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Nonprofits May Need to Collect Sales Tax in These States

We will try to provide information as directly as possible, but remember that GiveSignup and RunSignup do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. GiveSignup and RunSignup make no representations, warranties, or assurances as to the accuracy, currency or completeness of the information provided in this blog.

GiveSignup and RunSignup are working on a project to help nonprofits meet their sales tax collection obligations. While nonprofits may not be responsible to pay federal and state income taxes, and typically are exempt from sales tax when they purchase something, nonprofits do have a responsibility to collect sales tax.

There are many sales tax rules and exemptions, such as number of events held per year. As another example, in Georgia, religious organizations are exempt but non-religious nonprofits must pay sales tax on certain items. Sales tax also varies by state and sometimes is only on merchandise, sometimes on race or participation fees (like a golf outing), and sometimes on any event like a pancake breakfast. Sometimes there are exemptions on these based on the number of transactions or the dollars collected or the number of events held per year.

Here is a list of states where there may be some sales tax collection required by nonprofits:

  • Alabama
  • Arkansas
  • California
  • Colorado
  • Connecticut
  • District of Columbia
  • Florida
  • Georgia
  • Idaho
  • Indiana
  • Kansas
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Mississippi
  • New York
  • North Carolina
  • Ohio
  • Oklahoma
  • Pennsylvania
  • Rhode Island
  • South Dakota
  • Tennessee
  • Texas
  • Vermont
  • Virginia
  • Washington
  • West Virginia
  • Wisconsin
  • Wyoming

If you are a nonprofit holding events or selling merchandise in any of these states, you should look into your tax obligations.

The good news is that many of these states are requiring marketplaces to collect tax on behalf of the nonprofits (and for profit merchants and event organizers). This started over a year ago with a ruling by the Supreme Court in the South Dakota – Wayfair case. Since then 35 states have passed “marketplace” laws, and by this time next year all 45 states that collect sales tax are expected to pass a marketplace law.

The reason this is good news for nonprofits is that your vendors like GiveSignup and RunSignup, Blackbaud, Classy, Crowdrise, Eventbrite, and others will be required to collect and remit the sales tax on your behalf. As an example, GiveSignup and RunSignup will be testing this in September and be fully collecting sales tax with all of the rules programmed into our system in October.

This is a pretty large burden for us, as we are spending a lot of money with tax consultants and a lot of time developing software that is adaptable to allow for all of the diversity of exemption rules across the many states. On the other hand, from a state’s revenue collection perspective it is a lot simpler to go after a few marketplace vendors rather than a large number of merchants and nonprofits doing business online. It is also much more likely that marketplace vendors have the technical capability to implement systems that collect sales tax properly.

As a nonprofit, this DOES NOT release you from your tax obligations. In the states listed above, you may owe back taxes, and you may have tax liabilities. Even if your marketplace vendor should be collecting on your behalf, you still have the ultimate obligation.

Since the ruling is only a year old, and many states are just rolling it out, most nonprofits have not heard of this. And many of the vendors have not heard of it either, or are trying to avoid it thinking it does not apply to nonprofits. However, states are hungry for revenue and while they will first focus on the Amazon’s and Wayfair’s, there have been actions against smaller marketplaces like Eventbrite in Chicago.

Our recommendation is to ask your tax accountant for advice on your tax obligations, and to ask your marketplace vendor if and when they will be collecting sales tax for your events and merchandise sales. Eventbrite and GiveSignup and RunSignup have been very public about our work and plans. We have reached out to all of the major vendors to offer up our findings and to collaborate and will continue to share our information as we learn more and release our full software solution. We are also beginning to reach out to the major nonprofit industry groups to offer our research and learnings to share with their members.

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