Sales by Non-Profit Thrift Store Are Exempt in Missouri

The Missouri Department of Revenue (DOR) issued a letter ruling stating that a religious organization that runs thrift stores is not required to collect sales tax on purchased items sold in the stores. The organization is an international religious lay organization that runs multiple thrift stores in Missouri. All profits from the stores are returned to the organization for use towards the goals of their mission statement. Approximately 70% of the stores’ sales are sales of donated goods. The organization also makes purchases of new tangible personal property for sale to customers. The new goods are often sold at a markup from the wholesale price. Sales of new items make up approximately 30% of the stores’ sales. The organization sought guidance on whether the sales of purchased goods at the stores are subject to Missouri sales tax. The DOR stated that the sales of purchased goods are not subject to tax. Missouri provides a sales tax exemption for sales made by or to religious and charitable organizations. The organization is recognized by the IRS as a 501(c)(3) charitable organization. The organization has also applied for and received a sales and use tax exemption letter from the DOR that exempts all sales made by the organization that are conducted with the organization’s functions and activities. 30% of the organization’s sales are of items that they purchase and mark up for sale. This is similar to any retail store, and therefore puts them in competition with other retail stores. However, a previous Missouri Supreme Court ruling found that the purpose of the organization took precedence over any purported competition in determining whether the sales tax exemption applies. The purpose of the thrift stores’ sales is not to make profits, but to use the income to further the organization’s charitable functions. Since the primary purpose of the stores is charitable, sales of purchased goods sold at the stores are exempt from Missouri sales tax. (LR 8218, Missouri Department of Revenue, November 23, 2022)

Posted on December 21, 2022