Sales Tax Frequently Asked Questions
- A department is hosting a banquet. The guests are charged $15.00 for admission. They will receive a meal that costs $10.00. The remaining $5.00 covers decorations, programs, and table centerpieces. What portion is subject to sales tax in this situation?
If the ticket states $15.00, then the full amount is taxable for state and local sales tax. While Texas A&M University and its departments are exempt from paying sales tax as provided by Tax Code Section 151.309, the university and its departments are not exempt from collecting sales tax.
Texas Administrative Code Title 34, Part 1, Chapter 3, Subchapter O, Rule §3.293 specifically states that tax is due on the total charge for food, meals and drinks (even if part of the charge included overhead items) sold by universities, colleges, junior colleges or other schools of higher learning. Even if the university qualifies as an exempt organization under Texas Tax Code Section 151.309 on its purchases, the university still must get a sales tax permit and collect and remit sales tax on all items it sells, unless such sales are otherwise exempt. The university would collect sales tax on the $15.00 ticket.
- What if the table centerpieces are given out as door prizes? Should we be collecting sales tax on the full admission fee of $15.00?
- Sales tax is due on the full $15.00 ticket prices. If the ticket indicates separately that $10.00 is for the meal and $5.00 for registration, then only the $10.00 is taxable for the meal.
- What if my banquet is for educational purposes?
If your registration fee to a conference, seminar, or workshop includes the price of a meal, you are selling a registration and not a meal. Registration fees are not taxable. However, if the meal is optional and an additional cost to the registration fee, the amount for the meal is taxable.
Banquets held for reunions, social events, or fundraisers are not considered educational and would be subject to sales tax.
- Should TAMU collect sales tax on amusement services?
- Sales tax is not due on the sale of an amusement service (e.g. concert, college football game, etc.) if the service is provided exclusively by an educational organization, as long as no part of the proceeds goes to the benefit of a private individual. This exemption includes institutions of higher education as defined under Education Code, Section 61.003(8). See Title 34, Part 1, Chapter 3, Subchapter O, Rule §3.298 (g)(1)(C).
- Should sales tax be collected on items that are purchased at auctions and fundraisers?
- Sales tax is due on the value of the item. If an item is valued at $100.00 but it is auctioned off for $200.00, then $100.00 is subject to sales tax. The remaining $100.00 is considered a gift/donation.
- What if a student organization is holding the auction?
- If a university recognized student organization holds the auction or fundraiser, then a student organization gets one tax-free sale day every month, subject to the same $5000.00 monetary limitations, provided its primary purpose is to raise funds for the university organization. Further, the first $5000.00 in total receipts every year from sales by the student organization is exempt. A student organization only qualifies for these exemptions if it is affiliated with an institution of higher education, has a primary purpose other than making a profit, and files a certification with the comptroller. See Tax Code Section 151.321.
- A department would like to charge a fee to provide a certificate of completion for externships. Should TAMU collect sales tax?
If the certificate of completion is under the Texas Open Records Act, then it is exempt from sales tax. Sales of documents by governmental entities are exempt from tax if they are required to be provided under Texas Open Records Act. The documents may be certified or uncertified.
If the certificate of completion for externship is for completion of training and part of the training fee, then it is not taxable. Training classes or courses of study are not taxable in Texas if unrelated to the sale of taxable items.
Otherwise, the sale of the certificate would be taxable as the sale of tangible personal property.
- Is the sale of copyrights and permissions subject to sales tax?
- A separate charge for a copyright or permission to use is not subject to sales tax. However, if you sell tangible personal property (i.e. a photograph) along with a copyright, then the entire charge is subject to sales tax if the copyright charge is not separately stated.
- If we sell conference materials separate from the conference registration fee, should we collect sales tax?
- Yes, you will collect sales tax on materials (i.e. books, manuals, etc.) sold separately from the conference registration fee.
- Can vendors accept our payment card as proof that we are tax exempt since the card says TAMU and tax exempt on it? Or do we still need to provide the vendor with a tax exemption certificate?
- You still need to provide the vendors with the certificate. Your vendors will not be held liable for the sales tax if they accept a properly completed exemption certificate in good faith at the time of the transaction and do not have actual knowledge that the claimed exemption is invalid. As sellers, they are responsible for knowing the exemptions that are available for the items sold. They may question the use of an exemption certificate and not accept the certificate if they know or have reason to believe the property is being purchased for nonexempt purposes. Use the Comptroller's Texas Sales and Use Tax Exemption Certification Form.
- Is the sale of pallets taxable? We would like to start selling pallets that are left from deliveries?
- Yes, you should charge sales tax on the sales of the pallets.
- My department purchased shirts to give to our employees to wear on Fridays and special occasions. We have some left over and would like to sell the extras to our employees. Do we have to collect sales tax even though we did not pay the sales tax originally?
- Yes, you must collect sales tax on these items if they are sold to non-exempt individuals.
- Our department would like to hold a plant sell. Should we collect sales tax on these sales?
- Yes, you must collect sales tax on these plants if they are sold to non-exempt individuals. If someone claims they are exempt, they must provide you with a signed Sales Tax Exemption Certificate. Sales tax is not due on the sale of seeds and annual plants, the products of which ordinarily constitute food for human consumption or are used to produce feed for exempted animals. See Title 34, Part 1, Chapter 3, Subchapter O, Rule §3.296.
- Our department sponsors dinners, banquets, or receptions. The department pays for the expenses upfront and then attending employees/guests are expected to reimburse the department. Should TAMU collect sales tax on these?
- Yes, if the department pays for the expenses and expects to be reimbursed, then sales tax must be collected from those non-exempt individuals reimbursing the department. This is not a reduction to an expense. This is the sale of a meal.
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