Let's take another tack at this issue - I don't have your legal answer, but this approach will probably get you into very safe territory.

As a non-profit, your organization has been granted special status to pursue your mission. Does providing discounts to members and volunteers fulfill your mission? No. In fact, rewarding your members and volunteers goes against the intention and spirit of the charter of your organizations - which is to pursue your mission rather than create value for your board and membership. We are not buying clubs, we are non-profits. If you follow this logic, you will have nothing to worry about, there will be no question to your intent. IF you get audited, and you follow this approach, you will have nothing to explain. If you provide discounts, you are walking the fine line - the gray area of the law. Why take that chance?

Rather than giving discounts, you should ask members and volunteers to pay retail or better as support to the organization. Make this policy a badge of honor. Stand up and support everyone for doing 'the right thing'. If you loose volunteers because of this, they are not volunteers, they are profiteers. It's not about the money - or is it?

Just my 2 cents worth!

Wilbur Ince
Sibley Bike Depot

Edward France wrote:

This question came up in our 'Getting Incorporated -paperwork to get legit' and it almost seems like paranoia to me and the bici crew in santa barbara. We give volunteer discounts, but we still make a slight amount of profit in the transaction, just like any other shop would offer an employee discount. In a very real sense our volunteers are employees, they simply don't get paid. In the classic non-profit perspective they are donating their time, and I can understand how the idea of quid pro quo (you do something for me, I do something for you) seems to invalidate that. One way to guard against that is to not give away the volunteer discount to quickly or easily. Based on the accounting and legal advice that we have sought with professionals, this is not a significant concern, in other words:

Don't trip.

I feel like other concerns such as paying sales tax and having insurance to prevent an accident from taking down your kitchen and other important neccessities of being a legal entity are far more important concerns. If your collective is currently being reviewed and scrutinized for acceptance as your own 501(c)3 then perhaps board members shouldn't be recieving anything that could look like a kick-back. Even still I'm not convinced that discount pricing to someone involved in an industry, even the not for profit side of an industry, is at all a kick-back. If you volunteered in an orchard should you pay whole foods prices for peices of fruit?

Obviously to the general public new items you sell should be sold at fair retail value otherwise your organization would be using it's non-profit status to undercut local business. those who significantly contribute hours in an endevor, however, aren't members of the general public. They are part of a team that puts a lot of work into making their shop happen. A (in the scheme of things) minor discount as a perk for significant involvement certainly seems fair and, in our opinion, can be justified as legal.

If you live in California, however, any discount purchases should still include sales tax as they are still a taxable transaction, used or new.

-Ed
bici Centro
Santa Barbara

On Tue, Nov 18, 2008 at 1:51 PM, joshua muir <muirjoshua@gmail.com> wrote:

I haven't heard any conflicts along such lines other than those with neighboring retailers. The result then is that it gets harder and harder for community projects to get QBP accounts.

As far as taxes are concerned, I am not sure of the specifics. As long as you are covering your costs and not spending money/losing money to support your volunteers' parts habit, I don't suspect there is a problem. It is the mission of most of our project to provide for the safe and affordable repair of bicycles and to encourage mechanical self-reliance etc etc and cheap parts are a big part of this.

josh

On Tue, Nov 18, 2008 at 1:29 PM, Jonathan Morrison <jonathan@slcbikecollective.org> wrote:

Sadly, with a good lawyer you can do anything you want, sadly even illegal activities. Pretty sad isn't it? Sader still, if you don't have a good lawyer I would play it safe and not do anything that might _force_ you to get a good lawyer.

Smile!

To figure out what to do to play it safe, contact the agency you filed as a "Member owned Co-operative" with such as the California Secretary of State. If you are a 501(c)(3) non-profit than contact the IRS. Calls can be anonymous.

I would also ask established local "member owned cooperatives" what they do.

--
Sincerely,

Jonathan Morrison
Executive Director
Salt Lake City Bicycle Collective
2312 S. West Temple
Salt Lake City, UT 84115
w: 801-328-2453
c: 801-688-0183
f: 801-466-3856
www.slcbikecollective.org

Get Addicted to Crank!
http://www.slcbikecollective.org/crank/

The mission of the Salt Lake City Bicycle Collective is to promote cycling as an effective and sustainable form of transportation and as a cornerstone of a cleaner, healthier, and safer society. The Bicycle Collective provides refurbished bicycles and educational programs to the community, focusing on children and lower income households.

On Tue, Nov 18, 2008 at 12:40 PM, <GetGern@gmail.com> wrote:

Hello Bike Friends,
Does anyone have solid advice on the legality/Restrictions regarding discounts given to member/volunteers?
We are a California regestered incorperated Member owned Co-operative, not a Non-Profit(501c3). We want to give a discount, but I heard it may not be legal. I hope that it is illegal referring to 501c3's.
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--

Joshua Muir
joshua@santacruzhub.org

Frances Cycles -- francescycles.com
Handbuilt cycling framesets
Touring, Track, Road,Cross, and Cycletrucks for hauling any distance

The Bicycle Church Collective
Community Self-Service Cycle Repair
3pm to 7pm everyday except Sunday
703 Pacific Ave (enter on Spruce St)
Santa Cruz, CA 95060
(831) 425-2453

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--
Ed France
Bici Centro
601 E. Montecito St.
Santa Barbara, Ca 93103
310 936 0857
Bici Centro is a project of the Santa Barbara Bicycle Coalition
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