Nonprofit Law/501C3 Thrift shop


Can a 501C3 thrift shop buy new inventory for resale? We are all volunteer, all proceeds go to mission.

You could still qualify as a "Thrift Store" when "[s]ubstantially all of the work in operating the thrift shop is performed by volunteers without compensation."  That is based upon 502(b)(2)
Section 502 of the Internal Revenue Code reads, in relevant part,
"An organization operated for the primary purpose of carrying on a
trade or business for profit shall not be exempt from taxation
under section 501 on the ground that all of its profits are payable
to one or more organizations exempt from taxation under section
However, there are exceptions listed:
---End of Excerpt---

For purposes of this section, the term "trade or business" shall
not include -
(1) the deriving of rents which would be excluded under section
512(b)(3), if section 512 applied to the organization,
(2) any trade or business in which substantially all the work
in carrying on such trade or business is performed for the
organization without compensation, or
(3) any trade or business which is the selling of merchandise,
substantially all of which has been received by the organization
as gifts or contributions.
---End of Excerpt---

I am assuming by "all proceeds go to mission" that you are referring to charitable, educational or religious activities of the organization or to another 501(c)(3) organization for such.

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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