Thanks to efforts by the Texas PTA, the Comptroller's Office has revised their position on this matter, saving all parent groups thousands of dollars in sales tax.
Texas PTA met with the Comptroller, Susan Combs, and her staff on Monday, April 14, 2008 to discuss the "determined seller vs. agent" sales tax issue. Click here to view the letter we received from the Comptroller's Office as a result of our meeting. The fact of the matter is, due to vendors treating the determined seller/agent issue differently, and the confusion for PTA volunteers with contract wording, the Comptroller has recently ruled all catalog/brochure vendors are the determined sellers. In other words, for PTAs who have brochure/catalog sales, the fundraising company will always be responsible for the sales tax. Please forward this message to all PTAs in your area.
Since you are in Texas, I can give you some other references that will help you. You want to spend a little time investigating WHAT is taxable. As an exempt organization, you'll want to exclude the two biggest fundraisers you can. But groups make mistakes by sometimes counting something that was never taxable to begin with - so they've wasted one of their freebies. So, for instance, if you host a pancake breakfast - that's not taxable, so don't count it as one of the two.
Here's an excerpt about meals/food.
Meals and Food Products An exempt organization does not have to collect sales tax on meals and food products (including candy and soft drinks) if:
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sold by a member or a volunteer of a nonprofit organization devoted exclusively to education or to physical or religious training, or by a group associated with private or public elementary and secondary schools as part of an organization's fund-raising drive, when all net proceeds from the sale go to the organization for its exclusive use.
Wow! That helps since we're in Texas. We met w/a fundraising co. yesterday for our Christmas shop and she told us we would have to add tax. Now it all makes sense. I'll check out the Comptroller website and go from there! Thanks for the info.
That citation is probably about sales tax, which is a state issue and covered by state law, not federal. What state are you in?
It varies from state to state, but we have exactly that rule in Texas. Here you can have two events per year and you pay sales tax (if taxable) on the rest. But don't let that discourage you. Thousands and thousands of organizations file sales tax payments every year. It's not a big deal at all. You just have to factor in that extra expense.
However just recently, our school district found out we'd been incorrectly interpreting WHAT is allowed to be one of those two tax free events. We'd all been counting our annual cookie dough/gift wrap/candle type fundraiser as one the tax free ones. But the Comptroller has now specified we can't do that if the organization is really acting as a sales agent. So if we buy something, mark it up, and re-sell, taking any risk of profit/loss upon ourselves, that's eligible. (Like T-shirt sales in a one-day period.) But if we sell something where we get a split of the proceeds (so no risk of loss), then the organization is determined to be an agent of the fundraising company, which is not eligible for sales tax exemption.
You will also need to research what is taxable. For instance, here if you make and sell food for consumption on the premises (hot dogs, spaghetti dinner, pancake breakfast), there's no tax. But if you serve something delivered by a third party ready-to-eat (like pizza), that's taxable. Admission fees may not be taxable. Items like T-shirts or books definitely would be. But it's all controlled by state law.
I keep hearing that the we're only allowed 2 "tax free" fundraisers per year, everything else is subject to tax. I checked our by-laws and it does not state anything about fundraising. Does anyone know where I can look to find out what Uncle Sam says about non-profit fundraising rules? This may be redundant, but I'm new!:o
