The library board may find that state support and local funding are not sufficient to fund all services and programs of the library. The board can examine other fundraising options. Before starting a major fundraising campaign or establishing an endowment fund or foundation, the library board should consult its attorney to avoid violation of any state or federal laws on soliciting charitable donations.
Many libraries, rather than be directly involved in fundraising events, work with a local Friends of the Library group or a library foundation. Such groups, usually with 501(c)(3) status**, maintain their own treasury and use their proceeds to fund specific projects at the library.
Libraries can sell books and/or promotional items and per KRS 139.496 the library does not have to pay tax on the first $1,000 of sales in a calendar year. However, in a letter to the Friends of Kentucky Libraries, the KY Office of Sales and Excise Tax says:
It is the position of the Department of Revenue that if your chapter maintains a book store that sells used books, or has books continuously for sale on a book truck, table, or shelf, then you are engaged in the business of selling and the one thousand dollar exclusion would not apply. A chapter which has only irregular periodic sales for fundraising would be able to claim this exclusion.
Another issue to consider is the requirements of charitable gaming for fundraising. If the library, Friends group or foundation has a raffle or uses gaming to raise funds, a Charitable Gaming License is required. Each organization would need its own gaming license.
There are some basic differences in the purposes and operations of Friends and foundations. See Friends Group and Foundation for more information.
** see note on Tax Exempt Status
Revised March 29, 2016
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