Can Nonprofits Sell Products? Legal Considerations to Know

Can Nonprofits Sell Products?

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You’ve probably wondered this before: Can nonprofits actually sell products and still stay true to their mission? The short answer is—yes, absolutely!

Nonprofits can sell products and services, but there are a few things to keep in mind. It’s all about the balance between making money and staying mission-focused. In fact, selling products can be a fantastic way for nonprofits to generate additional revenue, expand their reach, and spread their message.

But wait—before you start thinking of all the custom merch or services you could offer, let’s dive into what you need to know to make it work.

Stay tuned as we go through the details! You’ll want to be aware of 

• tax rules, 
• potential pitfalls, 
• and some tips 

to help your nonprofit succeed in the world of products. So, can you sell those T-shirts or tote bags? Yes, but let’s make sure you’re doing it the right way!

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Understanding the Legal Side Before You Sell Merchandise or Services

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Before you dive into selling products or services, it’s crucial to understand the legal side of things. Selling merchandise as a nonprofit isn't just about having cool designs and loyal supporters; there are rules that govern how nonprofits can operate when generating revenue.

First, nonprofits must follow IRS guidelines about what qualifies as income related to their mission.

When you sell products or services unrelated to your mission, it can trigger something called the Unrelated Business Income Tax (UBIT). This tax ensures that nonprofit organizations don’t take advantage of their tax-exempt status by running for-profit businesses.

The key is to make sure the products you sell are aligned with your nonprofit’s mission. If your sales are too far removed from your core purpose, you could be hit with taxes that impact your nonprofit status.

So, what’s taxable and what’s not? Here’s a quick reference guide to help you make sense of it all.

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Don’t Lose Your Mission While Selling Products

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Selling products can be a fantastic way to fund your nonprofit, but don’t forget why you’re here: your mission. Stay on track with these quick reminders to keep your cause front and center!

• Stick to Your Story: Sell items that tell your nonprofit’s story. If you’re an animal rescue, go for pet-themed gear. If you’re an environmental group, eco-friendly merch is a win. Your products should be extensions of your mission, not distractions.
• Avoid the Cash Grab: Sure, random novelty items might make a quick buck, but they won’t help you build a loyal following. Keep your products mission-driven to strengthen your brand and keep your supporters excited about your cause.
• Stay Relevant: Make sure every product ties into your mission. That t-shirt you sell should raise awareness about what you do—whether it’s supporting education, health, the environment, or animals.
• Don't Drown in the Sales: It's easy to get caught up in the excitement of making money, but never let sales overshadow your core purpose. Keep your mission front and center, and let it guide your product choices.

By keeping your mission in mind, your products will be more than just things to sell—they’ll become powerful tools to amplify your cause and keep your community engaged.

Top Fundraising Items to Sell

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When choosing fundraising items, it's crucial to think about the potential return on investment. Different items can offer varying levels of profitability. To help you make the right decision, we’ve included a breakdown of each product’s potential profit margin—whether low, medium, or high.

Pricing and Cost Considerations

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Setting the right price is a balancing act. Too high, and you may deter supporters; too low, and you risk not covering your costs. To ensure profitability while still engaging your audience, here are some key factors to keep in mind:

• Know Your Costs: The first step is to understand the cost of producing each item. Consider production, shipping, and any third-party service fees.

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• Factor in Discounts: Offering bulk purchase discounts or early-bird pricing can help boost sales while keeping the margin intact.

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• Competitive Pricing: Research similar products to find the sweet spot. Make sure your prices are competitive but still allow for a reasonable markup.

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• Don’t Forget Your Mission: Pricing should align with your nonprofit's brand and mission. Be transparent about how proceeds support your cause to justify the pricing.

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Engaging Your Community Through Product Sales

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🎨 Make It Personal: Create products that tell a story. Think custom t-shirts with powerful messages, limited-edition items tied to key events, or unique designs that reflect your organization’s mission. 

When supporters buy these, they’re not just getting a product—they’re getting a piece of your cause.

👥 Build a Collaborative Spirit: Want your community to feel connected? Get them involved! Host design contests, gather feedback, or let supporters vote on the next big product idea. 

The more they’re part of the process, the more invested they’ll feel.

📸 Go Behind the Scenes: Take your supporters behind the curtain. Share the making of your products—whether it’s the design process or how their contributions are making a difference. 

People love transparency, and it builds trust. Plus, it makes the purchase feel even more meaningful.

🎉 Turn Product Sales into Events: Don’t just sell online—make it an event! Organize pop-up shops, community fairs, or online livestream sales. 

When people can come together to shop, it transforms your sale from just a purchase to a fun, social experience. Plus, they get to meet other like-minded supporters.

💌 Make Supporters Feel Special: Reward your most loyal supporters with exclusive offers or products. 

A ‘VIP’ product line, early access, or special discounts for regular customers helps to strengthen their connection to your mission. It’s all about showing appreciation!

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Frequently Asked Questions

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Can Nonprofits Sell Products?

Yes, nonprofits can sell products, but they must follow tax regulations. Sales must align with the organization’s mission to avoid unrelated business income tax. Consulting a tax advisor ensures compliance with laws and proper tax handling.

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Can Nonprofits Sell Merchandise?

Yes, nonprofits can sell merchandise like branded t-shirts or accessories. These sales should support the nonprofit’s mission. Following IRS guidelines and keeping sales related to the organization’s purpose helps avoid tax issues.

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How To Sell Your Product As A Nonprofit​?

Nonprofits can sell products by setting up an e-commerce store or using third-party platforms. Promote products through email, social media, and events. Ensure compliance with tax laws, especially regarding unrelated business income.

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What Can Nonprofits Sell To Make Money​?

Nonprofits can sell items like branded merchandise, event tickets, or mission-related products. They can also sell services such as workshops or memberships, as long as the sales align with the organization’s goals.

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