This post was originally published on Forbes May 8, 2015
You will find that a lot of museums are exempt 501(c)(3) organizations. The Worcester Art Museum, which currently has a samurai theme going on is a good example. Galleries are a different story. That is what a group of artists learned when the IRS issued Private Letter Ruling 201516066. I had no luck at all in penetrating the redaction, so I am going to call the group Selling Our Own Stuff (SOOS), since that is pretty much what they are about.
You are not like the organization in Revenue Ruling 66-178. The organization in that ruling conducted an annual exhibit, did not sell art, had artists not affiliated in any way to any gallery and charged no fees for exhibition. You have a gallery that is open to the public on a regular basis. You sell the works of member artists and retain commissions, have member artists affiliated with your gallery, and charge membership fees to a majority of the artists who wish to display their work at your gallery. Unlike the organization in the ruling, you are not formed primarily to further charitable or educational purposes, but are formed instead for the benefit of your members.
You are similar to the organization described in Revenue Ruling 71-395. You were formed by a group of artists and are operating an art gallery open to the general public which displays and sells members' artwork. One advantage of membership is listed as the ability to show works. In addition, like the organization in the revenue ruling, a committee consisting of artist members selects works that will be displayed and offered for sale. Additional members are admitted to membership by approval of the existing members. Your gallery is open free to the public on certain days and by appointment on others. Nearly all work is for sale, and you retain a commission of the original sales price of artwork that is sold. Consequently, like the organization in the revenue ruling, you are a vehicle for advancing members' careers and are promoting the sale of members' artwork. This serves the private purposes of your members, even though the exhibition of art may be an educational activity in other respects.