Can Non-Profit Organizations Sell Tickets to a Concert?

By River Braun, J.D.

Can Non-Profit Organizations Sell Tickets to a Concert?

By River Braun, J.D.

A nonprofit organization may be able to sell tickets to a concert under limited circumstances. It's not uncommon for such organizations to try selling concert tickets to raise funds or otherwise engage in fundraising activities, but if not handled properly, engaging in fundraising activities can cause problems for a nonprofit organization.

Woman looking at desktop computer with the word "Fundraising" and a lightbulb graphic displayed on the screen

Before planning any fundraising activities, determine how the Internal Revenue Service (IRS) will treat the income from the fundraising activity in relation to your organization's status as a tax-exempt organization. In addition to federal limitations, the state in which you organized your entity may also have something to say about your fundraising activities.

Fundraising Income vs. Unrelated Business Income

A nonprofit organization is permitted to conduct activities that support the tax-exempt purposes of the organization. For instance, a church collects offerings to support its various ministries as a religious organization. An animal shelter accepts donations to help feed and care for the animals under its care.

If a nonprofit engages in activities to earn income unrelated to its tax-exempt status, it may be considered unrelated business income that is taxable by the IRS. Income is considered unrelated business income if it meets the requirements of a three-prong test:

  • The income was derived from a trade or business activity
  • The business activity is ongoing
  • The business activity does not substantially relate to the organization's tax-exempt purpose

The income from selling concert tickets may or may not be considered unrelated business income. It depends on the organization selling the tickets, the tax-exempt purpose of the organization, and the frequency of the activity. For example, a school organization selling tickets to the annual spring concert probably does not qualify as unrelated business income because it only happens once a year.

It is preferable to limit fundraising activities to the tax-exempt purpose of the organization, but it could pay taxes on unrelated business income without losing its nonexempt status. However, the organization must complete and file the necessary tax forms with the IRS.

Furthermore, the nonprofit organization may be placed in the position of defending how the organization's other income-producing activities fit within the scope of its tax-exempt purpose. So if a nonprofit can avoid receiving unrelated business income, it is generally better for the organization to avoid the income because it does not need to tempt fate with the IRS.

State Requirements

State requirements for fundraisers can complicate matters significantly. Some states do not permit organizations to seek contributions from state residents unless the organization has registered with the state charity organization. Before your nonprofit begins selling concert tickets within any state, check with the state agency in charge of monitoring such activity to determine if you must meet specific requirements for selling concert tickets within that state.

To determine which state office you need to contact for a particular state, you can check the list of state charity officials on the website for The National Association of State Charity Officials. You may also contact your state's Secretary of State for guidance on the matter.

If you own and operate a nonprofit, and wish to sell concert tickets, consider the potential legal implications of doing so. More importantly, check your state laws to find out whether or not you can do so. You'll want to avoid any mishaps before making certain that you aren't breaking any laws.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.