Excise Tax Advisory
Excise Tax Advisories (ETA) are interpretive statements issued by the Department of Revenue under authority of
RCW 34.05.230. ETAs explain the Department’s policy regarding how tax law applies to a specific issue or specific
set of facts. They are advisory for taxpayers; however, the Department is bound by these advisories until superseded
by Court action, Legislative action, rule adoption, or an amendment to or cancellation of the ETA.
Number: 2004.04/08.167
Issue Date: November 23, 1999
ETBS have been made Excise Tax Advisories, and have retained their old
number. Advisories with a 2 (plus three digits) are new advisories, ETBs that
have been revised and readopted after review under the Department’s
regulatory improvement program, or advisories that have been revised and/or
readopted.
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format for the visually impaired or language other than English, please call
(360)753-3217. Teletype (TTY) users please call 1-800-451-7985.
Please direct comments to:
Department of Revenue
Legislation & Policy Division
P O Box 47467
Olympia, Washington 98504-7467
(360) 753-4161 eta@DOR.wa.gov
Page 1
Fund-raising Activities of Public Schools,
Associated Student Body Groups, and Parent Teacher Associations
Since Senate Bill (SB) 6599 (Chapter 336, Laws of 1998) was enacted, the Department of Revenue has
received many questions concerning whether fund-raising activities conducted by school districts, Parent
Teacher Associations (PTAs) and Associated Student Body (ASB) groups qualify for the bill’s two fund-
raising exemptions.
This advisory outlines how the fund-raising exemptions apply to school districts, PTAs and ASB groups
until such time as the information is incorporated into the applicable rules through the Department’s
rule-making procedure.
The Exemptions
SB 6599, now codified as Revised Code of Washington (RCW) 82.04.3651 and 82.08.02573, broadens
and simplifies previous exemptions for fund-raising activities conducted by nonprofit organizations. It
provides a two-prong test to determine whether an entity is eligible to take advantage of the tax
exemptions. An organization must:
1.
Meet the statutory definition of a nonprofit organization;
and
2.
Conduct fundraising activities as defined by the statute.
Excise Tax Advisory
Number: 2004.04/08.167
Issue Date: November 23, 1999
Page 2
Nonprofit Organization Defined
To meet the statutory definition of term “nonprofit organization,” an organization must meet one of the
following criteria:
(a)
Be exempt from tax under section 501(c) (3), (4), or (10) of the federal internal
revenue code (26 U.S.C. Sec. 501(c) (3), (4), or (10));
(b)
Otherwise qualify for exemption from federal tax under (a) above except that it is
not organized as a nonprofit corporation; or
(c)
Meet all of the following criteria:
(i)
The members, stockholders, officers, directors, or trustees of the
organization do not receive any part of the organization's gross
income, except as payment for services rendered;
(ii)
The compensation received by any person for services rendered to
the organization does not exceed an amount reasonable under the
circumstances; and
(iii)
The activities of the organization do not include a substantial amount
of political activity, including but not limited to influencing
legislation and participation in any campaign on behalf of any
candidate for political office.
Fund-raising Activities
The term “fund-raising activity” means soliciting or accepting contributions of money or other property,
or selling goods or services for cash to further the nonprofit organization’s goals. It does not include the
ongoing operation of a regular place of business in which sales are made or services are provided during
regular hours such as a bookstore, thrift shop, restaurant or similar business. Fund-raising activities can
be disassociated from regular business activities when the fund-raising activity is not done at a regular
place of business during regular hours.
The Exemptions
Organizations meeting both prongs of the test are not subject to business and occupation (B&O) tax on
gross income derived from fund-raising activities. In addition, such organizations are exempt from the
requirement to collect sales tax when selling retail goods and services as part of a fund-raising event.
Qualifying organizations purchasing goods to resell during a fund-raising event may purchase such
goods without sales tax. To make such purchases, the organization must give the seller a properly
completed resale certificate. When completing the resale certificate, organizations that are not required
to have a UBI/Tax Registration number should indicate that the organization is a qualifying nonprofit
organization and will sell the goods during a tax-exempt fund-raising activity.
Excise Tax Advisory
Number: 2004.04/08.167
Issue Date: November 23, 1999
Page 3
School Districts
Public school districts are governmental entities which are governed by locally elected legislative
boards. As such, public school districts are not eligible for the exemptions provided by RCW
82.04.3651 and 82.08.02573.
ASB Groups
ASBs are established by school districts. However, an ASB is not a public governing body lobbied to
make public decisions and is not necessarily involved in a substantial amount of political activity.
To be considered a nonprofit organization, however, an individual ASB must meet the qualifications in
the statute and prove that it and the student groups it sponsors are not engaged in a substantial amount of
political activity. The easiest way for an ASB to prove it does not engage in a substantial amount of
political activity is for the regulating school district to provide that the ASB cannot engage in a
substantial amount of political activity. This includes but is not limited to influencing legislative
decisions at federal, state or local levels, or participating in any campaign on behalf of any candidate for
political office. If the regulating school district does not provide for a limitation of political activities,
the ASB must be able to prove that neither the ASB nor ASB-sponsored groups engage in a substantial
amount of political activity.
Thus, ASB groups that are not involved in a substantial amount of political activity will qualify for the
fund-raising exemptions.
It is important to understand that exemption from the requirement to collect sales tax is limited to those
sales the ASB makes in its own name. The exemption does not apply if an ASB group makes sales as an
agent for a third party. For example, sales of class jewelry for which the ASB merely collects the money
on behalf of the seller continue to be subject to sales tax. The fund-raising exemption does not extend to
sales made on behalf of non-qualifying organizations.
PTAs
To the extent a PTA group qualifies as a nonprofit organization, it will qualify for the exemptions
providing it conducts fundraising activities as defined by statute.
When considering sales of tangible personal property by the PTA, it is important to distinguish between
sales made by the PTA in its own name and those sales whereby the PTA acts as an agent. The fund-
raising exemption does not extend to sales made on behalf of non-qualifying organizations.
A common example of a PTA acting as an agent includes book fairs during which the seller consigns
books to the PTA. Typically, a PTA will sponsor a book sale during a specific time period. Although
the PTA is the sponsor, the seller’s name is prominently displayed at the event. The PTA has the option
of keeping a book or cash profit based on specified percentages of their total sales. In most
Excise Tax Advisory
Number: 2004.04/08.167
Issue Date: November 23, 1999
Page 4
instances, the PTA retains a percentage of the sales proceeds and remits the remaining proceeds to seller.
The PTA returns unsold books to the seller. In this and similar situations, sales tax must be collected
and remitted on the book sales.
Further Questions?
School-related fund-raising activities vary school to school and group to group. This advisory is
intended to provide a general discussion of how the exemptions apply and may not address all school-
related fund-raising activities. In such circumstances, the facts should be submitted in writing to:
Taxpayer Information and Education Section
Washington State Department of Revenue
Post Office Box 47478
Olympia, Washington 98504-7478
