Baylor University
Tax & Compliance Accounting
Financial Services

Texas Sales Tax Issues

Tax Exemption Status

The State of Texas charges sales tax on all purchases made by individuals or entities within the state. A non-profit organization having tax-exempt status under the IRS designation of 501(c)(3) or (4) will be given sales tax exemption by the State of Texas. Baylor University has been designated as a 501(c)(3) federal tax-exempt tax organization by the Internal Revenue Service, and has received Texas sales tax exemption from the Texas Comptroller.


Purchases

Due to its tax exemption status, Baylor University does not have to pay sales and use tax when it buys, leases, or rents taxable items that are necessary to Baylor's exempt functions. This sales tax exemption does not apply to the purchase, rental or use of motor vehicles. An authorized agent or employee of Baylor University can purchase items tax-free for Baylor University if he/she gives the vendor a completed exemption certificate. If an item is purchased tax-free for Baylor University, the item cannot be used for a private party's or individual's benefit afterwards. The University has begun allowing individual departments to complete the Sales Tax Exemption Certificates, with the understanding that whoever signs the document will be responsible for explanations if the University is questioned under a Texas State audit. Please see the link entitled Texas Sales Tax Exempt Certificates above under the Sales Tax drop-down menu.

A few special rules exist. If an individual is purchasing an item to donate to the University, he/she can give an exemption certificate to the vendor; however, the individual cannot use the item before donating it to the University. An employee of the University cannot claim a tax exemption if he/she is buying items of a personal nature, even if the University will later reimburse that individual for those items. Such items include meals, toiletries, and clothing. If an employee travels for the University on business, the employee must pay sales tax on all taxable sales even if the University will later reimburse him/her. (Top)


Sales

Sales tax must generally be collected and remitted to the State for any sales conducted in the name of Baylor University by an authorized agent or employee. The authorized agent or employee must have a sales tax permit present at the sale location. The individuals purchasing items at such sales must be notified that the sales price includes sales tax, either by a sign stating such or by a receipt showing sales tax. If a sign is used, the sign should be kept afterwards for documentation purposes.

However, there are certain tax-free sales that are permitted by the State of Texas. Baylor University may hold an annual tax-free banquet or other food sale provided the following are met: (1) the event is not professionally catered; (2) the event is not held in a restaurant, hotel or similar place of business; (3) the event is not competing with a retailer who is required to collect sales tax; and (4) the food is prepared, served, and sold by members of the organization. This exemption does not apply to alcohol purchases.

In addition, each bona-fide chapter of Baylor University can hold two one-day, tax-free sales or auctions each calendar year. One day is equivalent to twenty-four hours. This exemption does not apply to items sold for more than $5,000 unless the items are manufactured by the chapter or Baylor, or the items are donated to the chapter or Baylor and not sold back to the donor. An organization will receive notification if it requests bona-fide chapter status. Similarly, University student organizations that have received an affiliated certification from Baylor can hold a one-day tax-free sale each month, if the purpose of the sale is to raise funds for the organization. This exemption does not apply to items sold for more than $5,000 unless the item is manufactured by the student organization or the item is donated to the student organization and not sold back to the donor. An organization will receive notification if it requests affiliated student organization. Baylor University also does not have to collect sales tax when providing amusements, i.e. athletic events, concerts, etc. Therefore all tickets to such events are tax-free.

Finally, the Texas Sales Tax exemption does not include materials published by an educational organization. Therefore sales tax must be collected on all sales of published books, magazines, and other periodicals that Baylor University creates and sells, whether on its premises, online, or at trade shows in other locations. (Top)