Unlike many nonprofits that are operating under the crushing weight of our economy, we can (attempt) to raise additional funds by focusing additional efforts on ad sales for our magazine. Since another salaried employee is outside our budget, we are curious if we, as a 501(c)(3) organization, could hire a commission-only sales rep for classified ad sales or add a commission incentive for the display advertising rep. These commission programs would only apply to ad sales and not fundraising, of course.
You may pay advertising sales reps on a reasonable commission basis without violating any federal tax law. (You can also pay fundraisers on a commission basis without violating federal tax law, but the professional fundraising organizations say it is unethical.) The net revenues generated by increased advertising sales will most likely produce unrelated business taxable income, but so long as the advertising is not deemed to be a substantial activity that jeopardizes your tax exemption, it can be a good way to raise extra income. (See Ready Reference Page: “Nonprofits Often Worry About UBIT.”)
You should be sure that you sell the advertising for its benefit to the advertiser, however, and not as a contribution to the organization. Many state charitable solicitation registration laws define solicitation to include selling advertising on the representation that some or all of the revenue will be used for charitable purposes. If the ads are sold as contributions, ad reps who are not employees of your organization may have to register as charitable solicitors. That would not be a good result.