Hi In North Carolina the general staute 14.309-15 states that non-profits can only hold up to 2 raffles per year and give away a maximum of $10,000 in cash or $50,000 in prizes. The distinction is the word RAFFLE. not FUNDRAISER. If more than 2 raffles are held then you are in violation of gambling laws and are subject to a class 2 misdemeanor. I have recently found out that the private school where our children attend have held three raffles this year. So I know they are violating the law. I think they are in danger of losing their tax exempt status. The sad part is when we approched the headmaster with this information, he didn't seem to care. I am wondering what we should do about this? You can contact me at This email address is being protected from spambots. You need JavaScript enabled to view it. Thanks Cathy

Hi In North Carolina the general staute 14.309-15 states that non-profits can only hold up to 2 raffles per year and give away a maximum of $10,000 in cash or $50,000 in prizes. The distinction is the word RAFFLE. not FUNDRAISER. If more than 2 raffles are held then you are in violation of gambling laws and are subject to a class 2 misdemeanor. I have recently found out that the private school where our children attend have held three raffles this year. So I know they are violating the law. I think they are in danger of losing their tax exempt status. The sad part is when we approched the headmaster with this information, he didn't seem to care. I am wondering what we should do about this?

Thank you all so much for the info. I'll definitely check further and let you know what I find out.

One more clarification...the federal tax exempt status (i.e. 501c3) exempts your organization from paying FEDERAL income tax. Individual states control sales tax (since so far we don't have a national sales tax) and the rules vary from state to state. I suspect most states (all?) first require you to earn federal 501c3 before even being considered for exemption from state sales tax. And then as we have seen here, not all states make it easy to be exempt from sales tax, even if you've qualified for 501c3.

In Michigan, my state, all we need to do to be exempt from state sales tax is to earn our 501c3. I'm not aware of any restrictions on types or numbers of fundraisers and we don't even need to fill-out a state-level application. I'm glad it's easy for us...wish so for you all.

[ 05-19-2005, 09:18 PM: Message edited by: Critter ]

One more note - I don't think any of this affects whether or not you retain non-profit status. It merely affects how much sales tax you owe.

And there are two sides to sales tax exemption

1) Exemption on paying sales tax on items you purchase for use in your organization

2) Exemption on collecting/remitting sales tax on goods your organization sells.

These rules only seem to deal with the second half.

Seems to me I've seen a rise in "donations" where you get a thank you gift (t-shirt, whatever). I wonder if this is connected. If it's a trend, then groups are looking for ways to get around outright sales.

They don't make this easy, do they?

I did some research (thank heavens for the Internet) and here's what I found...

No reference to a $10,000 amount, but definitely a two-fundraiser rule. It sounded contradictory to me. One place it said if you hold more than 2 sales fundraisers, all the fundraisers - including the first two - were taxable. But in the same document, it says if you hold more than two, you must pay sales tax on items purchased on subsequent ones.

First - you have to figure out what is taxable in your state. Sales of "things" (t-shirts, school supplies) would be. Candy is not. Admission to events is not. Foods prepared by volunteers are not taxable. (i.e., spaghetti dinner - not taxable, re-selling pizza - taxable.) Donations would not be taxable.

So you only need worry about the fundraisers that ARE taxable. Worst case, some of the fundraisers are taxable. All that means is that you have to pay 6-7% (plus local tax) sales tax each year. It's sad to lose any part of the funds, but it's an expense just like any other.

Call your Department of Revenue for more info (615) 253-0600 or (800) 342-1003 and I've listed a couple publications links below:

Tenn. Sales & Tax Guide (Dec. 2004)
tennessee.gov/revenue/taxguides/salesuse2004.pdf

Dept. of Rev Notice on Sales Tax Exemption
July 1, 2003
tennessee.gov/revenue/notices/sales/nonprofit03-22.pdf

Note - also finds out where the school fits. I think they are subject to the "two fundraiser rule" also. But are they holding any? Does that mean you could do 4 per year betweent the two orgs. Also think creatively. If you raise admission and provide "complimentary" pizza and drinks, you really aren't selling food, are you?

Report back and let us know how it works out.