We are considering selling T-shirts, coffee cups, water bottles, and other items in our church’s welcome center. These items have our church logo on them. Does the logo make them “related” to our nonprofit status, or does this create unrelated business income? And does it make a difference if the proceeds go to, say, “youth missions” versus church revenue? And lastly, do you have any insights on paying sales tax on such items?
First off, it doesn’t matter if your proceeds go toward youth missions or your general revenue budget. What matters is whether or not the items being sold are substantially related to your exempt purposes. Something does not become “related” just because you put your church logo on it.
Determining whether or not an item creates unrelated business income must be determined through an item-by-item analysis. For example, let’s say you sell a T-shirt with a Scripture verse or a Christian symbol—like a cross—on it and the shirt comes with a gospel tract or instructions on how to become a Christian. The sale of a T-shirt in this manner is more likely substantially related to the exempt purposes of spreading the gospel.