Please help me understand this better...

[Julie Deane]

Here's a situation I haven't seen mentioned before and I am confused by it.

Suppose a church has an "art contest". Actually, they have an art budget , they want to buy art along a certain theme for the church, and they have put out a general call for entries. They plan to pay a certain amount for each piece of art they like, and they only plan on buying about six works total .

The question I have is this: Is this considered a purchase or just winnings from the artist's point of view?

If it is a purchase, then there is (to me anyway) a confusing issue of sales tax/no sales tax to consider.

Your thoughts would help me understand this type of situation better. Thanks!

[Michele Rushworth]

This might be considered a retail "sale", "work for hire", or something else altogether. Time to talk to an accountant I think.

[Joan Breckwoldt]

Hi Julie,

I'm no accountant but this doesn't sound so different from the days when I was a graphic designer and more than one graphic designer or advertising company would 'pitch' their idea to the client. The company, or client, would then choose the one they liked best and hire and pay for that artwork. Seems like this is just about the same thing with the church being the client.

I think what is confusing is the fact that they're calling this an 'art contest'. It seems like a true contest would be when your entry is chosen as the winner, you are awarded the cash prize but don't you get to keep your painting? If they're keeping the painting it would seem to be a sale.

Like I said, I'm no accountant but these are just my thoughts and you might think about them. I would be curious how adding the word 'contest' changes things, if in fact is does.

Joan

[Julie Deane]

Thanks Joan and Michelle -

After some thought, I have come to this same conclusion, so if they want my painting, I will consider it a sale (for just the reasons you mentioned, Joan). I agree that a true contest would not ask for the paintings to keep.

And since the state of Georgia does not require a church to pay tax on an item meant for worship, it would be a nontaxable sale -
(I love the internet - who would have thought years ago about being able to look up laws and regulations from your own home!).

[Chris Saper]

It sounds a lot like a "purchase award" , common to a lot of competitions. I'd suspect a call to the organizers would be helpful. If my poor memory serves right, it seems to me that groups like the Pastel Society of America, and maybe the Bennington Center for the Arts have purchase awards where you need to choose whether your entry will be eligible or not for a purchase award. Often the amount of the award is far less than a potential sales price.

And you're right , the tax exempt status of churches and the like obviates the issue in this example. It's just income.