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Income Tax on Gift Shop Items

Depending on the merchandise, a tax may be required.

Key point. Merchandise sold in a charitable organization's "gift shop" may be subject to the federal tax on unrelated business income.

The IRS has issued a private letter ruling addressing the application of the tax on unrelated business income to various items sold in a charity's gift shop. While the ruling involved a museum rather than a church, it will be of interest to any church that conducts similar activities. The museum sells merchandise at retail, wholesale, and by mail order. Items for sale include: (a) books, tapes, records, films and compact discs relating to items in the museum's collections; (b) toys, games, hats, and flags; (c) non—prepackaged food products; (d) reproductions and adaptations of items in the museum's collections; (e) miscellaneous products for the convenience of museum visitors; (f) newspapers and magazines; (g) prepackaged foods, toiletries and ...

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Posted:
  • March 1, 1996

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