As the masses descend upon Philadelphia, New York, and Washington, D.C. for the papal visit, myriad pope-themed t-shirts, hats, bags, bobbleheads, soaps, and other commemorative memorabilia flood the streets. For nonprofits and exempt charitable organizations hosting fundraisers, it is imperative to understand that while exemptions are allowed to some nonprofit and charitable vendors for purchases, the exemptions do not always apply to items they sell.
Some states limit the exemption for isolated sales at large events like these. The obligation to collect sales tax may be limited by: (1) the number of permitted days per year for tax-exempt sales, (2) sale proceeds, (3) types of items eligible, and (4) the price per item in the exempt sales. So on this very rare visit, a Catholic church should be able to sell Zucchettos as a fundraising activity, right? Only without competition from other vendors, says Pennsylvania. Nonprofit and charitable vendors should know before placing that bulk order of Pontiff-inspired skullies, that according to Pa. Code §32.4 (b)(6)(ii), “the sale of property, other than food or beverages by charitable, religious, or nonprofit educational institutions as a fund raising activity, by a school or church, on the same premises in competition with other vendors required to collect tax, is not considered an isolated sale and the organization must also collect tax.”
The District of Columbia does exempt casual and isolated sales, but not those sales by churches, religious, educational, and other organizations. D.C. Administrative Ruling No. 2, 16 DCRR, states the gross receipts from such organizations for the purpose of resale are not considered to be casual and isolated sales and are subject to District sales tax.
New York Tax Law provides a general exemption from sales tax for sales made by certain nonprofits like religious charitable or educational organizations, but not without exceptions. If the organization engages in sales or services are similar to those ordinarily sold by private persons, a shop or store, and certain remote and auction sales, (to list a few), then the organization is required to collect state and local sales tax.
Maybe Pope Francis should have added Louisiana to his itinerary. Louisiana nonprofits and charitable organizations are always exempt from charging sales tax, so long as the sales do not amount to a regular commercial venture, the organization does not compete with retail merchants, and the entire proceeds from the sales of tangible personal property are used for charitable, educational or religious purposes.
Let’s confess—the financial benefits and sales tax implications for nonprofit and charitable organizations hoping to capitalize on Pope Francis’s visit are many, but the opportunities to buy pope-inspired beer and pope soap are few. You Only Pope Once.
Continue the discussion on LinkedIn: Should other states follow Louisiana’s lead for exempting sales by charitable organizations?
For more information about state tax issues, sign up for a free trial on Bloomberg BNA’s Premier State Tax Library .
by Cynthia Wells
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