A one-time effort to provide “volunteers” to help a business staff its event, in return for a payment from the business, is unlikely to cost a charity its exempt status.  Although it sounds like unrelated business activity, (and not a gift because there is a quid pro quo), it does not sound like it would be so substantial that it would jeopardize your status, or so regularly carried on that it would even generate taxable income.

The real issues arise is trying to determine the relationship of the “volunteers” to your organization and the for-profit. Treating the labor as volunteer obviously saves the for-profit a lot of money, avoiding withholding taxes, workers’ comp insurance, and probably other employee benefits.  In one recent case, a volunteer who was seriously hurt during an event was unable to collect worker’s compensation insurance and had to challenge the effectiveness of a waiver of liability when he sued the for-profit.  (See Nonprofit Issues®, 12/16/09 and 3/1/10.)  Does your volunteer appreciate these risks?

Is the volunteer your agent so that you would be liable if your volunteer hurts a patron at the event?  Do you have insurance to protect both of you?  Is the volunteer volunteering for your charity, in which case the Volunteer Protection Act, might apply with regard to personal liability, or is the volunteer a volunteer for the business, in which case there is no such protection?

The list of significant questions could go on for quite a while.  As we said in the comments to the other cases, whenever a relationship is structured to look like something it really isn’t, there are a whole lot of issues.  The participants ought to assume that ultimate decisions will go against them if they are trying to gauge their own risks.