Here's an excerpt from one of the determination letters (on the Comptroller's website). This one happens to be a response to a vendor asking for clarification about PTA sale, but the principle is the same whether it's PTA, PTO, school.
In determining the responsibility for collecting sales tax on fund-raising activities, it is important to distinguish who is the actual seller of the taxable items. ....Under this type of agreement, the PTA is merely acting as a sales agent or representative for the seller, and sales tax must be collected. This is often the case for items such as school pictures, books, gift-wrap, etc.
PTA as the Seller
The PTA is the seller when it purchases sales inventory from a vendor for a certain price (first transaction) and then resells the taxable items at its own profit or loss for a price the PTA determines (second transaction). The PTA assumes all responsibility and risk. (See STAR Documents 8609H0755E02 and 8609H0755C05.)
The PTA is the seller when it does not share/split the proceeds with the vendor/distributor. (200209453L)
When the PTA is the seller, then the sale could qualify as an exempt sale under the one-day tax-free sale provision. For information about the one-day tax-free sale provision for certain nonprofit exempt organizations, please see Tax Code Section 151.310(c) and Comptroller Rule 3.322(h)(2).
PTA as an Agent of the Seller (PTA not the Seller)
The PTA is not the seller when it takes orders for the vendor and receives a commission from the vendor, such as a share or split of the proceeds. This is true regardless of who is setting the sales price. (200011902L)
When the PTA is not the seller, the one-day tax-free sale provision does not apply and tax is due on taxable items unless another exemption applies.
Whether the payment, such as a check, is made to the PTA or the vendor may not be an indicator of the seller. For example, a check could be made to the PTA, but if the PTA is receiving a commission from a vendor, the PTA is not the seller.
The middle school fundraiser came home this week, and instructions included that buyers should calculate appropriate sales tax and include it in the total. This is the first time I've ever seen that, so investigated.
In Texas a qualified tax exempt entity can have two fundraisers (two days) per year that are exempt from sales tax. If an event spans multiple days, you count the day payments are due.
The schools and 501(c)(3) parent orgs in our area have always claimed the big catalog/cookie dough/candle as one of those.
Turns out, we shouldn't have. The district got a clarification this year. If the the fundraiser is the type where the organization is, in effect, acting as an agent for a company in the selling of goods, that sale is not eligible for tax exempt status.
I checked into it further, hoping the school was wrong. But they aren't. I found specific rulings from the Comptroller to organizations that had requested clarifiations on exactly these type of sales.
Important note: it's the fundraising company's responsibility to remit the sales tax to the state. But the PTA/PTO/School would need to include it in the price calculation and collection. Example: A 50/50 split with sales of $10,000. You also collect about $850 in sales tax. The company would get $5,850; the PTO $5,000; and the company files sales tax.
