N.J. Admin. Code § 18:24-9.11

Current through Register Vol. 56, No. 24, December 18, 2024

Section 18:24-9.11 - Organizations carrying on trade or business

(a) An organization may meet the requirements of N.J.S.A. 54:32B-9(b) although it operates a trade or business as a substantial part of its activities, if the operation of such trade or business is in furtherance of the organization's exempt purpose or purposes and if the organization is not organized or operated for the primary purpose of carrying on an unrelated trade or business.

(b) In determining the existence or nonexistence of such primary purpose, all circumstances must be considered, including the size and extent of the trade or business and the size and extent of the activities which are in furtherance of one or more exempt purposes.

(c) An organization which is organized and operated for the primary purpose of carrying on an unrelated trade or business is not exempt under N.J.S.A. 54:32B-9(b) even though it may have certain exempt purposes, its property is held in common, and its profits do not inure to the benefit of individual members of the organization.

(d) Any sale, amusement charge, use, or occupancy by an exempt organization, in the course of a trade or business in substantial competition with privately operated nonexempt business entities, is not directly related to the purposes of the exempt organization. Except as specifically exempted in N.J.S.A. 54:32B-9(e) and (f), such an organization shall, in the conduct of the trade or business, pay and collect sales and use taxes in the same manner required of a privately operated nonexempt business.

1. An exempt organization is considered to be engaged in a trade or business in substantial competition with privately operated nonexempt business entities to the extent sales are made as follows:

i. From a shop or store operated by such organization except as provided in (e) below;

ii. By mail, online, telephone, or facsimile orders accepted by such organization on a regular, continuous, or long-term basis; or

iii. By or through a nonexempt business entity on behalf of or under an agreement with such organization.

2. An exempt organization is not considered to be engaged in a trade or business in substantial competition with privately operated nonexempt business entities to the extent sales are made by such organizations through fundraising events or activities which are of relatively short duration, and are not held on a regular basis during a calendar year; provided, however, that all proceeds inure to the benefit of the exempt organization. Nothing in this paragraph shall be construed as exempting sales that are subject to sales and use taxes under (d)1 above or N.J.S.A. 54:32B-9(f)(2).

Example 1: The operation of a booth selling sandwiches and soft drinks at a state fair for two weeks a year is an activity of relatively short duration and that is not held on a regular basis during the calendar year. The exempt organization is not required to collect sales tax on the sandwiches and soft drinks.

Example 2: The operation of a coffee shop one day a week throughout the year is an activity that is conducted on a regular basis. The exempt organization must collect sales tax on the coffee shop sales.

3. A shop or store as used in (d)1i above includes any place, establishment, or online store from which goods are sold with a degree of regularity, frequency, and continuity.

(e) A shop or store operated by an exempt organization is not required to collect sales tax on donated merchandise if at least 75 percent of its merchandise is donated and at least 75 percent of the work to carry on the store business is performed by volunteers.

N.J. Admin. Code § 18:24-9.11

Amended by 48 N.J.R. 824(a), effective 5/16/2016