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TITLE 34PUBLIC FINANCE
PART 1COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3TAX ADMINISTRATION
SUBCHAPTER OSTATE AND LOCAL SALES AND USE TAXES
RULE §3.322Exempt Organizations

exemption under a parent's exemption must provide a copy of the parent organization's IRS group exemption ruling letter and a letter from the parent organization that states the applicant nonprofit organization is a subordinate covered by the parent organization's group exemption.

  (3) The comptroller may require an organization to furnish additional information to further clarify the organization's overall purpose and activities to establish the claimed exemption. For example, the comptroller may request a written statement that details the nature of the activities conducted, or to be conducted, financial information, and documentation that shows all services the organization performs.

  (4) After a review of the material, the comptroller will inform an organization in writing if it qualifies for exemption.

  (5) The comptroller or an authorized representative of the comptroller may audit the records of an organization at any time during regular business hours to verify the validity of the organization's exempt status.

(f) Revocations, withdrawals, or loss of exemptions.

  (1) Except as provided in paragraph (2) of this subsection, if at any time the comptroller has reason to believe that an exempt organization no longer qualifies for exemption, a comptroller's representative will notify the organization that its exempt status is under review. A comptroller's representative may request additional information that is necessary to ascertain the continued validity of the organization's exempt status. An organization must immediately notify the comptroller in writing of a revocation, withdrawal, or loss of exemption when the organization no longer qualifies for exemption. If the comptroller determines that an organization is no longer entitled to its exemption, then the comptroller will notify the organization. The date of the notification letter is the effective date of the revocation. All subsequent purchases by the organization are subject to tax.

  (2) For nonprofit organizations that are granted an exemption under Tax Code, §151.310(a)(2), the revocation, withdrawal, or loss of the federal income tax exemption automatically terminates the sales tax exemption, effective on the date on which the IRS serves formal written notice of the revocation on the nonprofit organization or the date on which the IRS notifies the comptroller, whichever is earlier. All subsequent purchases by the organization are subject to tax.

    (A) The effective date of a revocation for a nonprofit organization that was granted an exemption as a recognized subordinate is the date on which the organization ceased to be recognized as a subordinate under the federal group exemption. All subsequent purchases by the organization are subject to tax.

    (B) The organization must notify the comptroller in writing of the revocation, withdrawal, or loss of exemption immediately upon receiving notice from the IRS of such revocation, withdrawal, or loss.

    (C) Under a federal/state exchange agreement, the IRS may notify the comptroller when an organization no longer qualifies for federal exemption.

  (3) An organization that loses its exempt status must immediately notify its suppliers that its purchases are subject to tax. Failure to so notify a supplier is a violation of the sales tax law.

  (4) After revocation, the organization may re-apply for exempt status under other provisions of this section.

(g) Purchases by an exempt organization; refund claims and credits. See §3.287 of this title (relating to Exemption Certificates).

  (1) The purchase, lease, or rental of a taxable item that relates to the purpose of an exempt organization listed in subsection (b)(1), (2), (3), (5), (10), (11) or (12) of this section is exempt from tax when the organization or an authorized agent of the organization pays for the item and provides the vendor with an exemption certificate in the form prescribed by the comptroller.

  (2) The purchase, lease, or rental of a taxable item to an exempt organization listed in subsections (c) and (b)(4), (6), (7), (8), or (9) of this section is exempt from tax when the organization or an authorized agent pays for the taxable item and provides the vendor with an exemption certificate in the form prescribed by the comptroller.

  (3) A purchase voucher issued by any one of the entities identified in subsection (c) of this section is sufficient proof of the entity's exempt status.

  (4) An exemption certificate must be given to a vendor when an authorized agent makes a cash purchase of merchandise for an exempt organization.

  (5) An employee of an exempt organization cannot claim an exemption from tax when the employee purchases taxable items of a personal nature even though the employee receives an allowance or reimbursement from the organization.

  (6) A person who travels on official business for an exempt organization must pay sales tax on taxable purchases whether reimbursed on a per diem basis or reimbursed for actual expenses incurred.

  (7) Bingo equipment as defined by Occupations Code, §2001.002, including machinery or devices used to select or hold letters or numbers, electronic or mechanical cardminding devices, pull-tab dispensers, bingo cards, balls, and other devices commonly used in the direct operation of a bingo game, are exempt from sales and use taxes when purchased, leased, or rented by an organization exempt under IRC, §501(c)(3), (4), (8), (10), or (19), and exclusively used to conduct bingo games authorized under Occupations Code, Chapter 2001. Commonly available component parts of bingo equipment such as batteries, light bulbs, and fuses do not qualify for this exemption.

  (8) Refund claims and credits by organizations exempted under Tax Code, §151.310.

    (A) Qualifying organizations. The following organizations are covered by the provisions of Tax Code, §151.310 and are subject to the provisions of this paragraph:

      (i) organizations created for religious, educational, or charitable purposes;

      (ii) organizations qualifying for an exemption from federal income taxes under IRC, §501(c)(3), (4), (8), (10), or (19);

      (iii) nonprofit organizations engaged exclusively in providing athletic competition among persons under 19 years old;

      (iv) volunteer fire departments; and

      (v) chambers of commerce or convention and tourist promotional agencies representing at least one Texas city or county.

    (B) Exemption effective dates.

      (i) Organizations identified in subparagraph (A) of this paragraph are not considered exempted from sales and use taxes before the earlier of:

        (I) the date the organization applied for exemption with the comptroller as evidenced by the postmark date on the organization's qualifying application for exemption as required under subsection (e) of this section; or

        (II) the date of assessment of the organization's tax liability by the comptroller as a result of an audit.

      (ii) With the exception of entities that qualify for exemption under subsection (c) of this section, organizations' exemption effective dates can be verified by using the comptroller's Texas Tax-Exempt Entity Search located on the agency's Web site.

    (C) Refund claims by organizations with exemption effective dates prior to September 1, 2009. Organizations identified in subparagraph (A) of this paragraph with an exemption effective date prior to September 1, 2009 may request a refund or credit for sales and use taxes paid in error, retroactive to the effective date of the organization's exemption or the four-year statute of limitations, whichever date is more recent.

    (D) Refund claims by organizations with exemption effective dates on or after September 1, 2009. Organizations identified in subparagraph (A) of this paragraph with an exemption effective date on or after September 1, 2009 are not eligible to request a refund or credit for sales or use tax paid between September 1, 2009 and the exemption effective date. If the comptroller has determined the organization with an exemption effective date on or after September 1, 2009, has met the requirements for exemption from the sales tax under Tax Code, §151.310 for a period prior to September 1, 2009, the organization may request a refund or credit for sales and use taxes paid in error on purchases made between the earliest date the comptroller determined the organization met the requirements for the exemption or the four-year statute of limitations, whichever is more recent, and August 31, 2009.

    (E) See §3.325 of this title (relating to Refunds and Payments Under Protest) for more information about how to claim a refund and §3.339 of this title (relating to Statute of Limitations).

(h) Sales by an exempt organization.

  (1) An exempt organization that sells taxable items must obtain a sales tax permit and is responsible for collection and remittance of tax on all sales of taxable items that the organization makes, unless otherwise provided by this subsection or unless such sales are otherwise exempt from the tax. See §3.293 of this title (relating to Food; Food Products; Meals; Food Service), §3.299 of this title (relating to Newspapers, Magazines, Publishers, Exempt Writings), and §3.298 of this title (relating to Amusement Services).

  (2) A religious, educational, charitable, or eleemosynary organization, or an organization exempt under IRC, §501(c)(3), (4), (8), (10), or (19), and each of its bona fide chapters, may have two one-day tax-free sales or auctions each calendar year. During a tax-free sale or auction lasting only one day, the organization is not required to collect sales tax on the sales price of taxable items sold for $5,000 or less. Additionally, a taxable item may be sold tax-free during a one-day tax-free sale or auction regardless of price if the item is manufactured by the organization or is donated to the organization and is not sold to the donor.

    (A) One day is a consecutive 24-hour period. If a designated tax-free sale or auction exceeds a consecutive 24-hour period, the organization or chapter may not hold another tax-free sale or auction during that calendar year. An organization or chapter may hold the two tax-free sales or auctions consecutively, but the two tax-free sales or auctions by that organization or chapter cannot exceed a maximum of 48 consecutive hours in a calendar year.

    (B) The organization may employ an auctioneer to conduct the sale or auction and pay the auctioneer a reasonable fee not to exceed 20% of the gross receipts.

    (C) If two or more exempt organizations or chapters jointly hold a tax-free sale or auction, each is considered to have held a tax-free sale or auction during that calendar year. Each exempt organization that participates in a joint tax-free sale or auction may hold one additional tax-free sale or auction during that calendar year.

  (3) Fundraisers. Exempt entities engaged in fundraising activities in conjunction with for-profit entities are not the sellers of any taxable items and do not need to be permitted to collect and remit tax on such sales. See §3.286 of this title (relating to Seller's and Purchaser's Responsibilities, including Nexus, Permits, Returns and Reporting Periods, Collection and Exemption Rules, and Criminal Penalties).

  (4) Sales by agencies and instrumentalities of the federal government are subject to tax, and the agencies and instrumentalities must collect and remit tax unless the collection of tax is specifically prohibited by federal law. If the collection is prohibited by specific federal law, the purchaser of the taxable item shall be liable for reporting and paying the tax directly to the state.

  (5) Sales of governmental publications, records, or documents.

    (A) When a governmental body is required to furnish a copy of any document under the Open Records Act, the transaction is not considered the sale of a taxable item. Sales tax is not due on any fee charged by the governmental body for furnishing one or more copies, regardless of whether the copies are certified or the fee is established by statute, ordinance, public official, or state agency.

    (B) Sales tax is not due on the fee charged by a governmental body for furnishing a copy or copies of a document not open to public inspection to a person who is authorized to obtain a copy or copies of such document. For example, sales tax is not due on the fee charged by a college for furnishing a student's academic transcript to the student or on the fee charged by the Department of State Health Services for furnishing a person a copy of the person's birth certificate.

    (C) Unless such sales are otherwise exempt, sales tax is due on sales of regular publications, records, or general information by a governmental body, even though such publications, records, or information may be open or available to the public by statute. For example, textbooks sold by a state university and magazine subscriptions sold by a state agency are taxable. See §3.299 of this title.

    (D) Sales tax collected by state agencies must be remitted in accordance with comptroller accounting requirements.

(i) Organizations that do not qualify for exempt status. Examples of organizations that cannot qualify for exempt status include professional groups, certain mutual benefit or social groups, and political, trade, business, bar, or medical associations. However, certain sales by certain organizations may be exempt. For information on exempt sales by senior citizens' organizations, student organizations affiliated with a college or university, or nonprofit animal shelters, see §3.316 of this title (relating to Occasional Sales; Joint Ownership Transfers; Sales by Senior Citizens' Organizations; Sales by University and College Student Organizations; and Sales by Nonprofit Cont'd...

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