August 3, 1981

Mr. R. Van Johnson 
Secretary of Revenue 
Kneip Building 
Pierre, South Dakota 57501

Official Opinion No. 81-28

Application of Sales and Use Taxes to School-Related Activities

Dear Secretary Johnson:

You have requested an official opinion from this office in regard to the following factual situation:

FACTS: 

1.  A school or school-related organization sells tickets to a dinner to raise money to buy band uniforms.  The food is furnished by a caterer who charges three dollars a plate.  The tickets are sold for five dollars.  The organization pays the caterer three dollars for each person served and two dollars go toward the purchase of band uniforms. 

2.  Students order class rings through their school.  The orders are made on forms provided by the company furnishing the rings, but the school takes the orders, handles the payment and delivers the rings to the students. 

3.  Students from a school-related organization buy pop and popcorn from a retailer with a school voucher.  Volunteers serve the pop and popcorn at a basketball game.

Based on the above facts you have asked the following questions:

QUESTIONS: 

1.  Is the school, school-related organization or the caterer liable for sales tax and, if so, upon what amount? 

2.  Is the school or the company furnishing the rings liable for sales tax upon receipts from the sale of rings? 

3.  Is the retailer, the organization or the school liable for sales or use tax upon receipts from these sales?

SDCL 10-45-10 and 10-45-13 are relevant to the questions you raised.  These statutes read as follows: 

10-45-10.  There are hereby specifically exempted from the provisions of this chapter and from the computation of the amount of tax imposed by it, the gross receipts from sales of tangible personal property to the United States, to the state of South Dakota, to public or municipal corporations in the state of South Dakota, to any relief agency, which shall mean a nonprofit charitable organization which devotes its resources exclusively to the relief of the poor and distressed or underprivileged, and has been recognized as an exempt organization under Section 501(c)(c)3) of Section 501(c)(3) of the Internal Revenue Code, or to any Indian tribe. 

10-45-13.  There are hereby specifically exempted from the provisions of this chapter and from the computation of the amount of tax imposed by it, the gross receipts from the sales of tickets or admissions to the grounds and grandstand attractions of state, county, district, regional, and local fairs, and except for the state fair, without regard to the number of days such fairs and attractions may be conducted, and community operated celebrations or shows sponsored by chambers of commerce or similar nonprofit corporations or associations and admissions to nonprofit historic sites and repertory  theater performances operated by nonprofit organizations; and the gross receipts from educational, religious, benevolent, fraternal, or charitable activities, where the entire amount of such receipts after deducting all costs directly related to the conduct of such activities is expended for educational, religious, benevolent, fraternal or charitable purposes, and which receipts are not the result of engaging for more than five consecutive days in a business or occupation otherwise taxable, and provided that all organizations claiming this exemption shall pay this tax on all goods and services otherwise subject hereto and used in the conduct of all activities.

IN RE QUESTION NO. 1:

In Official Opinion No. 77-14, my predecessor held that SDCL § § 10-45-10 and 10-45-13 provided a tax exemption for gross receipts from all sales to and by the school or school activities or programs which are educational and are 'supervised, financed or organized by the school.'

In my opinion, if a school or a school-related organization has a dinner to raise money for uniforms for the school band, the activity is educational and is supervised by the school and, therefore, the $3.00 per plate sale by the caterer to the school and the $5.00 per plate sale by the school to the contributors are exempt from taxation.

IN RE QUESTION NO. 2:

In my opinion, the contract for the purchase of school rings is between the vendor and the student, with the school as a mere agent of the vendor for collection of the money and placing of the order. Moreover, the purchase of class rings is not an educational activity.  Therefore, it is my opinion that the sale of class rings is not tax-exempt.

IN RE QUESTION NO. 3:

In my opinion, the sale of pop and popcorn at a football game by a school-supervised organization is a part of an educational activity and is, therefore, exempt from taxation.

Respectfully submitted,

Mark V. Meierhenry
Attorney General