[btbowers]

My children's school operates as a 5013c.. I am wanting to start selling school spirit items such as tshirts, magnets, cups, etc. at the school. If we pay sales tax on the items on the front end, are we legally able to make a profit on the items without paying additional taxes and violating any laws?

[ebaines]

First please clarify - are you doing this sale as a volunteer working on behalf of the school (i.e. the school is buying and reselling these items)? Or are you looking to establish a separate charity independent of the school whose purpose is to raise money that would then be donated to the school - like a booster club?

There's no problem with reselling items that the charity buys as part of a fund raise (don't forget to collect sales tax from the purchasers), and yes the school can make a profit as long as the earnings realized are not too big. The IRS allows 501(c)(3)'s to make some money through sales to the general public, but in general the amount raised must not be too significant - less than 15% of the organization's income is OK. Most of the income for a charity should be through fees or dues of members, plus charitable donations. In this case I would expect that income from tuition and fees from students is probably the vast majority of the school's income, so this rule is probably not an issue.

One other thing - as a 501c3 you should be exempt from paying sales tax on the items you purchase. Depending on the state you live in there ought to be a form available that the school can use to avoid paying sales tax.