By Will Hall, Message Editor
When the Louisiana legislature passed measures during a special session earlier this year to close the gap in the state budget, lawmakers targeted a number of transactions that included activities of local churches.
The Louisiana Baptist Convention consulted with attorneys and tax experts to develop guidance on how these apply to congregations and associations pertaining to such areas as:
- Fundraisers (cake sales, auctions, golf tournaments and sponsorships)
- Admission and registration fees for conferences
- Food banks and clothing stores
- Snack shop and bookstore sales
These changes are effective immediately; however, a second special legislative session will convene June 6 specifically to address some of the tax issues relating to nonprofits.
The guidance for churches and associations is posted at https://louisianabaptists.org/tax-changes-louisiana-churches/.
Meanwhile, ministry leaders should monitor BaptistMessage.com and LouisianaBaptists.org for updates.
Cake Sales
Overview: A member church’s congregation bakes cakes and donates them to the church for sale to the congregation and/or general public.
Analysis: Prior to April 1, 2016, sales of items at a fundraiser event for a religious organization were exempt from sales tax, provided that the organization obtained an annual exemption certificate (Form R-1048). La. R.S. 47:305.14(A)(1)(a). However, Acts 25 and 26 impose a sales tax on the sale of items at a fundraiser event, even if an annual exemption certificate is obtained. La. RIB 16-020. As a result, cake sales by a member church as a fundraiser are now subject to Louisiana sales tax at the following rates:
April 1-June 30, 2016 – 5%
July 1, 2016-June 30, 2018 – 3% July 1, 2018 and later – exempt
However, if the church only sells cakes occasionally the sales of the cakes should qualify as isolated or occasional sales, without the need to apply for an annual exemption certificate. Prior to April 1, 2016, isolated or occasional sales were exempt from sales tax. La. R.S.
47:301(10)(c)(ii)(bb). However, Act 25 imposes a sales tax on isolated or occasional sales, while Act 26 does not impose a sales tax on isolated or occasional sales. As a result, a member church which only occasionally sells cakes will be subject to Louisiana sales tax on the cake sales at the following rates:
April 1-June 30, 2016 – 4%
July 1, 2016-June 30, 2018 – 2% July 1, 2018 and later – exempt
Cake sales made pursuant to a fundraiser for a religious organization continue to be exempt from parish and city sales taxes under either the fundraiser exemption (if an annual exemption certificate is obtained) or the occasional sale exemption.
Auctions
Overview: A member church’s congregation donates items to the church for sale by auction to the congregation and/or general public. Winning auction bids typically exceed the cost of the item.
Analysis: The same analysis applicable to cake sales applies to auctions. As a result, if a member church holds several fundraising auctions during the year and obtains an annual exemption certificate, the sales of items at those auctions would be subject to sales tax at the following rates:
April 1-June 30, 2016 – 5%
July 1, 2016-June 30, 2018 – 3% July 1, 2018 and later – exempt
However, if the member church only occasionally auctions items during the year, the sales of items at those auctions would be subject to sales tax at the following rates:
April 1-June 30, 2016 – 4%
July 1, 2016-June 30, 2018 – 2% July 1, 2018 and later – exempt
The sale of items at fundraiser auctions continues to be exempt from parish and city sales taxes under either the fundraiser exemption (if an annual exemption certificate is obtained) or occasional sale exemption.
Golf Tournaments
Overview: Member churches may sponsor a golf tournament, in which members of the congregation and/or general public participate. The fees charged for participation generally exceed the cost of sponsoring the tournament.
Analysis: Prior to April 1, 2016, sales of admissions to entertainment events sponsored by a religious organization were partially exempt from sales tax and as such were subject only to a 1% Louisiana sales tax. La. R.S. 47:305.13, 47:321. However Acts 25 and 26 impose an additional tax on sales of admissions to such events. La. RIB 16-020. As a result, a member church which sponsors a golf tournament will be subject to sales tax on the sale of admissions to the tournament at the following rates:
April 1-June 30, 2016 – 5%
July 1, 2016-June 30, 2018 – 4% July 1, 2018-March 31, 2019 – 1%
Further, the same exemption that formerly applied to sales of items, such as cakes, by religious organizations as a fundraiser applied to sales of admissions to fundraising events, provided that the organization obtains an annual exemption certificate. La. R.S. 47:305.14; La. RIB 16-020. Thus, if a member church obtains an annual exemption certificate, it will be subject to sales tax on the sale of admissions to the tournament at the following rates:
April 1-June 30, 2016 – 5%
July 1, 2016-June 30, 2018 – 3%
July 1, 2018 and later – exempt.
Meal Charges
Overview: A church collects a separate fee for meals.
Analysis: As discussed above, amounts charged separately for prepared meals are subject to
Louisiana sales tax at the following rates:
April 1-June 30, 2016 – 5% July 1, 2016 and later – 4%
Parish and city sales tax would also be applied for separately stated charges for meals.
Facilities
Overview: Churches may charge fees for use of the church building, conference center or camp. Member churches generally use the facility for religious education.
Analysis: Amounts charged for rental of a building or conference center should not be subject to Louisiana, parish or city sales tax because the lease rental of immovable or real property (other than as a hotel or motel unit) is not a lease or rental which is subject to sales tax. See La. R.S.47:301(6) and (7). Acts 25 and 26 did not affect the taxation of leases or rentals of immovable or real property.
Use of Motel Units
Overview: Baptist camps that charge a fee for motel units at the Center.
Analysis: Prior to April 1, 2016, room rentals at camp and retreat facilities owned by a nonprofit organization were exempt from sales tax provided that the guests were attending a function of a charitable organization.
La. R.S. 47:301(6)(b). However, Acts 25 and 26 impose sales tax on charges for room rentals at such facilities beginning April 1, 2016.
As a result, with respect to guests attending a function of the church, the member churches or other charities, fees charged by the church for furnishing motel units at the Center are subject to Louisiana sales tax at the following rates:
April 1-June 30, 2016 – 5%
July 1, 2016-June 30, 2018 – 3% July 1, 2018 and later – exempt
Fees charged by the church for furnishing motel units at the Center continue to be exempt from parish and city sales taxes provided that the guests are attending a function of a charitable organization.
However, fees charges by the church for furnishing motel units at the Center to guests not attending a function of a charitable organization, such as commercial entities using the Center, would be subject to parish and city sales taxes, as well as Louisiana sales tax at the following rates:
April 1-June 30, 2016 – 5% July 1, 2016 and later – 4%
The LDR has informally indicated that the cost to attend a retreat or convention, which is not otherwise subject to sales tax because it is educational in nature, is not subject to tax even if the cost to attend includes lodging provided that charge for lodging is not separately stated.
However, this informal position is not binding on the LDR or any parish or city government.
Fees for Use of Recreational Equipment and Facilities
Overview: A member church may charge fees for use of recreational equipment and facilities.
Analysis: Fees paid for access to or uses of recreational facilities are identified as a taxable sale of services. La. R.S. 47:301(14)(b)(i)(aa).
Further, the lease or rental of equipment is a transaction subject to sales tax. La R.S. 40:301(7). As a result, if a church charges fees for the use of recreational equipment and facilities, those fees would be subject to the following rates:
April 1-June 30, 2016 – 5%
July 1, 2016 and later – 4%
Further, fees charged for the use of recreational equipment and facilities would be subject to parish and city taxes.
Prior to April 1, 2016, membership fees or dues paid to a nonprofit organization, which provided access to or use of a recreational facility, were exempt from sales tax.
However, that exemption does not apply to exclude such fees or due from sales tax enacted by Acts 25 and 26. La. RIB 16-014.
If a church allows access to recreational facilities and use of equipment in connection therewith to members, in exchange for fees or dues, then the church’s charge of such fees or dues would be subject to Louisiana sales tax at the following rates:
April 1-June 30, 2016 – 5%
July 1, 2016-June 30, 2018 – 3% July 1, 2018 and later – exempt
Further, such fees or dues should not be subject to parish or city sales tax.
Snack Shop & Bookstore Sales
Overview: A church snack shop or bookstore sells snacks and other items, including water, candy, food t-shirts or books.
Analysis: As discussed above, amounts charges for snacks and other items, such as water, candy, food, t-shirts and books are not exempt from sales tax. The church’s sale of such items at the snack
Food Banks/ Clothing Stores
Overview: A member church may have a foodbank or clothing store, where it sells food or items of clothing for a small fee or in some cases gives donated food and clothing away to the indigent. The food and clothing generally is donated, although in some cases the church may purchase the items.
Analysis: Food donated to the church – The Louisiana sales tax does not apply to food sold for preparation and consumption in the home. La. Const. Art. VII, § 2.2; La. R.S. 47:305(D)(1)(n-r). However, prepared meals are subject to Louisiana sales tax. As a result, if the church is selling food for preparation and consumption in the home, then such sale would not be subject to Louisiana sales tax. If the church is selling prepared meals, then such sales would be subject to Louisiana sales tax at the following rates:
April 1-June 30, 2016 – 5% July 1, 2016 and later – 4%
City and parish sales taxes would apply to sales of food by the church without regard to whether the food is being sold for preparation and consumption in the home or as a prepared meal.
Clothing donated to the church – The sale of clothing by churches is not subject to any special exemption from sales tax, even if the clothes were donated to the church. As a result, a church’s sale of clothing would be subject to Louisiana sales tax at the following rates:
April 1-June 30, 2016 – 5% July 1, 2016 and later – 4%
In addition, sales of such items would be subject to parish and city sales taxes.
Items purchased for resale by the church, generally – If the church is purchasing items for sale in the clothing store or otherwise, the church may avoid paying sales tax on the purchase of the items by obtaining a resale certificate from the Louisiana Department of Revenue (the “LDR”). However, the sale of such items by the church will be subject to sales tax at the same rates applied to items donated to the church.
Items purchased for resale by the church and donated to the indigent – If the church purchased items for resale and provided a resale exemption certificate to avoid paying sales tax on the purchase, the later donation of those items by the church would be subject to use tax in amount to the sales tax that would have been due on a sale of the items. However, the LDR has indicated that if the items are being donated because they are unmarketable, then the donated items will be treated as having no value and as a result no use tax will be due on the donated items. See La. RIB No. 16-026. As a result, no use tax should be due on the donation of such items.
Admission and Registration Fees for Conferences
Overview: Religious-based educational conferences.
As part of the conference, food may be provided to attendees of the conference. The food may be included in the cost of attendance or may be charged separately from the cost of attendance.
The host of the conference may sell items, such as religious books, t-shirts, trinkets and souvenirs.
Analysis: Sales of admissions to educational events and conferences were not subject to sales tax prior to April 1, 2016 because educational services are not within the definition of taxable sales of services. See La. R.S. 47:301(14); La. RIB 16-029. Sales of admissions to educational events and conferences continue to be exempt from sales tax after Acts 25 and 26. La. RIB 16-
- As a result, fees charged for attending conferences that are for religious education should not be subject to Louisiana, parish or city sales taxes.
Further, food provided to attendees, the cost of which is included in the cost of attending the conference should not be subject to sales tax. See La. RIB 16-029. However, if the food is a separately stated charge paid by attendees, the amount charged for the food will be subject to Louisiana sales tax at the following rates:
April 1-June 30, 2016 – 5% July 1, 2016 and later– 4%
Parish and city sales tax would be applied for separately stated charges for food in addition to the Louisiana sales tax.
Any religious books, t-shirts, trinkets and souvenirs sold by the host of the conference would be subject to Louisiana, parish and city sales taxes at the same rate applicable to sales of food that is separately stated.
Conferences that are entertainment in nature.
Prior to April 1, 2016, sales of admissions to entertainment events sponsored by a religious organization were partially exempt from sales tax and as such were subject only to a 1% Louisiana sales tax. La. R.S. 47:305.13, 47:321. However, Acts 25 and 26 impose additional taxes on the sale of admissions to such entertainment events. La. RIB 16-020. As a result, fees charged for attending a conference which is entertainment in nature, as opposed to educational, would be subject to Louisiana sales tax at the following rates:
April 1-June 30, 2016 – 5%
July 1, 2016-June 30, 2018 – 4% July 1, 2018-March 31, 2019 – 1%
Sales of such admissions should not be subject to parish or city sales tax.
There is no legal definition of educational or entertainment as it relates to the Louisiana tax rules. Nor is there a formal test that the Louisiana Department of Revenue uses to determine what qualifies as education and what qualifies as entertainment. However, most church conferences are educational and each church should use their best judgement to determine if an activity is considered purely entertainment. You may want to consult with your local city and parish sales tax department.
Sale of Obsolete Office Equipment
Overview: Occasionally a church may sell obsolete office equipment.
Analysis: There is no special exemption for sales of obsolete computers and cell phones. However, a church makes such sales only occasionally; the sales should qualify as occasional or isolated sales, in which case the sales would be subject to Louisiana sales tax at the following rates:
April 1-June 30, 2016 – 4%
July 1, 2016-June 30, 2018 – 2% July 1, 2018 and later – exempt
Further, parish and city sales taxes would not be imposed on such occasional sales.
If a church makes sales of office equipment regularly, then the sales would be subject to
Louisiana sales tax at the following rates:
April 1-June 30, 2016 – 5% July 1, 2016 and later – 4%
In addition, regular sales of such items would be subject to parish and city sales taxes.
