Does your church have a coffee shop? Many churches have found that coffee shops are a great way to increase fellowship at their churches. Often times, PSK is asked about the tax and accounting issues that come along with coffee shops. These are great questions! Nonprofit organizations can be taxed on dollars that are earned from activities that are not related to their tax-exempt purpose. So, is selling coffee supportive of the church's tax-exempt status?
The IRS has some specific rules regarding coffee shops run by churches. If the shop is run by volunteers and the purpose of the shop is to provide a format for church members to congregate and have religious discussions, then the shop supports the exempt purpose of the church and income would not be taxable. If the church's coffee shop is attempting to compete with Starbucks, then there could be some tax ramifications. Whether or not that income is taxable, it is a good idea to code all coffee shop activity separate general ledger accounts, one account for income and another account for expenses.
Contact PSK if you have specific questions about your church's coffee shop!
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