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Successfully Qualify Organized Camps for Sales Tax Exemptions
In July 2018, the California Department of Tax and Fee Administration (CDTFA) reissued Publication 127, Organized Camps. The state of California defines “Organized Camps” as traditional camps that offer outdoor group living experiences such as camps operated by the YMCA and the Boy Scouts of America.
Organized camps sell meals and other tangible personal property sold to campers, staff, and guests. Camps are required to hold seller’s permits and report tax to the California Department of Tax and Fee Administration.
Generally, tax applies to sales of tangible personal property and meals served at camps. However, Sales and Use Tax Regulation 1506, “Organized Camps” offers an exemption for sales of meals when the camp qualifies as a school or educational institution.
Four qualifications for the camp to be considered a school or educational institution are:
The camp conducts regularly scheduled classes
Students are required to attend the classes
Qualified instructors teach the classes
The camp is an “organized camp” as defined in California Health and Safety Code section 18897
The camp must provide regularly scheduled classes, even if they are outside a traditional classroom setting. Examples include outdoor activities that teach problem solving, communication, and leadership skills. Educational classes can also include classes in spiritual training or physical education, such as archery, marksmanship, swimming, boating, and arts and crafts. These types of classes qualify only if they are held regularly. In general, most traditional youth camps include classes that are regularly scheduled; however, some adult camps may qualify if they have a curriculum of regularly scheduled classes.
Students are required to attend the regularly scheduled classes. If attendance is not required, the camp will not be considered a school or educational institution because students are not regularly attending activities or classes. Camps must document attendance, and this is required in their marketing materials and registration documents.
If the camp determines that the instructor is qualified to lead a class, then the California Department of Tax and Fee Administration will consider the qualification met. Camps should maintain records that show instructors’ qualifications and level of experience related to the subjects they teach.
Camps accredited by, or affiliated with, the American Camp Association and camps that are approved members of the Christian Camp and Conference Association also meet the definition. The definition of “Organized Camp” excludes businesses that are not traditional camp organizations, such as tourist camps, trailer parks, resorts, hunting camps, and childcare institutions. Businesses that provide outdoor recreational packages outside a traditional organized camp are not considered “organized camps.”
If a camp does not meet all the requirements to qualify as a school or educational institution, the camp’s sales of meals are taxable. Even when the camp meets the requirements, sales of meals to non-students, such as staff, guests, and visitors are taxable. The camp will owe tax on the cost of nonfood items that it gives away (sodas for example) and were purchased for resale without payment of tax. These purchases would be subject to “use tax” which is the same rate as sales tax in California. Camp operators should keep a record of purchases subject to use tax and remit the use tax timely to California to avoid interest and penalties.
Disposable service ware such as paper plates, napkins, plastic utensils, straws, disposable to-go containers, and similar items that are of a non-reusable character which are provided with the food and beverages sold are considered nontaxable sales of student meals. A camp can issue a resale certificate to purchase these items tax free.
Camps cannot issue a resale certificate for property used to serve meals such as reusable plates, silverware, glasses, table linens, etc. Camps also may not issue a resale certificate for sports equipment, classroom supplies, or other equipment used in the operation of the camp.
Tips for the Taxpayer
Review your camp operations to see if you qualify for sales tax exemption in the described areas. Consult a tax professional if you are unaware of how to classify your camp operations. Register for a resale number to begin purchasing tax exempt items for your camp. Keep records of purchases to avoid tax liabilities under audit.
Contributor: Dustin Kato
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