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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 3182
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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Our church is generally in the habit of paying California

Customer Question

Our church is generally in the habit of paying California sales tax.
Help us make this black/white…
When we buy pencils for the office: taxable
When we buy pencils to put in backpacks to give away to the needy: nontaxable.
What about hen we buys sweatshirts for resale (hypothetically; we don’t do this): taxable, and pay sales tax back to state.
What if church buys to give to volunteers for
A) outtreach activities off campus
B) on campus service to parishoners/visitors (hard to distinguish)
???
Please cite chapter and verse from the Franchise Tax Board or other appropriate California State code.
Submitted: 1 year ago.
Category: Tax
Expert:  Barbara replied 1 year ago.
Welcome to Just Answer. My name is ***** ***** it will be my pleasure to assist you with your question today.
The distinction is that a sale is an exchange of merchandise or goods for something else of value, i.e., money, barter, or trade.
In your example, there would be no sales tax due on A or B.
The following link contains excellent, detailed information that you will find helpful:
http://www.boe.ca.gov/pdf/pub18.pdf
Please let me know if I can assist you further.
Thank you and best regards,
Barb
Customer: replied 1 year ago.

Barb, thank you for the boe document.

Which page references our circumstances?

Thank you!

Expert:  Barbara replied 1 year ago.
Pages 5 and 6 (general provisions) as well as Pages 14, 15 and 16 (specific to religious organizations).
Best regards,
Barb
Customer: replied 1 year ago.

can't review until tomorrow at earliest... will come back with questions and/or good rating. Thank you!

Expert:  Barbara replied 1 year ago.
Take your time.
Best regards,
Barb
Customer: replied 1 year ago.

Barb, reviewed those pages with a nonprofit compliance guy who said that "unless there is a specific exemption," like food, "someone has to pay the sales tax." What am I missing??? THANK YOU!

Expert:  Barbara replied 1 year ago.
Pages 5 and 6 list the general provisions.
Customer: replied 1 year ago.
Barb, from pages 5&6, I can't make the argument that A & B, above, are exempt from sales tax. Would you please help further?
Expert:  Robin D. replied 1 year ago.

Hello,

You are correct , the items are not exempt because the church is using the items as office supplies. Even if the church is issuing the items to the volunteers, the volunteers are using them to perform a task for the church.

The pencils are not donated (like when you place them in backpacks).

The sales tax is applied to the purchase for the supplies, your church is not exempt on these items used.

The volunteers (even if working off campus) are still using the pencils for a task they are completing as representatives of the church.

The church can not claim exemption from paying sales tax on the supplies.

Expert:  Barbara replied 1 year ago.
I apologize for the delay, but have been in the ER with my mom since 12:00 am. I will research this further and let you know.
Correct me if I'm wrong, but I believe you were asking about A and B in your original question as they pertain to sweatshirts NOT pencils, to which you already know the answer.
Best regards,
Barb
Customer: replied 1 year ago.

Hoping your mom is better.

Still not clear from your or Robin's response:

If we buy pencils and give them to the needy as part of a back to school program, are we exempt from sales tax? I can't find the exemption.

Thank you!

Expert:  Barbara replied 1 year ago.

When you buy pencils and give them away to the needy, the pencils are exempt from sales tax. If you buy pencils and use them as supplies in the church's office or to perform a church function, the pencils are subject to sales tax.

Actually, I will telephone the CA BOE on Monday, 8/24, and let you know what I find out.

Best regards,

Barb

PS: Thank you for your kind words regarding my mom.

Customer: replied 1 year ago.

thanks for checking. I have 2 CPAs saying "no," so please have BoE cite specific code/case/law...

"Barb says so" won't be good enough.

Expert:  Barbara replied 1 year ago.

I will get as much info as I can regarding the sales tax issue and let you know.

Best regards,

Barb

Customer: replied 1 year ago.

very grateful! You will earn a top rating when we're complete!!

Expert:  Barbara replied 1 year ago.
Thank you.
Expert:  Barbara replied 1 year ago.
As promised, I spoke to a representative at the Board of Equalization(###) ###-#### ***** was advised of the following:
The first consideration is whether your church is set up to relieve poverty and distress.
As to the pencils, if they are used in your church's office OR given away to the needy, they are subject to sales tax.
As to the sweatshirts, if they are given to volunteers of the church, they are subject to sales tax. If they are given to the needy, they would not be subject to sales tax.
The representative suggested that you call the Board of Equalization directly because there are very specific questions that only you can answer about the church which will allow the tax experts at the Board of Equalization to give you more definitive information.
Thank you and best regards,
Barb

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