Taxes and fundraising

[anabanana's candles]

How do you all handle the tax aspect of fundraising. Do you write off the percent that you give to the organization? How does that work. I know that it is a long time off, but I was just wondering.

[Misty]

I let the organization be responsible for collecting and turning in taxes. I am essentially wholesaling the product to them, so they collect the taxes and turn them in to the state.

[anabanana's candles]

What in the case of a non profit organization like the YMCA> That is who the fundraiser was for.

[Callmaker]

Non profit does not pay taxes and you can't charge them any..also over sea's does not have taxes and you don't charge in this instance either

[Misty]

In my state they still have to collect sales tax on the items that they sell. They just don't pay taxes on items that they purchase for themselves. But since they are selling a product, they still have to collect state sales tax, and turn it in to the comptroller, because it was sold in that state.

[Abbiepql]

It varies from state to state, here is a link that I have used for contact information:

http://www.fundraisetaxlaw.org/states.html

[momtohaley2004]

I did a fundraiser for the local college honor's group. They filled out our state tax exemption resale certificate. Thus, I'm not responsible for the taxes. Whether or not they are that I can't tell you but my bottom is covered. I assume they do not have to pay as it's a non profit organization trying to raise money.

[OverSoyed]

You are only responsible for the profit you make. You are simply supplying the product to them. You can however claim any discount to the organization as a charitable donation on your taxes under 501©(3) if they regularly solicit donations. There are a lot ways to claim deductions for non-profits, so it's always best to ask advise of a knowledgeable tax adviser.

[VerticallyEnhanced]

I did a fundraiser for the local college honor's group. They filled out our state tax exemption resale certificate. Thus, I'm not responsible for the taxes. Whether or not they are that I can't tell you but my bottom is covered. I assume they do not have to pay as it's a non profit organization trying to raise money.

In the state of Texas, exemption certificates and resale certificates are two different things.

http://www.window.state.tx.us/taxinfo/taxforms/01-339.pdf

(In the above link, the resale certificate is on top and the exemption certificate is below it.

In Texas, for the sale of items through a fundraiser, the sales tax needs to be collected from someone even if it is conducted for/by an exempt organization. The exempt org is acting as a representative of your company and you are responsible for collecting and remitting the tax if they are getting a percentage of your sale. Tax is due on the total cost of the item, not just the base minus their markup, if that makes sense. Most people build the tax into the sale of the candle and back out the tax when it is time to report. You do have to state somewhere on your order form that Texas State Sales Tax is included in the purchase price.

Another way to handle it is to "sell" the candles to the organization and accept a RESALE certificate from them and THEY are responsible for the sales tax. Say they get $4 profit from each candle, you would sell a candle to them for $10 each and they would charge their customers $14. They are then responsible for collecting and remitting the sales tax on the total consideration (which is $14). BUT, In order for your "bottom to be covered", the exempt org has to give you a properly completed resale certificate (not exemption certificate). This means that the resale certificate has to include their taxpayer ID number. You can verify their ID number in the state of Texas through this page:

http://ecpa.cpa.state.tx.us/vendor/tpsearch1.html

If they give your an exemption certificate for candles and you are audited, then your bottom is not covered. If you have a resale certificate from them with a texas issued taxpayer number stating that they are responsible for collecting/remitting tax, then you are covered. Keep it on file for four years.

Many are mistaken that exempt orgs are exempt from tax period and that is not the case in most states. In Texas, an exempt org is exempt from paying tax on items they purchase which are used to further their exempt purpose. If a school purchases teaching supplies, or a church purchases vestments for the priest to wear, those are considered purchases which further their exempt purpose. However, exempt orgs are not exempt from COLLECTING tax on the sale of items.

Now if the school were buying teaching supplies or the church the vestments, then they would issue an exemption certificate. That same exemption certificate can be used by you and I. For example, if I am buying a wax melter, that is an exempt purchase because it is a manufacturing item. In general, sales tax is not due on items that are used to manufacture items for sale. Of course there are some rules that go with the whole manufacturing thing. But as far as the melter is concerned, it is used directly in the manufacturing of my end product, so it is an exempt purchase.

It is all so confusing, made even more so by differing rules for different states. It is always good to check with your state's revenue/tax/comptroller's office.

[momtohaley2004]

Sorry.....I typed that wrong. They are NOT one in the same. They filled out the resale certificate and they do not pay me tax but must pay tax on the final value. Sorry if I typed that wrong. I do have on file the resale certificate. At the top it states Texas Sales and Use Resale Certificate and at the bottom it says

"The taxable items described above.....will be resold, rented or leased by me within the geographical United States of America.....in their present form or attached to other taxable items to be sold. I understand that..........I must pay sales tax on the items at the time of use based upon either the purchase price or the fair market value........"

I figure once they sign this with the tax number they are responsible for sales tax as their signature constitutes acceptance of those terms.