Scientology withdraws application:
Sale of Courses, Books and Lie detectors subject to sales tax
Muenster Finance Court decision of 25 May 1994 15 K 5247/87

This page adapted from of 30 Apr 2001, last updated 4 Feb 2003, a critique of Scientology by Ingo Heinemann

Contents of this page

A Scientology branch has finally withdrawn its application after more than ten years in the courts.
Result: The tax decision becomes legally binding.

Finance Court:

Scientology is purely a commercial operation

Muenster, Germany
June 6, 2000
Westfaelische Rundschau

by Klaus Brandt

Muenster. The so-called "Scientology Church" is not a religious denomination and, in regards to taxes, may be treated like a commercial enterprise.

Income from seminar fees, sale of printed material and of the "electrometer," a type of lie detectors, are subject to sales tax. This legal opinion of the revenue court in Muenster can now be applied in practice in a real case.

A Scientology group from Westfalen-Lippe, to the surprise of the revenue court, recently withdrew from renewed legal proceedings against a tax sales decision. As a result, the tax decision, initiated by the revenue agency, becomes legally effective.

Scientology has been vehemently protesting its classification as a commercial enterprise for years. In the first trial before the revenue court in Muenster, the organization - categorized as a dangerous psycho-sect by its critics - argued that the decision was a violation of constitutional basic law of self-administration of churches. Scientology demands the charitable status like recognized religious denominations have.

In a decision of May 25, 1994, the Revenue Court dismissed the suit (Az.: 15 K 5247/87). Scientology was said not to be a religion, but was "regularly and deliberately commercially engaged" as a business, said the basis of the decision. Scientology filed an appeal in the Federal Revenue Court on account of a mistake made on a form to the revenue court in Muenster. Yesterday, the obligation to pay sales tax to was be heard again in court. One day before the court date, Scientology withdrew its suit.

According to an announcement by a court spokesman, the tax decision has become legally enforceable as a result. The Revenue Agency will now react to the result of the proceedings and treat the Scientology as a commercial enterprise with regards to tax. That means the Scientology organization is legally obligated to submit tax statements, to reveal their income and to keep official accounts books.

From: Decisions of the Finance courts EFG 1994, page 810 Nbr. 720

Sales tax withholding ordnance
Scientology fails public benefit (charitableness) test, must pay sales tax

Muenster Finance Court decision of 25 May 1994 15 K 5247/87 U - appeal filed (Az of BFH: X1 R 50/94).

Scientology is not religion. Having failed the test for public benefit (charitableness), Scientology must pay sales tax on the money it receives for courses and seminars, as well as for the sale of printed matter and the so-called electrometer.

German legal references for the above statement: AO 1977 § 52 Abs. 1 und Abs. 2 Nr. 1, § 55, § 59, § 60 Abs.1, §65; UStG §1 Abs.1 Nr.1, §2, §4 Nr.22 Buchst. a.

The complainant is a sub-member of the "Scientology church" (Sc) and is entered in the association register.

For the years under dispute, complainant association members have attempted, through distribution of material on the streets, through personal-to-person contact of pedestrians and through other advertising media, to recruit new members. Prospects can, in return for payment, participate in courses and seminars, and association members can participate in further seminars for which the association board has set definite fees.

Association members and third parties are also offered spiritual counselling ("Pre-clearing", "auditing"), for which compensation is required. Association members and third parties can buy books and seminar materials that are concerned with the ideology of Sc.

Association members, who apply for and receive the status of active members, are contractually obligated to put their time at the disposal of the association for an agreed upon minimum number of years as part of the work force. They can receive training or seminars for their work rather for money, the amount of services thereby received is dependent upon time served. In case the full time is not served, the portion of fees not worked off must be paid due to a statement of obligation signed by the member.

The complainant does not his income want to be subject to sales tax due to being a religious community in the sense of Article 4 and 144 of Basic Law, and Art. 137 of WRV. Being subject to taxation is a purported violation of the constitutionally guaranteed principle of the church self-determination law, and of the legal principle being treated equally. The income is said to finance the operations of the association as a religious community. To that extent it is said that this is an exclusively internal church matter in which the state should not intervene directly or indirectly through sales tax. In addition, it is claimed that he - the complainant - should not be put at a disadvantage with regard to sales tax due to a procedure whereby members are charged in accordance with a gradiated price system instead being charged dues.

In answer to the tax obligation on income, the complainant claims tax exemption in accordance with § 4 Nbr. 22 a UStG. The charter of the association is supposed to be adequate evidence of this in that it states its purpose as being the spread of the religious belief of Sc. and the practice of this religion.

From the grounds:

The complaint is not founded.

The complainant operated as a business during the years in dispute. The money withheld was deducted from taxable income which had to be reported upon for tax purposes. Tax exemption does not apply.

[Interlocutory decision] The concept of "business" is also applicable to religious or worldview oriented communities

The complainant's concept is legally flawed. This is the concept that the designation as "business" cannot be used for corporations with a stated goal of spreading religion or worldview. The designation as "business" from § 2 UStG is much more value-neutral than this, and differs considerably from general usage, directed at a business activity in the commercial sphere which deals with profit-oriented, as opposed to worldview-oriented, use of capital and labor. The word "business" with regard to sales tax does not stop at the external appearance of the corporate person, but apples to a strictly defined activity under specific circumstances. It corresponds to a prevailing opinion that includes legal persons of public rights, religions, in the scope of their operations are engaged in activity of a commercial nature in the sense of § 2 para. 3 sent. 1 UStG.

[Interlocutory decision] Remunerated services and sale of goods are business operations

For the period in question, the complainant operated regularly and consistently as a business by marketing and providing services (courses, seminars), printed material, and an electronic device described as a "Hubbard electrometer" - probably a sort of lie detector - under the auspices of commerce in its generally recognized form -- exchange of goods for set amounts money. It did this in such a manner so that the complainant's association members or non-members had a relationship with the complainant whereby customer indebted laws were applied. The court senate is aware, from the decisions by other courts (such as OVG Hamburg decision of 27 February 1984 Bs II 12/85, NJW 1986, 209, VG Hamburg decision of 11 December 1990, 17 VG 978/88, NVwZ 1991, 806) and from numerous press articles, that the Sc. organizations in Germany make use of many commercial methods, and that the intensity of their street recruitment has resulted in numerous numerous disputes with local authorities, including some for which fines have been set. The assumption of taxable remunerated services does not conflict with the complainant's statement that the goods are not of a material nature, but are religious-philosophical. Ideological goods can also be distributed as a marketed product, and their distribution or exchange for money constitutes a services in the sense of § 1 para. 1 Nbr. 1 UStG (VG Hamburg, NVwZ 1991, 806: "The complainant operates a religion commercially in exchange for money.").

Another objection by the complainant lacking in rigor is that the payments made by its members are donations. It is true that donations and fees are basically not taxable income. That includes the income of an association which, on the basis of its charter, in keeping with the general interests of the members, does not provide separate services for which money is charged. The mere circumstance that the complainant declares sales to be donations, or that its charter requires these donations from members, is not significant. The character of the amounts contributed by the course or seminar participant as individual recompensation in exchange for services is made clear by the fact that the payments are exacted for the individual steps of mental training. The price structure shows that the measure of significance is in the individual and his personal claim to services, not the general interest of all members. The fact that a personal association can conduct taxable services-for-payment , even when the only market is its members, can be concluded from § 2 para. 1 sent. 3 UStG (also BFH decision of 21 April 1993 XI R 84/90, BFH/NV 1994, 60). Occasional recompensation by association members through work for services by the complainant, the receiver of the work, is not the issue; for the period as of 1980, taxability follows from § 1 para. 1 nbr. 1 ltr. b UStG.

[Interlocutory decision] Constitution does not hinder sales tax for religious communities

Neither does the taxation of the complainant does not violate constitutional law. The self-perception and assertion alone as a religious community professing religion, is not enough to justify invoking the guarantee to freedom and protection under Art. 4 of Basic Law (see BVerG - decision of 5 February 1991 2 BvR 263/86, BVerfGE 83, 341 and - re Sc. - of 28 August 1992 1 BvR 632/92, NVwZ 1993, 357). Whether Sc. actually deals in spiritual content and has the external appearance of religion is not relevant to the question of the constitutional decisiveness of taxation, since the same laws apply to religions equally in their system of affairs and limitations (Art. 140 GG i. V. m. Art. 137 Abs. 3 WRV), and in the same way all others are subject to taxation (BFH-Urteile vom 13. Dezember 1978 1 R 36/76, BFHE 127, 352. BStBI II 1979, 492; vom 13. August 1986 II R 246/81, BFHE 147, 299, BStBl II 1986, 831).

[Interlocutory decision] Scientology Church is not a religious community

The complainant is not entitled to either tax exemption in accordance with § 4 Nr. 22 a UStG or tax moderation in accordance with § 12 Abs. 2 Nr. 8 UStG. This is by virtue of the fact that the complainant is deficient in charitable purpose [American version note: in the sense of public benefit].

The claim of religion is viewed as the claim of public benefit in the sense of § 52 above without regards for the Christian religion, religions in general, or religious corporations of public rights (BFH-Urteil vom 6. Juni 1951 III 69/51 U; BFHE 55, 376, BStBl III 1951, 148). Scientology, however, is not religion. According to the Brockhaus encyclopedia (1969), it has to do with the teachings of L. Ron Hubbard and a mixture of occult concepts with psychotherapeutic practices.

[The finance court cites L. Ron Hubbard's "Dianetics" text here and continues:]

According to this Scientology's focus is a mental training system called "auditing", a form of verbal therapy in which religion does not play a central role, but a subordinate one. In the book published by Scientology, "The Background of the Ceremonies of the Scientology Church" [German edition] there is found on pp. 68 the following definition by Mary Sue Hubbard:

"Scientology is a religion in the oldest sense of the word, a study of wisdom. Scientology is a study of man as a spirit in his relation to life and the physical universe. It is trans-denominational. By that is meant that Scientology is open to people of all religions and beliefs and does not attempt in any way to talk a person out of his religion; rather it helps him to better understand that he is a spiritual being."

[Interlocutory decision] ... more of a philosophy

This, too, is more the definition of a philosophy, and descriptive of this is the fact that Scientology organizations were first established in Germany as associations with names like "College fuer angewandte Philosophie e.V." (1970 in Frankfurt am Main) whose purpose, according to its charter, was "to conduct courses and training for independent personality development with practical application of the philosophy of L. Ron Hubbard, and the complainant's members could be found before the association's founding in 1978 in the "Studierkreis angewandter Philosophie." The book cited above on Scientology makes it clear on p. 8-22 that Sc. is a philosophy (citations given).

[Interlocutory decision] Philosophically aligned communities are not charitable

Such communities are not viewed as charitable. Apart from the fact that Art. 140 GG i. V.m. Art. 137 Abs. 7 WRV does not conclude that the claim of any philosophy can be rated as tax-exempt activity, the decision of the BVerwG of 14 November 1980 8 C 12 79 (BVerwGE 61, 152) instructs a conscientious objector, who relies upon his membership in Scientology, that there are philosophical communities and even "youth religions" whose influences are conducive to psychic damage and other harm, especially with young people. In its decision BFHE 127, 352. BStBI II 1979, 492, the BFH specifies that an association whose purpose is to spread mental and moral values and their implementation through study, research and practical application of natural and spiritual laws with the intention to teach its members how to be able to live in peace, happiness and harmony with the creative and developing powers of nature and of the universe, while possibly being of benefit to the individual member, was nevertheless not substantial enough to result in direct benefit to the public.

The claim of religion in the sense of § 52 Abs. 2 Nr. 1 AO is contingent upon a definite religious direction being taken. Religion in this sense is not the desire for the feeling of spiritual power (called a "Thetan" in Scientology), for the belief in the transcendental or the involvement with "dynamics" and "gradient scales" which are Scientology teachings not definitive of any specific religion. Neither is the presumption of a higher spiritual being or the spiritual perfection of the members (through "auditing" etc) adequate to qualify as a claim of religion in the sense of § 52 Abs. 2 Nr. 1 AO, (see also FG Baden-Württemberg, Urteil vom 4. Februar 19[unleserlich] X K 196/85, EFG 1988, 270). This applies especially to Scientology in light of its sustained objective of making profit for the organization, which puts any coincidental charitable goal completely in the background.

(Various administrative court decisions are cited, including VG Hamburg, NVwZ 1991, 806; OVG Hamburg, Urteil vom 6. Juli 1993 BF VI 12/91, DVBI 1994, 413). It is then stated that regardless of whether the complainant maintains the "charitableness" required by § 55 AO is fulfilled in that its profits are forwarded to the "mother church", the complainant still fails to meet the conditions for selflessness on the whole BFH-Urteil vom 26. April 19E 1 R 209/85, BFHE 157, 132, BStBI II 1989, 670)

[Interlocutory decision] Complainant's activity not purposive operation

The complainant does not conduct a purposive operation in the sense of § 65 AO, as must be present for an association; see § 4 Nr. 22 UStG (Schuhmann in Rau/Dürrwächter/Flick Geist, UStG, § 4 Nr. 22 Anm. 41) as well as § 12 Abs. 2 Nr. 8 a Satz 2 i. V. m. § 64 Abs. 1 AO (BFH-Urteil vom 15. Dezember 1993 X R 115/91, BFHE 173, 254, BStBl 1994, 314). The restriction on tax benefits in § 64 para. 1 AO applies specifically to corporations that use commercial business operations as a means of fulfilling their purpose (middleman operations). For this reason a commercial operation is not a [n ideal] purpose operation solely for the reason that it requires financial compensation. It's also irrelevant that the proceeds of the business operation goes to fulfill an ideal purpose. A tax-safe purpose operation is present only if the compensated activity itself is required, not the compensation therefore. The fact that the income from the commercial business activity is being used for purposes in accordance with the charter is not enough to turn this commercial operation into a tax haven (Fischer in Hübschmann/Hepp/Spitaler, AO, § 65 Anm. 21, 19, 22, 23. 29). Therefore the complainant's statement that he - in contrast to the Christian state churches in Germany - may not levy church taxes and thus must resort to such financial payments as he requires for the participation in courses, seminars, printed material and the electrometer. The complainant is free, the same as other small religious communities, to fund itself with voluntary donations and contributions from its member instead of arranging the sale of psychological and psychotherapeutical services, as well as to compete with other book stores for the sale of printed material (§ 65 Nbr. 3 AO).

[Interlocutory decision] In addition, requirements in the charter are not fulfilled

In addition, the complainant is lacking for tax advantages for public service also in relevance to the official charter in the sense of §§ 59, 60 para. 1 AO. The charter must not only state the purposes pursued by the corporation, but also the form these activities will take (Kühn/Kutter/Hofmann, AO, § 60 Anm. 2). The complainant's charter, however, does not delve into the central principles of Scientology like "Operating Thetan", "Clear", "Preclear", "reactive mind", or into the supporting system of "dynamics" and "gradient scale." Even for a superficial understanding of the teachings developed by Scientology, it is required to go to sources outside the charter. The primary deficiency of the charter's presentation is the investigative methods used in the recompensed practice called "auditing", without which an audit of the material conditions for tax-exemption is not possible. Whether, in addition, there are deficiencies in the charter's finance plan in the sense of § 61 para. 1 AO, can remain unanswered. All that is indicated is Hübschmann/Hepp/Spitaler (a.a.0.. § 61 Anm. 9), whereby the applicable determination of exception is § 61 Abs. 2 Satz 1 AO.

A direct invocation of Art. 13 A para. 1 ltr. 1 of the 6th EG directive does not result in tax exemption for the complainant because his services and accoutrements, as submitted, are neither non-profit undertakings nor do they follow religious purposes.

Federal Finance Court V R 65 / 94 decision of 21 Aug. 97

unofficial anonymized version


1. The complainant and appellant (complainant) is a registered association. It perceives itself to be a religious community in the sense of Art. 140 of Basic Law (GG) as well as with Art. 137 of the Weimar Constitution. The complainant produces income in connection with the marketing of printed material and electronic devices, arranging courses / seminars, conducting spiritual counselling with individuals and with services to similar institutions.

to be continued ...

www.Ingo-Heinemann was opened in September 1998