When Tom Waite learned that the state of California requires sales tax to be paid on items auctioned off for charity, he was furious.

"Morally, it's wrong," said the Thousand Oaks resident.

As treasurer of the Sunrise Rotary Foundation and past president of the Rotary Club of Westlake Village Sunrise, Waite has given his time and money to help charities.

So when Brenda Small of Agoura Hills asked him to help with her inaugural Music for Heart fundraiser last summer, he agreed to help her get a grant from Rotary International to match whatever money she raised.

The money from the fundraiser, organized by Small with the support of the Rotary Club of Agoura Hills/Oak Park, is used to provide life-saving pediatric heart surgeries for children in El Salvador.

What Waite and Small, who founded the Delaney Kate Honorary Heart Foundation, didn't expect, they say, was that the charity would have to pay more than $1,800 to cover sales tax due on items donated for auction at the fundraiser.

They were stunned when the accountant handling the charity's finances told them, they said.

The "$1,800 could have saved two kids' lives," said Small, whose youngest child, Delaney Kate, 6, was diagnosed at birth with congenital heart disease and underwent a life-saving operation.

"It's very disturbing to me. The money would have been better spent saving these kids than whatever the state does with it," Small said.

The charity held its second annual fundraiser May 4. Michelle Kahn, who helped organize it, said organizers estimate they'll have to pay $2,500 in sales tax on the $30,000 raised from the auction portion of the event.

"We're going to have to eat it up, unfortunately," she said.

To some it might seem like a small amount compared to the total of about $70,000 raised by the gala at the Canyon Club in Agoura Hills, but, Kahn said, it's still money that could have been used to provide life-saving surgeries.

Under state law, the only charitable organizations not required to pay state sales taxes are those engaged in the relief of poverty or distress that qualify under the "welfare exemption," that is, they either sell or donate items principally to help those who receive them, and they make or prepare the items being sold or donated.

"How can you exempt some charities?" Waite asked. "I can't believe that genuine grass-roots charities where all those involved are volunteers and where a hundred percent of monies raised go to charitable causes have to pay sales tax."

"It's a double standard," said Small. "Why should we have to pay sales tax when another 501(c)(3) organization doesn't?"

"It's not a double standard. It's merely the law," said Anita Gore, a spokeswoman for the Board of Equalization, a state tax agency.

"Sales of tangible personal property are taxable, and whether you buy something at an auction or a store or a flea market, the seller is required to deduct sales tax," Gore said.

At this year's fundraiser, Small said she and her fellow organizers had considered charging the winning bidders for the sales tax but ultimately worried that it might deter people from bidding.

"We're so grateful for their support that we decided to absorb it," she said.