Nonprofit Resources


How to Ensure Your Church Bookstore is Tax-Exempt

Church bookstores can be wonderful resources for attendees as well as the church. These stores can give attendees convenient access to study guides their small group is using, books mentioned in the sermon series, inspirational gifts, and many other worthy items. At the same time, they enable churches to offer convenient access to worship and study materials tailored to the particular interests of the congregation.

It’s important to be aware, however, that your church bookstore may generate what the IRS considers unrelated business income (UBI), which is taxable. This article will help you understand the requirements for operating in a tax-exempt manner and how to remain in compliance.

Defining the Purpose of Your Bookstore

Whether your church is considering opening a bookstore or you already have one, we recommend that you work with your church leadership to answer and document the following:

  • Why your church wants to operate its own bookstore
  • How operating a bookstore helps accomplish your church’s exempt purpose
  • What you want to sell in the store
  • What hours you want the store to be open
  • How the store will be staffed (volunteers vs. paid staff)
  • Whether the location of your store is the right one

This exercise will help you determine whether you can operate your store in a tax-exempt manner while also meeting your objectives for the store. If you want and are able to do this, the remainder of this article will help you ensure compliance.

Understanding UBI

A church bookstore generates UBI if it meets all three of the following tests:

  1. It is a trade or business;
  2. It is regularly carried on; and
  3. It is not substantially related to the church’s exempt purpose

Most church bookstores meet (1) and (2) on this three-part test. Making sure all bookstore sales are related to your exempt purpose (your religious mission) will help you avoid meeting (3).

There are additional steps you can take as well. Many church bookstores use these strategies to lawfully avoid paying tax:

  1. They ensure all bookstore sales are related to the church’s religious mission
  2. They operate the store for the convenience of the members and attendees
  3. They use volunteers for substantially all of the work related to the store

We discuss each strategy below.

Strategy 1: Ensure All Bookstore Sales are Related to Your Religious Mission

You can demonstrate that your bookstore is substantially related to your church’s tax-exempt purpose by making sure store inventory is relevant to church ministry, and by operating in a non-commercial manner.

The following factors will help classify the store as non-commercial:

  • The store is not advertised in a commercial manner, such as in newspaper ads and flyers
  • The store is not located where it is highly visible to general (non-church) traffic
  • Merchandise pricing shows a goal of carrying out your ministry rather than making a profit

Demonstrating that store inventory is relevant to your exempt purpose can be harder, however. We recommend that you keep a record of how major product lines and specific items in your inventory are substantially related to your religious mission.

Many church bookstores carry some products that encourage or demonstrate Christian thought or behavior, but are not explicitly religious. While your church management may feel that the store sales are substantially related to the church’s religious mission, the IRS can have a fairly narrow perspective. As a result, you may want to consider the other two strategies to help avoid unrelated business income tax (UBIT).

Strategy 2: Operate for the Convenience of Members and Attendees

With this strategy, you need to focus on operating the bookstore primarily for the convenience of church members and attendees, rather than the general public. There are several ways you can demonstrate this, including these factors:

  • The hours of operation (and the majority of sales) occur around church services or when members are present on the church campus
  • Sales to the general public are minimal

In addition, to remain tax exempt under this strategy these two criteria must be met:

  • The bookstore must be located on church grounds, and
  • The store must not be advertised to the general public

Strategy 3: Use Volunteers for Substantially All the Work 

To meet this strategy, at least 85% of the work done for the bookstore must be carried out by unpaid volunteers.

Additional Considerations

If your church bookstore does generate UBI, keep in mind that typically only a portion of the store’s sales will be considered unrelated and therefore subject to income tax.

If your church bookstore’s UBI reaches $1,000 annually before deducting expenses, you are required to file a tax return to report the income, and pay income tax on the net profit after expenses. You will need to track exempt sales versus UBI.

Further, there are two additional areas of taxation to be aware of: sales tax and property tax. The requirements for each vary by state, and may include restrictions that are different from the income rules outlined above. In many states, sales of religious products are subject to sales tax, but other states have exemptions. Further, in many states tax-exempt bookstores are exempt from property tax, but in some states having any UBI at all could jeopardize that exemption. It’s important to check the specific rules for sales and property tax exemptions in your state.

With all of these rules and restrictions, operating a tax-exempt bookstore may seem like a lot of effort at times. Carefully monitoring for compliance, however, will do more than just keep your store tax exempt; it will help ensure that your church is maintaining its original purpose for operating the store. That original purpose should be documented in writing and answer the questions we posed at the beginning of this article.

More information on UBI for tax-exempt organizations is provided in IRS Publication 598, which is available at


  • Peggy Senn says:

    I know that our church fits into the “exempt” for charging sales tax. But there is a lawyer in our church who insists that we should be. She says there is no exemption in North Carolina for a bookstore in a church. We actually don’t even have income as we charge the same price we paid for the books. Do you have anything that I could show her that would specifically say North Carolina? She quotes “§ 105-164.13. Retail sales and use tax”, which is the NC Sales & Use Tax Act.

  • Michele says:

    Hello…thank you for the article it was much needed. I have a question about our church. We are now starting a bookstore in our church. Does Tennessee have a exemption on sale taxes? This will be open during church grounds. I’m reading information but I just need to make sure I understand it correctly.

  • Violeta Hernandez says:

    Hello, our church just began our bookstore. Our goal is to supply our members with christian literature. Our goal is to charge a little more for the books than we purchase them, so that we can sustain the bookstore with its own sales. Would that be considered taxable income? We are located in Texas.

    • Chris Purnell Chris Purnell says:

      The question of whether and to what extent a tax on unrelated business income exists for an organization can be a complicated matter. From what you’ve written, it appears that you could fall into one of the exceptions that exists to unrelated business taxable income. If the bookstore is open for the convenience of your members, then there would most likely not be any unrelated business taxable income from the sale of goods there. You can learn more from IRS Publication 598, located at CapinCrouse would also be happy to examine your situation in greater detail as you open your bookstore.

      -Chris Purnell
      Tax Counsel

  • Veronica says:

    I am looking into increasing items offered in my church’ established bookstore located in Maryland. I would like to offer Sunday newspapers, candy, and perhaps small packages of healthy snacks and bottled water and juice. These items will most likely be donated since funds are limited. If there is a minimal amount of income made (less than a dollar – should profit be made) or just at cost (no profit), is there UBI.

    The point of offering other items besides just literature is to create more foot traffic and more options for the congregation.

    • Chris Purnell Chris Purnell says:


      The question of whether and to what extent a tax on unrelated business income exists for an organization can be a complicated matter. From what you’ve written, it appears that you could fall into one or possibly two of the exceptions that exist to unrelated business taxable income. First, if all of the goods that are sold at a store are donated, then proceeds from the sale of those goods would not be considered unrelated business taxable income. Second, if the bookstore is open for the convenience of your members, then there would most likely not be any unrelated business taxable income from the sale of goods there. You can learn more from IRS Publication 598, located at CapinCrouse would also be happy to examine your situation in greater detail as you open your bookstore.

      -Chris Purnell, Tax Counsel

  • Deborah Benford says:

    Our church is tax-exempt. Can a member pay the church and we order them a Bible tax exempt?

    • Chris Purnell Chris Purnell says:


      The answer to this question depends on whether your church is exempt from the collection and remission of sales tax for its sales. This is different from the question of whether your church is exempt from paying sales tax on its purchases. The answer is a very state-specific inquiry, and you should find out the answer to this question if you do not already know. If your church is exempt from the collection of sales tax on its sales, then this arrangement would work. However, the member would not be entitled to a tax-deduction for the payment since the member is receiving goods and services equal to the value of the payment.

      If the church has not been granted an exemption from the collection of sales tax on its sales, then it would need to collect sales tax from the member for this purchase. This is a sale that would be subject to the church collecting sales tax. That is true regardless of whether the member gives the church the funds to order the Bible or gives the church the funds for the Bible and receives it right away.

  • I have been trying to see what the tax law is for a church bookstore in Florida and I could not find the information. Could you point me in the right direction? Will we need to charge sales tax? Would it be best as a separate entity from the church if they want to ramp it up in our area as a local bookstore for the community? (Or is that not allowed under any circumstances?). I have a church member who wants to volunteer and really promote it to the community but I wanted to find out if that is even doable under the tax code. Thanks for the help.

    • Chris Purnell Chris Purnell says:

      Hi Jenni,

      Thank you for your questions. First, the question regarding whether you will be required to collect and remit sales tax on the sales made in your bookstore is a state-specific inquiry. Therefore, you should go to the Florida Department of Revenue website ( to see if you qualify for any exemptions that are available for collection and remission of sales tax. Second, tax exempt organizations, including churches, are allowed to have some unrelated business income activity as long as it is not substantial. However, it is very possible that the operation of a church bookstore may be so substantially related to your tax-exempt purposes that it is not considered an unrelated business whose income is subject to taxation. In this case, you could make the argument that operating the bookstore is substantially related to your exempt purpose as a church because you are disseminating Christian books and other articles that will draw people deeper in their relationship with God—a key and indispensable prong of a church’s mission. This is a fact-sensitive arena, so you will want to engage a competent tax attorney or related consultant before you make any significant decisions in this area.

      Many thanks!

      • Thanks Chris. Besides books they would like to sell gift items as well. How do gift type items fit into this criteria?

        • Chris Purnell Chris Purnell says:


          You would need to assess whether those gift items help further your exempt purpose and, if they do not, whether those sales will rise to a level that they may result in unrelated business income. Again, this is a very fact-sensitive arena that would require more in-depth analysis from a tax advisor.

  • Conner Moon says:

    Would making our products available online, via our website, violate the first and second strategies?

    • Chris Purnell Chris Purnell says:


      Making your products available online should not have an impact on whether they are considered related to your religious mission or not. However, it could potentially undercut your argument that they are provided for the convenience of your members if the products are available to the general audience. As noted in the article, the convenience of the member exception requires that the bookstore be on the church grounds, which would make the online sales not fit that definition. You should also keep in mind that with online sales, you will need to be aware of any requirements (if applicable) to collect and remit sales tax on the sales made.

  • Mari Gordon says:

    Our church is located in California, we have a bookstore that seems to qualify to be set up as a non-profit under our church, but it was setup as a for profit. Would it be possible to change to nonprofit? If so, what steps do we need to take to do that?

  • Jennifer Andreani says:

    What if, instead of operating the bookstore online, you were to use a system like’s affiliate referral program? Would the commissions fall under UBI?

    Would it undercut the ‘convenience of the members’ argument if all in-person sales were during church events, such as services or Bible studies?

  • Susan Mccollum says:

    We have a church bookstore, run exempt – – only offering products to the furtherance of our religious mission, only offered prior to and after services, etc. Question: From time to time, we have guest speakers who have authored books. If we were to handle their book sales, as a convenience to them, then pay them out according only to their sales for that event, may we do so? Are there any tax ramifications or other concerns with doing so?

    • Chris Purnell Chris Purnell says:


      First, so long as the book sales are in furtherance of your exempt purposes as a church, there should not be any unrelated business taxable income (UBTI) implications from the sales. That analysis will be very similar to the analysis that you made regarding the sales at your bookstore: is the material such that you could make a good faith argument that it furthers your exempt purposes? Why or why not? Does the sale fall into another exception to UBTI? That is a question of fact that you should analyze for each potential author.

      Then, there could be sales tax implications from the sales of the author’s books if they fall outside any sales tax exemption that you already have. Each state is different with regard to the provision of sales tax exemptions, so you should analyze your state’s laws before engaging in the activity.

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