales in which the campus/student group is considered an “agent”, the one-day tax free sale provision cannot be used. (The campus/student group serves as an “agent” when it takes orders for the vendor and then receives a commission or percentage of the sales revenue.)

Sales Tax Collections and Remittance Flowchart

A school district is a political subdivision of the State of Texas and is, therefore, exempt from paying state sales tax and no tax number is assigned.

Purchases by the school for educational or instructional use or for administrative use necessary to the educational function of the school are exempt from tax (office supplies, duplicating paper, etc.)

A school must provide the vendor with a valid signed exemption certificate when claiming state sales tax exempt status.Exemption certificates do not require numbers to be valid.

The District exemption status may not be utilized by parents, patrons, or alumni organizations to secure exemption from sales taxes. Parent/teacher organizations and booster clubs must apply for their own exemption.

Meals
Meals purchased by the school for athletic teams, bands, etc. on authorized school trips are exempt from sales tax if the school contracts for the meals. The school must pay for the meals with a school district check and provide the eating establishment with an exemption certificate.

Individual members of the athletic team, band, etc., may not claim exemption from the sales tax on the meals they purchase while on a school authorized trip.

Hotels
An exemption may also be claimed by the school from the state portion of the Hotel Occupancy Tax.

A Hotel Occupancy Tax Exemption Certificate must be furnished to a hotel when a district representative is occupying a room overnight while on school district business. One certificate may be issued for more than one room, and the method of payment does not affect the tax nor determine the exempt status.

Taxable Sales

State and local sales taxes shall be imposed and collected on all sales for:

Agenda Books	Magazine-Subscriptions less than 6 months
Agricultural Sales	Magazines-when sold individually
Art-supplies and work of art	Musical supplies-recorders, reeds
Artistic-CDs, tapes, videos	Parts-career & technology classes (not to include products used in cosmetology)
Athletic-equipment and uniforms	Parts-upholstery
Auction items sold	PE-uniforms, supplies
Automotive-parts and supplies	Pennants
Band-equipment, supplies patches, badges, uniform sales and rental	Pictures-school, group (if school is the seller)
Book Covers	Plants-holiday greenery and poinsettias
Books-workbooks, vocabulary, library, author (when we are the seller)	Rentals-equipment of any kind
Book Fairs-all books sold	Rentals-uniforms of any kind, towels
Brochure Items	Repair to tangible personal property (i.e., computer repair, house remodeling)
Calculators	Rings and other schoool jewelry
Calendars	Rummage, yard and garage sales
Candles	Safety supplies
Car -painting, pin striping	School publications-athletic programs, posters
Clothing-school, club, class, spirit	School publications-brochures
Computer-supplies, mouse pads	School publications-magazine (unless >six month subscription)
Cosmetology products sold to customers	School publications-newsletters, newspapers (generally are not sold though)
Cups-glass, plastic, paper	School publications-reading books
Decals	School publictions-sheet music, hymnals
Directories-student, faculty	School publications-yearbooks
Drafting-supplies	School store-all items (except food)
Family and Consumer Science-supplies and sewing kits	Science-science kits, boards, supplies
Fees-copies, printing, laminating	Spirit items
Flowers-roses, carnations, arrangements	Stadium seats
Greeting Cards	Stationary
Handicrafts	Supplies-any sold to students
Horticulture Items	Uniforms-any type to include PE, dance team, drill team, cheerleaders, athletic, club shirts
Hygiene Supplies	Vending-pencils and other non-edible supplies when the school services the machine
Identification Cards-when they are sold to the entire student body (not just the fine for a lost ID)	Woodworking crafts-entire sales to inlcude parts and labor
Locks-sales and rentals	Yard signs

Non-Taxable Sales

School and school related organizations need not collect sales tax on the following:

• Ad Sales-in yearbooks, athletic programs, newspapers, posters
• Admission tickets – athletic , dances, dance performances, drama and musical performances
• Admission – summer camps, clinics, workshops, project graduation, banquet fees, bids, prom, homecoming, tournament fees, academic competition fees
• Diplomas
• Discount/Entertainment cards and books
• Facility rentals for school groups
• Food and drinks sold at PTA Carnivals
• Sale of food and soft drinks sold during a regular school day, subject to an agreement with the proper school authorities.
• Vending machine sales
• Meals and food products, including candy and soft drinks, served in an elementary or secondary school during the regular school day.
• Candy and food items sold through fund raising drives by PTA or students of the school who are under eighteen years of age
• Labor -automotive, upholstery classes (parts are taxable)
• Magazine subscriptions greater than six months
• Parking Permits
• Services- car wash, cleaning
• Transcripts