Are online auctions for charity/non profit organization legal in CA?
October 16, 2022 8:17 PM Subscribe
I have volunteered to set up an online auction (through Bidding Owl, if it matters) for a non-profit organization in California. A board member has opposed the idea, citing that charity auctions are not legal in the State of CA. Can you help me prove that it is too legal?
Through googling, I have been able to find that "gambling" (for example: holding a raffle) is not okay . . . but nothing specifically stating that online auctions are/are not okay Can you help point me to sources that prove that it is perfectly legal and a legitimate fundraising idea for a 501c3?
Through googling, I have been able to find that "gambling" (for example: holding a raffle) is not okay . . . but nothing specifically stating that online auctions are/are not okay Can you help point me to sources that prove that it is perfectly legal and a legitimate fundraising idea for a 501c3?
I'm not a lawyer, so this is not legal advice, but I have had to look into this before.
This link talks about the difference between raffles (gambling) and auctions (sales). It says that there is no law expressly prohibiting auctions in CA, so I think you won't find a specific link stating they are legal, because we mostly make laws stating when things are illegal or regulated in some way...
Raffles are also legal, but require hoop jumping. You might find the FAQ on this page helpful as they differentiate between raffles and silent auctions. They also suggest to contact the State Board of Equalization if you have questions. Upon googling, you might(?) need to deal with sales tax for your auction because they are technically sales (it's just a sale to the highest bidder).
If auctions were illegal in CA for nonprofits, every PTA president in the state would be in prison...so...
posted by Toddles at 9:08 PM on October 16, 2022 [4 favorites]
This link talks about the difference between raffles (gambling) and auctions (sales). It says that there is no law expressly prohibiting auctions in CA, so I think you won't find a specific link stating they are legal, because we mostly make laws stating when things are illegal or regulated in some way...
Raffles are also legal, but require hoop jumping. You might find the FAQ on this page helpful as they differentiate between raffles and silent auctions. They also suggest to contact the State Board of Equalization if you have questions. Upon googling, you might(?) need to deal with sales tax for your auction because they are technically sales (it's just a sale to the highest bidder).
If auctions were illegal in CA for nonprofits, every PTA president in the state would be in prison...so...
posted by Toddles at 9:08 PM on October 16, 2022 [4 favorites]
I run an escape room in the Bay Area and we regularly donate tickets to school PTAs and other orgs for charity auctions. I can't like prove that everyone's following the law, but I am 100% sure they're not getting shut down for it.
(Also the tickets often go for more than they're worth and then the buyers often don't even use them, so it's a pretty efficient donation for us)
posted by aubilenon at 9:46 PM on October 16, 2022 [1 favorite]
(Also the tickets often go for more than they're worth and then the buyers often don't even use them, so it's a pretty efficient donation for us)
posted by aubilenon at 9:46 PM on October 16, 2022 [1 favorite]
I've participated in a numerous silent auctions in the Bay Area. These were high end events where you could win a chef's dinner, trips, art, wine and everything in between. The local PBS station does an annual silent auction.
posted by shoesietart at 9:53 PM on October 16, 2022 [3 favorites]
posted by shoesietart at 9:53 PM on October 16, 2022 [3 favorites]
Since it's hard to prove a negative, maybe it would help to point the IRS rules on charity auctions. Basically the IRS is concerned with how much of a deduction donors can take for what they give to the charity and buyers can take for what they purchase (nothing unless they pay more than retail value)
It sounds like your board member is confusing an auction - which a normal sale where the price is set competitively instead of a fixed price set by the seller - and a raffle or other fund raisers that include an element of chance or luck which are highly regulated as forms of gambling.
posted by metahawk at 10:18 PM on October 16, 2022 [2 favorites]
It sounds like your board member is confusing an auction - which a normal sale where the price is set competitively instead of a fixed price set by the seller - and a raffle or other fund raisers that include an element of chance or luck which are highly regulated as forms of gambling.
posted by metahawk at 10:18 PM on October 16, 2022 [2 favorites]
CA OAG: Nonprofit raffles
Public Counsel: Anatomy of a Fundraiser: A Legal Guide for Charitable Fundraising In California [PDF]
Law firm's explainer (not an endorsement): California Charity Auctions
501c3 refers to an IRS regulation. Not California law.
posted by snuffleupagus at 6:09 AM on October 17, 2022
Public Counsel: Anatomy of a Fundraiser: A Legal Guide for Charitable Fundraising In California [PDF]
Law firm's explainer (not an endorsement): California Charity Auctions
501c3 refers to an IRS regulation. Not California law.
posted by snuffleupagus at 6:09 AM on October 17, 2022
Not a lawyer, does not play one on TV either.
IMHO, your board member has confused auction with raffle. Raffle is a game of "chance" (i.e. a lottery) and thus is considered a type of gambling, and thus is subject to regulations (though for charity, as others said, it does require jumping through some hoops).
Auction, which is considered skill-based, is NOT a raffle, and usually NOT subject to gambling regulations.
Given that California School Employee Association does their charity auctions through Bidding Owl as well, I seriously doubt they'd be breaking any laws...
Just remember to turn on the sales tax for BOE.
posted by kschang at 12:52 PM on October 17, 2022
IMHO, your board member has confused auction with raffle. Raffle is a game of "chance" (i.e. a lottery) and thus is considered a type of gambling, and thus is subject to regulations (though for charity, as others said, it does require jumping through some hoops).
Auction, which is considered skill-based, is NOT a raffle, and usually NOT subject to gambling regulations.
Given that California School Employee Association does their charity auctions through Bidding Owl as well, I seriously doubt they'd be breaking any laws...
Just remember to turn on the sales tax for BOE.
posted by kschang at 12:52 PM on October 17, 2022
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Looks like you can do raffles if you jump through some hoops, but check out FAQ #4. "A silent auction is not considered a raffle so a charity is not required to register with the Registry of Charitable Trusts before conducting silent auction activities. A silent auction is not a game of chance."
posted by dogstoevski at 9:05 PM on October 16, 2022