Auctions are a fun way for a charity to raise money. In a Connecticut auction, the auctioneer is deemed to be the retailer for sales tax purposes. Sales of tangible personal property or enumerated services at an auction are subject to Connecticut sales taxation to the same extent as any other retail sale in the state. Charities can often purchase items free of sales tax, but they generally cannot sell items without charging sales tax.

There is, however, a special rule that can exempt certain items sold at a charity auction from Connecticut sales taxation.

If a charity hires a professional auctioneer, the professional auctioneer is responsible for complying with Connecticut’s sales tax laws. This can ease the sales tax compliance burden on the charity, but it does not reduce or eliminate the imposition of sales tax on items sold at an auction.

If, instead of hiring a professional auctioneer, a charity uses one of its employees or volunteers to conduct the auction, the charity is deemed to be the retailer and, thus, must comply with Connecticut’s sales and use tax rules. This can be burdensome, especially if the charity is not already registered with Department of Revenue Services as a retailer.

Fortunately, there is a sales tax exemption that can eliminate a charity’s obligation to collect, remit and report sales tax from sales at auctions.  The exemption applies only when:

  1. The charity does not hire a professional fundraiser, and
  2. The charity holds the auction at an appropriate event (described below).

In addition, the exemption only applies to auction sales of tangible personal property. It does not apply to auction sales of services.

More specifically, C.G.S. Section 12-412(94) provides a sales tax exemption for sales of tangible personal property by nonprofit organizations at bazaars, fairs, picnics, tag sales or similar events. Up to five such events of a day’s duration each calendar year are eligible for the exemption. The Department of Revenue Services has stated that events that may qualify for the exemption include the fundraising or social events usually held by nonprofit organizations, such as telethons, auctions, church suppers, bake sales, dances and casino nights.

Thus, if the auction is conducted by a charity at such a fundraising event, the charity need not collect sales tax on tangible personal property sold at the auction. DRS Special Notice 98-11 provides the following helpful definitions:

  • Nonprofit organizations.Nonprofit organizations include any organization, whether or not incorporated, that is not organized for profit, whose organizing documents contain a provision that no officer, member or employee of the organization will receive or may ever receive any pecuniary profit from the operation of the organization, except reasonable compensation for services in carrying out the purposes of the organization.
  • A day’s duration.A day’s duration means either (1) any uninterrupted period of 24 hours or less, whether or not it spans more than one calendar day, or (2) any period or periods that begin and end within a single calendar day (between midnight and midnight).
  • Five events of a day’s duration.This term means any total of five days of events of a day’s duration, even if the events are held on consecutive days, and even if the events are considered a single fundraising or social event.