Start-Up Launchpad Blog

Farmer's Markets May Not Be Tax Exempt Organizations - June 26, 2012

Margaret Van Houten

Margaret Van Houten, trust and estate planning

Summer is upon on and farmer's markets are popular attractions in many cities, including Des Moines. In addition to growing optimal produce and choosing the best location, farmer's market organizers also need to review tax laws before setting up their wares.


The IRS recently ruled, in Private Letter Ruling 201205014, that a farmer's market is not a tax exempt organization. 


The cited organization was organized by a group of vendors that had banded together to find a place to sell their produce and "stimulate interest in and demand for locally grown farm products."  The organization conducted the farmer's market and also contributed food to local food banks and operated an educational booth at the market. Members paid membership fees and vendor fees.


The IRS first found that the organization was not qualified as a business league under Internal Revenue Code section 501(c)(6), because the association was not directed at the improvement of farmer's markets generally, but was rather directed toward the business betterment of the members of the organization. Read more at the Davis Brown Tax Law Blog.