Texas school districts and public schools are exempt from paying Texas sales and use tax on taxable items they purchase. Qualified nonprofit private schools are also exempt from paying tax if their purchases relate to their exempt function.
Unless an exemption applies, these entities must get a sales tax permit and collect and remit sales tax on taxable items sold. They do not need a sales tax permit if they sell only exempt items or if the sales are through tax-free fundraisers.
Texas school districts, public schools, qualified exempt private schools and bona fide chapters within a qualifying school may have two one-day, tax-free sales or auctions each calendar year (January through December). During a tax-free sale day, the organization is not required to collect tax on the sales price of taxable items.
A one-day, tax-free sale day (24 consecutive hours) is either
For example, a school group selling yearbooks can accept pre-orders without collecting tax if the day the group delivers the yearbooks to its customers is on one of the group’s designated tax-free sales days.
Customers buying from surplus inventory on the designated day do not owe tax. For example, a school can sell old yearbooks on the same designated day they are distributing the new yearbooks and not collect sales tax. Extra yearbooks sold outside of those days are taxable.
If two or more organizations hold a tax-free sale together, the event counts as one tax-free sale for each participating group. Each organization that participates in the joint tax-free sale can hold one additional tax-free sale during that calendar year.
An organization can hold its two tax-free sales back-to-back for a maximum of 48 consecutive hours. For example, a sale could last from noon Friday until noon Sunday.
This exemption does not apply to any items sold for more than $5,000, unless the exempt organization made the item or it was donated to the organization and not sold back to the donor.
If an exempt organization sells only nontaxable items or sells only during its tax-free fundraisers, it does not need a sales tax permit. To buy taxable items tax free for resale, the organization can either give the seller a resale certificate (PDF), if it has a sales tax permit, or an exemption certificate (PDF). See the "Food and Beverage Sales" and "Other Nontaxable Sales" sections.
To qualify as a bona fide chapter of a school, a group of students must be organized for an activity other than instruction or to have tax-free sales.
"Bona fide chapters" include school-recognized student groups organized by electing officers, holding meetings and conducting business. Bona fide chapters can include whole grade levels, such as the senior, junior, sophomore or freshman class, but cannot be limited to a specific class, such as English Composition or Freshman Biology. Other school groups composed of students and staff can qualify, such as student councils, science clubs or drama clubs. There is no limit on the number of bona fide chapters.
School departments such as purchasing, accounting or maintenance departments, and specific classes like biology or math classes, are not bona fide chapters, even though they are part of the school or school district.
Unless otherwise qualified to hold tax-free sales, groups that are not bona fide chapters must get a sales tax permit and collect and remit sales tax on taxable items unless another exemption applies.
Nonstudent organizations do not qualify as bona fide chapters of a school, but may qualify for the tax-free sale days under other provisions. Examples are booster clubs, parent-teacher associations (PTAs), parent-teacher organizations (PTOs), parent-teacher-student associations (PTSAs) and parent-teacher-student organizations (PTSOs). Nonstudent nonprofit organizations that are not bona fide chapters of schools, however, may still qualify for two one-day, tax-free sales or auctions on their own.
For example, a booster club for a band, athletic team or similar group can hold two one-day, tax-free sales or auctions once it has received a sales tax exemption from the Comptroller’s office.
A nonprofit organization that has received an Internal Revenue Service (IRS) exemption under Section 501(c)(3), (4), (8), (10) or (19) can qualify for Texas sales and franchise taxes exemptions. A booster club that has one of these 501(c) federal exemptions must apply to receive these tax exemptions by completing and submitting Form AP-204 (PDF) along with a copy of its IRS exemption letter to the Comptroller’s office. After our office notifies the club of its exempt status, the club can hold two one-day, tax-free sales or auctions each calendar year.
PTAs, PTOs, PTSAs and PTSOs and similar parent-teacher organizations can qualify for a sales tax exemption as educational organizations and can hold two one-day, tax-free sales or auctions each calendar year. All parent-teacher organizations must complete and submit Form AP-207, Application for Exemption - Educational Organizations (PDF) to the Comptroller’s office. Once the exemption is granted, these organizations can hold the two one-day, tax-free sales or auctions each calendar year.
Sales of taxable items made at other times of the year are taxable, unless another exemption applies.
Sometimes a school, school group, parent-teacher group, booster club or other exempt organization raises funds by entering into an agreement with a fundraising company to sell taxable items, such as wrapping paper, gifts, candles or candy, and receives money for their exempt school organization use.
The exempt school organization markets the items, collects the money and forwards to the fundraising company an agreed-upon portion of the money collected and all the sales tax collected. The fundraising company is the seller, in this case, and not the exempt school organization. These types of sales do not qualify as a tax-free sale, and the fundraising company must collect, report and remit the sales tax. Since the exempt school organization is not considered the seller, they cannot use their tax-free sale days to make exempt sales on behalf of the fundraising company.
The fundraising company should provide instructions to the exempt school organization about collecting sales tax correctly. The fundraising company can require that tax be calculated and collected on each taxable item’s sales price, or it can advertise in the sales catalog or state on each invoice that tax is included in the item’s sales price.
The school, school group, PTA/PTO, booster club or other exempt organization raises funds by acting as a sales representative for a for-profit fundraising company. The school organization is not responsible for reporting or remitting sales and use tax.
Online sales of taxable items are treated the same as sales made at the school or at any other sales location.
Unless an exemption applies, schools, school groups and other nonstudent nonprofit organizations that accept online orders must collect sales tax on taxable items they sell online. An online sale during a one-day, tax-free sale qualifies for the exemption.
A public or private elementary or secondary school, school group or PTA/PTO does not have to collect tax on sales of meals and food products, including candy and soft drinks, if the sales are made during the regular school day and by agreement with the proper school authorities. This exemption includes food, soft drinks and candy sold through vending machines.
PTAs/PTOs and other qualifying groups associated with a specific public or private elementary or secondary school or school group may also sell meals, food, candy or soft drinks tax free outside of the school day if the sales are part of the organization’s fundraising drive and all net proceeds go to the group for its exclusive use.
The following entities do not have to collect tax on sales of food products, candy, snack items and soft drinks sold during the regular school day and by agreement with the school or school district:
This exemption also includes these items sold through vending machines.
Sales outside of the school day of food products, candy, snack items and soft drinks by a PTA/PTO, booster club or other school support organization are tax free if
The exempt school organizations can issue an exemption certificate (PDF) instead of paying tax on taxable food and beverage items they buy to sell at an exempt food sale. The exemption certificate should state that the group will sell the items as part of its fundraiser. The food and beverage sales tax exemption does not include sales of alcoholic beverages and other non-food items such as spirit wear, accessories or school supplies.
Fundraising sales of food, prepared food, soft drinks, snack items, or candy by booster clubs or other school support organizations, which will benefit the school or school district, are exempt from sales tax if the fundraiser takes place at a concession stand during a school’s or school district's sponsored or sanctioned event.
For example, a middle school sports booster club sells food items from a concession stand at a school-sanctioned track meet to raise funds for new uniforms for the school. These sales are exempt from tax.
Baked goods are nontaxable, unless heated or sold with eating utensils. Exempt school organizations selling baked goods at a bake sale do not have to collect sales tax. Examples of baked goods include pies, cakes, cookies, doughnuts, kolaches, biscuits and bagels. Eating utensils include plates, spoons, knives and forks. Napkins or wax tissues are not eating utensils. A piece of pie served on a plate is taxable, but a doughnut handed to the customer with a wax tissue is not taxable.
All volunteer nonprofit organizations, such as a booster club or a parent-teacher group, can hold a tax-free annual banquet or other food sale; however, a school district or school cannot. The exemption applies if
If the organization sells nonfood items, such as spirit items, t-shirts or alcoholic beverages, it must collect tax unless another exemption applies.
If you sell only beer and wine using a beer and wine permit (no mixed beverages), then your sales are subject to sales tax.
If you sell mixed beverages, and hold a mixed beverage permit, your sales of the mixed beverages, beer, wine and mixers are subject to two taxes:
Magazines subscriptions for at least six months are exempt from sales tax. Single issues and subscriptions for fewer than six months are taxable.
The sale of gift certificates, discount cards and coupon books is not taxable. Any tax due is collected by the retailer when the purchaser redeems the gift certificate, promotional discount or coupon.
An amusement service exclusively provided and sold by a nonprofit organization, not including a 501(c)(7), is exempt from sales tax if the proceeds do not benefit an individual. For example, the sale of an admission ticket to a school carnival, dance, athletic event or musical concert is exempt.
All tickets and advertising must show the organization as the sole event provider and that the event is exempt from tax.
A nonprofit organization can hire a for-profit entity to provide expertise to produce an event if the for-profit entity is not providing the amusement service.
Periodicals and reading materials published and distributed by religious, philanthropic, charitable, historical, scientific or other similar nonprofit organizations are exempt from tax. Similar organizations include PTAs, PTOs, PTSAs and PTSOs, but not schools. These similar organizations can publish and sell printed reading materials, such as yearbooks, directories, newsletters and calendars, without collecting sales tax. The qualifying organization can give a completed resale certificate (PDF) or exemption certificate (PDF) to the printer instead of paying tax on charges for printing, binding and item placement.
School districts, schools and school groups must collect tax on the printed reading materials sold unless the sale is during one of the organization’s tax-free fundraisers.
Printed items that are not reading materials are taxable, unless sold during a qualifying and designated tax-free sale. Examples include school logo t-shirts, bookmarks, photographs and novelties.
Donations (gifts) of cash, taxable items or taxable services to an organization are not taxable sales, unless the exempt organization gives the donor a taxable item in exchange for the donation, and the item is of equal value to the donation.
A person using their personal funds to buy a taxable item to donate to a qualifying organization can give an exemption certificate (PDF) to sellers instead of paying tax on the item. The person cannot use the item before donating it. The exemption does not apply if the item is donated to an individual, such as a teacher or a student.
The purchaser must show on the exemption certificate that the taxable item will be donated to a qualifying organization and clearly identify the organization accepting the donation. The purchaser owes tax on the item’s purchase price if it is used before donating the item.
School districts, schools and associated groups must collect sales tax on taxable items or services sold to its students.
For example, if a school sells uniforms, gloves and shoes to drill team members, it must collect tax on the sales, unless it designates the sale as part of its tax-free sales.
This table lists examples of taxable and nontaxable sales.
|Renting items such as locks, musical instruments, calculators and computers||Renting space such as a gymnasium, auditorium, library or cafeteria|
|Horticultural products such as flower arrangements, roses, carnations, holiday greenery and poinsettias||Agricultural products (plants and seeds), or products that normally constitute human food|
|Cosmetology products such as shampoo, conditioner and nail polish sold to customers||Cosmetology services such as haircuts, shampoo, manicures and pedicures|
|Parking permits for the general public||Campus parking permits for public school students, faculty and staff|
|Pets, such as hamsters, mice, cats and dogs||Livestock, such as pigs, cows, chickens, sheep and goats|
|Publications such as football, basketball or volleyball programs||Advertising space in athletic programs, yearbooks or newspapers|
|Automobile repair parts||Automobile repair (depends on contract/invoice)
|Bumper stickers and decals||Car wash|
In 2015, the Texas Legislature passed House Bill 855, which requires state agencies to publish a list of the three most commonly used Web browsers on their websites. The Texas Comptroller’s most commonly used Web browsers are Google Chrome, Microsoft Internet Explorer and Apple Safari.