Sales Tax

No sales tax on things we purchase

As a 501(c)3 nonprofit, we do not need to pay sales tax for things that we purchase. Sometimes it is a bit of a hassle to prove this to the vendor - and the vendor needs to track that information for their tax purposes. However, if we purchase property for resale at fundraising events (other than casual use) we do have to pay sales tax.

Sales tax on goods we sell

We do need to pay sales tax on some goods that we sell. Generally, sales of tangible personal property by non-profits are taxable, unless exempted by another provision of law. For example, G.L. c. 64H, item 6(c) grants an exemption for "[c]asual and isolated sales by a vendor who is not regularly engaged in the business of making sales at retail...."

Much of the below is from the Massachusetts directive.

"Casual and isolated sales" are defined by the Casual and Isolated Sales regulation, 830 CMR 64H.6.1, as "[t]hose of an infrequent, non-recurring nature made by a person not engaged in the business of selling tangible personal property." The regulation provides examples of various casual and isolated sales, including

"sales by nonprofit organizations at fairs, picnics or similar events to the extent of two such events of a day's duration held during any calendar year; provided, however, that where sales are made at such events by an organization holding a registration certificate as a vendor, or otherwise required to hold such registration certificate because its selling events are in excess of the number permitted, such sales constitute sales in the regular course of business and are not exempt as casual sales. An organization conducting an exempt casual sale....is deemed to be the consumer of that property which it purchases for resale and as such must pay the tax on purchases not otherwise exempt."

See 830 CMR 64H.6.1(1)(f).

Although the total number of fundraising events conducted in a given year is the most significant factor in determining whether an organization is making casual and isolated sales, eligibility for exemption also depends on the nature of the tangible personal property sold at such events. If the property sold is of the same or similar nature, sales of such property may be made at no more than two fundraising events per year in order to qualify as casual and isolated. If the property sold at such events is not of the same or similar nature, such non-recurring sales also will generally qualify as casual and isolated. Therefore, under these limited circumstances, a tax exempt organization may conduct more than two fundraising events in a calendar year while still qualifying for the exemption provided that it maintains appropriate records to substantiate the exemption.

References:

• Massachusetts directive on tax exempt organizations engaging in fundraising activities

Sales tax on services we sell

We do not need to pay sales tax on services that we sell. Services in Massachusetts are generally not taxable, unless the service is manufacturing or creating a product.