Do booster clubs charge sales tax in Massachusetts?

The rule for fundraising sales

Massachusetts taxes retail sales, including many sales by exempt organizations, unless an exemption applies. The one that covers most booster fundraising is the casual and isolated sales exemption in Massachusetts General Laws c.64H §6(c), explained in the DOR regulation 830 CMR 64H.6.1.

Under that regulation, sales of tangible personal property by a nonprofit for fundraising are exempt if two tests are met:

• The organization does not make sales of the same type of property in the regular course of business
• The money from the sales is used to further the organization's exempt purpose

If both tests are met, the regulation says the number of casual and isolated sales in a calendar year is immaterial. DOR also generally presumes that fundraising proceeds are used for the exempt purpose.

Snack bars and concession stands

Food is “meals” for Massachusetts tax purposes, and meals have their own regulation, 830 CMR 64H.6.5. It follows the same approach: meals sold by a nonprofit for fundraising are exempt casual and isolated sales if the club does not sell meals in the regular course of business and the proceeds further its exempt purpose. Again, the number of sales in a year is immaterial if the tests are met.

So a PTO bake sale, a football concession stand or a band pancake breakfast is usually outside the meals tax. Where a caterer prepares and serves the food, the regulation's examples suggest looking at the specific arrangement.

What “regular course of business” means

The regulation makes this a question of facts and circumstances, and names three factors DOR will consider:

• Whether the organization sells from a retail establishment it operates
• Whether it is required to hold a vendor registration and is ordinarily engaged in selling the same type of property it sells at its fundraisers
• Whether the proceeds are unrelated business income under the Internal Revenue Code

The old “two events” rule

Older guidance, DOR Directive 91-1 from 1991, treated sales of similar goods at more than two fundraising events a year as regular-course sales. You will still see that rule repeated online.

It no longer applies. 830 CMR 64H.6.1 states that it supersedes and revokes prior directives on casual and isolated sales, naming Directive 91-1 specifically, and it replaced the event count with the facts-and-circumstances test above.

The buying side: you usually pay tax on what you resell

Here is the part that surprises treasurers. The regulation says items not purchased for resale in the regular course of business are generally taxable. A club making casual fundraising sales is not a registered vendor, so it does not use a resale certificate. In practice, the club pays sales tax to its supplier on spirit wear, candy or other goods it buys to resell, and then does not collect tax when it sells them.

Even a club with a Form ST-2 exemption certificate should not assume that goods bought for a fundraiser sale are exempt-use purchases. Ask DOR or your preparer before using an ST-5 for fundraiser inventory.

When a club has to register as a vendor

Any group, including a 501(c)(3) that holds an ST-2, that sells tangible personal property in the regular course of business must register as a Massachusetts vendor and collect and remit sales tax, even if the sales happen at fundraising events. A nonprofit making only casual and isolated fundraising sales does not need to register.

If your club is drifting toward a permanent store, a standing online shop or a concession operation that looks like a business, talk to DOR or a tax professional before the season starts.