Can the Items Donated to a 501(c)(3) Be Resold in a Thrift Store?

Most nonprofit and charitable organizations rely on donations to keep operating and providing needed social services. Some depend on cash contributions or such donated goods as foodstuffs that a food bank can distribute. Many nonprofits, however, use some form of a donated goods program, in which contributions of used clothing and other materials are sold in a "thrift" store to raise money.

Not all thrift stores are nonprofits. Some, including some chain operations, collect merchandise and sell it in thrift stores for a profit. A nonprofit thrift store is run by a tax-exempt 501(c)3 organization deemed by the Internal Revenue service to be a charitable organization. You can tell the difference by asking for a tax receipt for donations; tax-exempts will provide this, for-profit thrifts cannot.

Charitable thrift stores have operated for years. Goodwill Industries, for instance, was founded in 1902 by a Methodist minister who collected used clothing and household goods, hired people to mend or repair them and then sold them. Today, Goodwill is a $4 billion nationwide enterprise that accepts donated goods and sells them in stores to finance its primary mission of job training and rehabilitation.

A nonprofit thrift store still must follow state and local laws on licenses, permits and other general business operations. If a nonprofit operation should generate a separate business unrelated to its charitable enterprise and that operates for profit, it will have to pay appropriate taxes. A library donation organization that develops a sideline business of buying and selling used books, for instance, will treat that as a for-profit business even if it's owned by a non-profit.

Some national organizations, like Goodwill and the Salvation Army, rely on sales of donated goods for operating money to support their primary charitable missions. Nearly 80 million people donated to Goodwill nationally in 2011. The Salvation Army raises money from sales of donated merchandise, but it is a religious and benevolent organization helping the poor and downtrodden. Local charities also may start and operate thrift stores.