Current through Register Vol. 49, No. 9, September, 2024
A. The gross receipts or gross proceeds
derived from the sale of tangible personal property or services by churches or
charitable organizations are exempt from the tax except where such
organizations may be engaged in business for profit. Additionally, sales made
by charitable organizations that sell new tangible personal property and their
sales compete with sales made by for-profit businesses are not exempt. (See
GR-39(C).)
B. The gross receipts or
gross proceeds derived from sales of tangible personal property or services to
churches or charitable organizations are not exempt from tax unless the items
purchased are for resale by the church or charitable organization. In order to
claim the sale-for-resale exemption, a church or charitable organization must
have either a resale certificate or a letter opinion issued by DFA certifying
that it is a church or charitable organization and that it intends to resell
the items purchased.
C. WHEN SALES
BY CHARITABLE ORGANIZATIONS ARE NOT EXEMPT:
1.
The exemption for charitable organizations shall not extend to sales of new
tangible personal property by the organization if the sale competes with sales
by for-profit businesses.
2. A sale
by a charitable organization does not compete with a sale by a for-profit
organization if:
a. The sales transaction is
conducted by members of the charitable organization and not by any franchisee
or licensee;
b. All of the proceeds
derived from the transaction go to the charitable organization;
c. The transaction is not a continuing one
and is held not more than three (3) times a year; and
d. The dominant motive of the majority of
purchasers of the items sold is the making of a charitable contribution, with
the purchase of the item being merely incidental and secondary to the dominant
purpose of making a gift to the charity.
3. The limitations of this section do not
apply to sales made by a nonprofit hospital, a cafeteria at a nonprofit
hospital, or a gift shop at a nonprofit hospital, whether operated by the
hospital, a hospital auxiliary, or other nonprofit organization; or to sales by
gift shops operated by charitable organizations at for-profit
hospitals.
4. The following
activities shall not be deemed to compete with sales by for-profit
organizations:
a. Sales of tangible personal
property by charitable organizations at county fairs;
b. Sales at concession stands operated by a
non-profit little league or soccer association or other similar athletic
association;
5. The sale
of fireworks by a non-profit charitable organization shall be deemed to compete
with for-profit organizations.
D. DEFINITIONS.
1. See GR-37(E)(6) for definition of
charitable organization.
2. The
phrase "engaged in business for profit" means that the income or receipts of
the church or charitable organization inures to the benefit of an individual,
corporation organized for profit, trust organized for profit or partnership
organized for profit. A charitable organization or church that has obtained a
ruling from the United States Internal Revenue Service or Arkansas Department
of Finance and Administration, Income Tax Section, which certifies the
organization for income tax purposes is presumed to be a non-profit
organization.
Ark. Code Ann. §§
26-52-401;
26-52-430
