QUESTION
If a non profit group sells cookbooks they created above purchase price and donate the money to the local library, will we have to pay taxes on them?
Asked on Dec 18th, 2011 on Business Law - Wisconsin
More details to this question:
We are a group of ladies from a small town in Wisconsin putting together a cookbook. Each person who wants one will prepay. If the cost of the book is low enough, we would like to raise the price to make a profit and donate that money to our local library (town of 400, we have a library that is very popular for that town). But, we don''t want to get into trouble over taxes since we are not an organized group, we are just a bunch of ladies who thought this would be fun to do.
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As a purely legal matter, since your non-profit status is not recognized by the IRS, the "profit" you make on the sale of the books is taxable. This profit would be offset by the value of the charitable contribution to the library for those participants who itemize their deductions. As a practical matter, there is not much likelihood that these arrangements will ever be examined, regardless of how you structure them, since they are small and there is no meaningful tax revenue involved. If you will engage in this activity on a regular basis, you should consider donating the books in kind to the library, and allowing the library to be the "seller." You can arrange the sales and handle all of the mechanics.
Answered on Dec 20th, 2011 at 10:26 AM