IRS letter ruling - Museum gift shop sales do not constitute UBTI 

July 28:  The IRS publicly released a private letter ruling (PLR)* finding that a museum gift shop’s sales of certain items did not result in unrelated business taxable income (UBTI). PLR 201429029 (release date July 18, 2014; dated April 24, 2014)

Read PLR 201429029 [PDF 345 KB]

*Private letter rulings are taxpayer-specific rulings furnished by the IRS National Office in response to requests made by taxpayers and can only be relied upon by the taxpayer to whom issued. It is important to note that, pursuant to section 6110(k)(3), such items cannot be used or cited as precedent. Nonetheless, such rulings can provide useful information about how the IRS may view certain issues.


A museum gift shop sells toys, books, documentary videos, and various items (including posters, coffee mugs, book markers) depicting a reproduction of a newspaper article pertaining to a particular event. The “toys” include jigsaw puzzles, posters, cartoon books, and t-shirts.

Items sold contain accompanying descriptive literature.

Private letter ruling

The IRS ruled that the items sold were educational and had a nexus to the educational purposes of the museum.

Accordingly, sales of the items were found to contribute importantly to the museum’s exempt purposes, and the income from such sales was not UBTI.

KPMG observation

The IRS has issued a number of rulings on museum gift shop sales over the years. Each of them is somewhat different.

This ruling emphasized that a nexus must be created between the items sold in a museum gift shop and the accomplishment of the museum’s exempt purposes before sales of the items can be considered “substantially related” and therefore not subject to unrelated business income tax. The IRS also noted that if the primary purpose of an item is utilitarian, ornamental or as a souvenir, it would not be considered substantially related.

For more information, contact:

Rick Speizman, Partner-in-Charge of KPMG's Washington National Tax Exempt Organizations Tax group

+1 (202) 533-3084

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