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Fundraiser tax


Trae
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I'm going to be starting a fundraiser with a local soccer team. Youth sports leagues are not tax exempt in my state. The coach of the team wants all checks and cash to come to me and me cut them a check for their percentage instead of the checks being made out to the league and the league giving me a check. Even if the league WAS tax exempt, wouldn't I have to charge sales tax anyway since the checks are coming to me? The team mom is having a tough time understanding this so I want to make sure I'm correct. Thanks!

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Include tax in the price so the kids are not having to figure that out themselves. Them et the whole amount after the FR. Deduct the sales tax and cut the % after the tax is taken out. YOU will be responsible for paying sales tax. So for ex.

Lets say the group made 100.00. Lets say your sales tax is 10%. So you would take out 10.00. The remaining balance after sales tax deductions is 90.00. Lets say your split is 50/50. So you give them 45.00 and you keep 55.00. (the 10.00 you keep to pay your sales office later. ) I hope that makes sense.

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Ok, now I am getting confused. It was my understanding that if an organization is tax exempt then you do not charge them sales tax. And You, the seller does not pay sales tax because the transaction is for a tax exempt consumer.

Is this not correct?

You are correct, but she said that the team is NOT tax exempt. So the tax has to be paid.

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It was my understanding that if an organization is tax exempt then you do not charge them sales tax. And You, the seller does not pay sales tax because the transaction is for a tax exempt consumer.

Nope...even if an organization IS EXEMPT, they are exempt from PAYING tax on items used to further the purpose of their organization. That is a slippery slope! If a director of an organization is buying candles from you to give as gifts to employees or burn in the office, I don't consider that "used in the course of their exempt organization's purpose."

Exempt orgs are NOT exempt from collecting sales tax on taxable sales of tangible personal property (i.e. fundraiser). It is two totally different things. I know that all states have different rules, but this is one that is pretty much across the board. At my kid's school, they sell tshirts, book bags, koozies with our school logo. We have to collect sales tax on those transactions.

Example that might come into play with a fundraiser:

A school has received 501© exempt status. They want to sell your candles as a fundraiser. The amount of the total sale of the candle is $10. They keep $5. The total tax due is based on the SALE of the candle which is $10. The school is acting as your sales agent which makes YOU responsible for collecting and remitting the tax. If your tax rate is 9% and the total sales of the fundraiser amounted to $2000, then YOU have to report and remit $180 as part of your total sales for whichever time period the sale took place. Tax is not based on the 50% profit you make, but on the TOTAL sale of the item. You will have to figure this into your cost some how...either by building it into the price and doing a "tax included" sale (make sure you state on the order form that State sales tax is included in the price of the candle), or you will have to have a column on the fundraising form to compute the tax and add it up on the form.

I guarantee you that if you do it the right way, you will have organizations saying "No...we are exempt so it does not apply to us." Again, exempt orgs are exempt from PAYING tax on items they CONSUMED or USED in the course of providing their service (trash bags at a school, trays used in the cafeteria, light bulbs, paper, etc.) Arm yourself with information. Get copies of the rules/laws from your state to back yourself up. Bottom line, I am not willing to sacrifice my business by being audited and penalized for something someone is not willing to do that is legally dictated. I have flat out refused some fundraisers because of this. Did I lose business? Yup. But, I can sleep at night. :D

Another way to handle it is to treat it as a resale. Sell the candles to them through a wholesale transaction and THEY are responsible for the taxes. In order to do this, the have to be permitted for sales tax. You will have to have them fill out the paperwork (usually called a resale/tax exempt certificate) and include their taxpayer number. If you accept it in "good faith" (meaning you have a properly completed form with all info and you, in good faith, believe that they will follow through on their end), then you are covered. Keep it on file for at least 4 years.

Again, each state has different laws/rules, but in those that have a sales tax, this one is pretty much across the board. If you have any questions, call your regulating office.

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Well, I ended up making a column on the order form for the sales tax to be added. I explained everything to my friend, who has a son on the team, so she could explain it to the team mom. The team mom is kinda dense so I put everything in easy terms and added that I'm covering my a$$. If the coach wants all payments coming directly to me, then this is how it is! Thanks for all the help.

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