Sales and Use Tax for Nonprofits (2023)

If you want to make a sale and collect sales tax, you must first register for a Vermont Business Tax Account with the Vermont Department of Taxes and obtain a license to collect sales and use tax.

Buying Taxable Items
Use Tax
Other Tax-Exempt Nonprofits Are Subject to Tax
Tax-Exempt Nonprofits from Another State
Selling Taxable Items
Sales Tax On Charges For Admission To Events
Quick Reference Table

Buying Taxable Items

Only federally designated 501(c)(3) tax-exempt nonprofit organizations are normally exempt from Vermont Sales Tax when making purchases of items that are taxable in Vermont. If your eligible 501(c)(3) nonprofit wants to use the exemption to buy items subject to sales tax in Vermont, you must first register for a Vermont Business Tax Account with the Vermont Department of Taxes.

After your business tax account is set up with the Department, you may make qualifying tax-exempt purchases. To do this, first complete Form S-3, Vermont Sales Tax Exemption Certificate for Resale and Exempt Organizations. Please read the instructions on the second page of Form S-3 carefully before you complete and submit the form. Complete the form accurately and in its entirety. Present Form S-3 to the seller at the time of purchase.

Use Tax

Vermont Use Tax is due if tax is not collected on a taxable purchase made without an exemption. This usually occurs when the seller is not registered with the Vermont Department of Taxes to collect tax and therefore does not charge Vermont Sales Tax. Examples of sellers who do not charge sales tax are online and other out-of-state vendors.

(Video) Sales and income tax for your nonprofit

Following the United States Supreme Court decision in South Dakota v. Wayfair, the out-of-state vendor provisions of Vermont Act 134 of 2016 became effective. Starting July 1, 2018, all out-of-state vendors who make sales into Vermont above a certain threshold are required to register with the Vermont Department of Taxes, and to collect and remit sales tax. That threshold is $100,000 of sales, or 200 individual transactions into Vermont in any preceding twelve-month period. An out-of-state seller, including a non-profit, who makes sales of at least that threshold amount must register, and collect and remit sales tax. For more information seeSouth Dakota v. Wayfair.

As the buyer, the nonprofit must pay the sales tax in the form of use tax. Both sales tax and use tax have the same rate of 6%. If you pay less tax than the 6% rate in another state, you must pay the difference between the two rates.

You may file and pay use tax online though myVTax. If you prefer to use a paper form, use Form SUT-451, Sales and Use Tax Return if you have a Vermont Business Tax Account. If you don’t have an account, use Form SUT-452, Vermont Use Tax Return.

Other Tax-Exempt Nonprofits Are Subject to Tax

A tax-exempt nonprofit organization that is not a 501(c)(3) is not exempt from Vermont Sales and Use Tax. Organizations with tax exempt status under subsections 501(c)(4)-(13) and (19), and political organizations under 26 U.S.C. § 527(e), are subject to sales and use tax unless specifically exempted.

Exception for 501(c)(19) nonprofits: Vermont’s only exception for other nonprofits is that 501(c)(19) organizations (veterans’ organizations) may purchase or sell United States flags tax-free in Vermont. See 32 V.S.A § 9741(33). There is no exemption certificate for this exception, and Form S-3 may not be used for this purpose.

(Video) Sales and Use tax for Non Profits

If the seller refuses to exempt the sale, the veteran’s organization may pay the tax charged and then request a refund. To request a refund, submit Form REF-620, Application for Refund of VT Sales and Use Tax or Meals and Rooms Tax.

Taxation of Credit Unions

Credit unions are chartered at either the federal or state level. Federal credit unions are exempt from federal income tax under Internal Revenue Code, section 501(c)(1). State credit unions are exempt from federal income tax under the Internal Revenue Code, section 501(c)(14). Both federal and state credit unions are exempt from Vermont income tax under Vermont law at 8 V.S.A. § 30901.

Vermont law exempts federal and state credit unions from some state taxes. Credit unions must pay state and municipal property taxes and personal property taxes. Credit unions are exempt from Vermont Sales and Use Tax, but Vermont Meals and Rooms Tax applies to credit unions.

Tax-Exempt Nonprofits from Another State

Vermont tax laws apply to tax-exempt nonprofit organizations from other states that come into Vermont to conduct business or for an event in the same way they apply to Vermont-based organizations. In other words, they are not exempt from Vermont taxes just because they may be exempt from similar tax types in their own states.

Selling Taxable Items

When your 501(c)(3) tax-exempt nonprofit organization is selling taxable items, such as tangible personal property, you do not have to collect sales tax as long as you meet the requirements for the exception explained below.

(Video) Non-Profit Sales Tax? What NPO Executives Need to Know About Collecting Sales Tax

If the town where you are selling tangible personal property has a Local Option Tax, you are also exempt from this tax.

Exception for sales more than $20,000 in the previous year: If your 501(c)(3) tax-exempt nonprofit organization’s total sales of tangible personal property exceeded $20,000 in the prior year, you must collect and remit the sales tax on any sales of tangible personal property in the current year. If the town where you are selling tangible personal property has a Local Option Tax, you also must collect and remit this tax to the Department of Taxes. See Technical Bulletin 19 for more information.

Sales Tax On Charges For Admission To Events

Charges for admission to a place of entertainment provided by a 501(c)(3) tax-exempt nonprofit organization are exempt from sales tax.

Exception for gross sales more than $100,000 in the previous year: If gross sales of admission fees to a live performance by or on behalf of your tax-exempt nonprofit organization exceeded $100,000 in the previous year, you must collect and remit sales tax on any entertainment charge in the current year. If the town where the event is held has a Local Option Tax, you also must collect and remit this tax to the Department of Taxes.

Reminder: You must register for a Vermont Business Tax Account and obtain a license to collect sales tax on sales and admission charges before you begin charging for the event.

(Video) Sales and Use Tax for Nonprofits: Updates & Expectations for 2013 - March 26, 2013

When You Are a Tax-Exempt Nonprofit Other Than A 501(c)(3)

If you are a tax-exempt nonprofit organization other than a 501(c)(3), you must charge tax on the admission to an event.

Exception: You do not have to charge tax on admission if you meet all three of the following criteria:

  1. No more than four special events in a calendar year
  2. Held over no more than four days
  3. Open to the public

In other words, this means that if:

  • your nonprofit holds a monthly dinner/dance—12 per calendar year— you must charge sales tax on admission.
  • your nonprofit holds a week-long fair or carnival—more than four days—you must charge tax on admission.
  • your nonprofit holds a members-only event—not open to the public—you must charge sales tax on admission.

Quick Reference Table

Nonprofit TypeBuyingSelling
501(c)(3)Tax exemptTax exempt (see below for exception)
Exception: 501(c)(3) with more than $20,000 in sales in previous yearNAMust charge, collect, remit sales tax for current year
501(c)(3) charging admission to eventsNATax exempt (see below for exception)
Exception: 501(c)(3) with gross sales of more than $100,000 in previous yearNAMust charge, collect, remit sales tax for current year
501(c)(19)Flags only—tax exemptFlags only—tax-exempt
Tax-Exempt orgs other than 501(c)(3)sMust pay sales and use taxMust charge, collect, remit sales tax for current year (see below for exception)
Exception: Tax-exempt orgs other than 501(c)(3)s charging admission to an eventNAExempt from sales tax only when all three criteria are met: 1) No more than four special events in a calendar year; 2) Held over no more than four days; and 3) Open to the public
Tax-exempt nonprofits other than 501(c)(3)s from another stateSubject to Vermont sales and use lawsSubject to Vermont sales and use laws

LAWS, REGULATIONS AND GUIDANCE
Vermont Law at 32 V.S.A. Chapter 233
Reg. § 1.9701—Sales and Use Tax
TB-02 Nonprofit Organizations Exemption

FAQs

Does 501c3 pay sales tax in Virginia? ›

Does an organization's Federal tax-exempt status automatically exempt them from Virginia retail sales and use tax? No.

Do non profits pay sales tax in Georgia? ›

Limited exemptions from the payment of Georgia's sales and use tax are available for qualifying nonprofit organizations including: Licensed nonprofit orphanages, adoption agencies, and maternity homes. Licensed, nonprofit in-patient general hospitals, mental hospitals, nursing homes, and hospices.

Are 501c3 exempt from sales tax in Iowa? ›

No, the general rule is that nonprofits are not exempt from sales tax. Nonprofits that are exempt from federal income tax under 501(c)(3) are automatically exempt from parallel state income tax but not automatically exempt from other state level taxes such as sales, use, and property taxes.

Do nonprofits pay sales tax in Washington state? ›

Washington State law does not give nonprofit organizations a blanket sales tax or use tax exemption. Generally, nonprofit organizations are taxed like any other consumer or business on their purchases or rentals of consumable supplies, furniture, equipment, and retail services.

What is exempt from sales and use tax in Virginia? ›

Things sold to federal or state governments, or their political subdivisions, are not subject to sales tax. The exemption doesn't apply to property purchased by the Commonwealth of Virginia, then transferred to a private business.

Do Nonprofits pay state and local taxes? ›

Nonprofits are also exempt from paying sales tax and property tax. While the income of a nonprofit organization may not be subject to federal taxes, nonprofit organizations do pay employee taxes (Social Security and Medicare) just like any for-profit company.

Who is exempt from sales tax in Georgia? ›

In Georgia, certain items may be exempt from the sales tax to all consumers, not just tax-exempt purchasers. Several exemptions in the state are certain types of groceries, some medical devices, certain prescription medications, and any machinery or chemicals which are used in development and research..

What is the sales and use tax in Georgia? ›

Effective January 1, 2022

Code 000 - The state sales and use tax rate is 4% and is included in the jurisdiction rates below.

Who is exempt from TAVT in Georgia? ›

Some Military Veterans are exempt from TAVT (Form MV-30 Georgian's Veteran Affidavit for Relief and Local TAVT fees and Military Documentation required): Disabled Veterans compensated at 100% Prisoners of War. Purple Heart Recipients.

Who is exempt from sales tax Iowa? ›

Services provided to the following entities are exempt from sales and use tax: Iowa private nonprofit educational institutions, the federal government, Iowa governmental subdivisions, Iowa government agencies, certain nonprofit care facilities, nonprofit museums, and nonprofit legal aid organizations.

Are non profits tax-exempt in Iowa? ›

Income Tax Exemption

Nonprofit entities may request exemption from income tax from the Internal Revenue Service (IRS). See the IRS brochure Applying for Tax-Exempt Status (pdf). Iowa does not make this determination. An entity is automatically exempt from Iowa income tax if exempt status is granted by the IRS.

What is the difference between a nonprofit and a 501c3? ›

These terms are often used interchangeably, but they all mean different things. Nonprofit means the entity, usually a corporation, is organized for a nonprofit purpose. 501(c)(3) means a nonprofit organization that has been recognized by the IRS as being tax-exempt by virtue of its charitable programs.

Who is exempt from Washington state sales tax? ›

All nonresidents may be exempt from sales tax based on: The type of item sold (e.g. vehicles and trailers, watercraft, or farm machinery) Where the item was received by the customer (delivery and receipt outside Washington are interstate or foreign sales)

What services are exempt from sales tax in Washington? ›

Services to individuals and businesses – things like haircuts, medical bills, consultant fees, etc. – are not “personal property,” and most services are not subject to sales tax.

What does not have sales tax in Washington state? ›

Washington law exempts most grocery type food from retail sales tax. However, the law does not exempt “prepared food,” “soft drinks,” or “dietary supplements.” Businesses that sell these “foods” must collect sales tax. In addition, all alcoholic items are subject to retail sales tax.

Are nonprofits exempt from property tax in Virginia? ›

Non-profit organizations are not automatically exempt from local property taxes in Virginia.

What is subject to sales and use tax in Virginia? ›

In general, all sales, leases, and rentals of tangible personal property in or for use in Virginia, as well as accommodations and certain taxable services, are subject to Virginia sales and use tax, unless an exemption or exception is established.

Who must pay sales tax in Virginia? ›

If you sell, lease, distribute, or rent tangible personal property to customers in Virginia, or otherwise meet the definition of a “dealer,” and have “sufficient activity” in Virginia, you have nexus as defined in Va. Code § 58.1-612, and must register to collect and pay sales tax in Virginia.

Are nonprofits tax-exempt? ›

Organizations organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, educational, or other specified purposes and that meet certain other requirements are tax exempt under Internal Revenue Code Section 501(c)(3).

How can a nonprofit earn income without paying taxes on it? ›

Tax-exempt nonprofits often make money as a result of their activities and use it to cover expenses. This income can be essential to an organization's survival. As long as a nonprofit's activities are associated with the nonprofit's purpose, any profit made from them isn't taxable as "income."

Do nonprofits pay IRS taxes? ›

Non-profit status may make an organization eligible for certain benefits, such as state sales, property, and income tax exemptions; however, this corporate status does not automatically grant exemption from federal income tax.

Do I need a sales and use tax license in Georgia? ›

Who is required to obtain a Georgia sales and use tax number? Any individual or entity meeting the definition of a “dealer” in O.C.G.A. § 48-8-2 is required to register for a sales and use tax number regardless of whether all sales will be online, out of state, wholesale, or exempt from tax.

Who is responsible for paying sales tax in Georgia? ›

(b) (1) Every purchaser of tangible personal property at retail in this state shall be liable for a tax on the purchase at the rate of 4 percent of the sales price of the purchase. The tax shall be paid by the purchaser to the retailer making the sale, as provided in this article.

What is not taxable in Georgia? ›

Tax-exempt customers

Some customers are exempt from paying sales tax under Georgia law. Examples include government agencies, some nonprofit organizations, and merchants purchasing goods for resale. Sellers are required to collect a valid exemption or resale certificate from buyers to validate each exempt transaction.

Is sales tax ID and Ein the same for Georgia? ›

Because the EIN, or tax ID, is used for federal tax purposes, it stays the same from state to state. Some states require a separate state tax ID, however, to pay state-specific taxes.

What are the differences between a sales tax and a use? ›

The difference lies in how they're calculated and who pays them. While a sales tax is applied at the time a purchase is made and is collected and remitted to the government by the seller, a use tax is calculated and paid by the consumer or end user. The rate, however, is generally the same as the local/state sales tax.

Is sales and use tax the same as resale certificate Georgia? ›

A Georgia sales tax permit is not the same as a Georgia resale certificate. The former allows a company to make sales inside a state and collect/remit sales tax for those sales.

How is GA TAVT calculated? ›

How is TAVT calculated? The TAVT is calculated by multiplying the fair market value by the rate in effect on the date of purchase. A reduction is made for the trade-in when the sale was made by a dealer, but not when the sale was made by a private individual.

Is Georgia TAVT tax deductible? ›

You can deduct only the Ad Valorem Tax portion of the annual auto registration on your Federal Schedule A. The new Title Ad Valorem Tax (TAVT) does not appear to be deductible for Federal or Georgia purposes. In order to be deductible as a personal property tax, it must be imposed on an annual basis.

How much is the TAVT in Georgia? ›

Georgia does not charge a state sales tax on new or used cars. They do, however, charge a 6.6% title ad valorem tax (TAVT). TAVT went into effect on March 1, 2013. It is a one-time tax paid when your vehicle is titled, and it replaced both sales tax and the annual ad motor vehicle tax.

Who needs a sales tax permit in Iowa? ›

Retailers that sell taxable tangible personal property, services, and products in or into Iowa must obtain a sales and use tax permit.

What services require sales tax in Iowa? ›

Iowa requires tax to be collected on the sale of all "tangible goods". The sale of personal property is also taxable in Iowa. Furthermore, automobile rentals and leases as well as hotel and motel rooms are also taxable.

What qualifies a person as tax exempt? ›

Typically, you can be exempt from withholding tax only if two things are true: You got a refund of all your federal income tax withheld last year because you had no tax liability. You expect the same thing to happen this year. Internal Revenue Service.

Are churches subject to sales tax in Iowa? ›

Purchases made for resale are exempt from all sales tax.In other words, a nonprofit corporation, church or other religious organization is treated the same as any other private citizen for sales and use tax purposes when purchasing goods and taxable services at retail.

Does a nonprofit have to file with the IRS? ›

Although they are exempt from income taxation, exempt organizations are generally required to file annual returns of their income and expenses with the Internal Revenue Service. Small tax-exempt organizations with gross receipts under a certain threshold may be required to file an annual electronic notice.

How do I get a sales tax permit in Iowa? ›

You can easily acquire your Iowa Sales Tax Permit online using the Iowa Business Tax Online Registration System website. If you have quetions about the online permit application process, you can contact the Department of Revenue via the sales tax permit hotline (800) 367-3388 or by checking the permit info website .

What are the 3 types of nonprofits? ›

There Are Three Main Types of Charitable Organizations

Most organizations are eligible to become one of the three main categories, including public charities, private foundations and private operating foundations.

What are the 4 types of non-profit organizations? ›

Association, Trust, or Corporation

A nonprofit organization can organize itself in four ways: an unincorporated association, a trust, a corporation, or a limited liability company.

What are the cons of becoming a 501c3? ›

Cost: Creating a nonprofit organization takes time, effort, and money. Fees are required to apply for incorporation and tax exemption. The use of an attorney, accountant, or other consultant may also be necessary.

What are the exempted sales? ›

Exempt sales are based on the business or entity making the purchase. This means that the business or entity making the purchase is exempt from paying sales tax. Refer to this guide for common reasons that a business would be exempt from paying sales tax.

What is the use tax in Washington state? ›

Rate of use tax

The state portion is 6.5%. The local portion varies depending on where the goods are put to use. Example: A Seattle automobile dealership will pay 8.8% use tax on shop supplies consumed in that dealership, while an Olympia dealership will pay 8.4% use tax on the same items.

What is an exempt well in Washington state? ›

Permit-exempt wells are authorized through RCW 90.44. 050. This state law allows use of groundwater for specific purposes without the need to obtain a water rights permit. Although these permit-exempt uses don't require a water right permit, you are still subject to state water law.

What services are exempted from service tax? ›

  • SECTION 93 OF THE FINANCE ACT, 1994. ...
  • MEGA EXEMPTION NOTIFICATION (notification no. ...
  • 2.1 UNITED NATIONS OR SPECIFIED INTERNATIONAL ORGANIZATION. ...
  • 2.2 HEALTH CARE SERVICES. ...
  • 2.3 CHARITABLE ACTIVITIES. ...
  • 2.4 RENTING SERVICES. ...
  • 2.5 LEGAL SERVICES. ...
  • 2.6 TECHNICAL TESTING.

Which services is not included in taxable services? ›

Example: Salt, grains, jaggery etc. Supplies are taxable but do not attract GST and for which ITC cannot be claimed. Example: Fresh milk, Fresh fruits, Curd, Bread etc. These supplies do not come under the purview of GST law.

Which goods are exempted from goods and services tax? ›

Exempted goods under GST

Grapes, melons, ginger, garlic, unroasted coffee beans, green tea leaves that are not processed, and more. Food items that are not put into branded containers like rice, hulled cereal grains, wheat, corn, etc. Components like human blood. Unspun jute fibres, raw silk, khadi fibre, etc.

What are 3 items that are not taxable? ›

Nontaxable income won't be taxed, whether or not you enter it on your tax return. The following items are deemed nontaxable by the IRS: Inheritances, gifts and bequests. Cash rebates on items you purchase from a retailer, manufacturer or dealer.

Who pays sales tax in Washington state? ›

The buyer must pay sales tax to the seller, and each seller must collect from the buyer the full amount of the tax. Vessel brokers and dealers are sellers under the law (RCW 82.08. 050) and are required to collect and remit sales tax to the Department of Revenue with their excise tax returns.

Does a 501c3 need a business license in Virginia? ›

After your articles of incorporation have been filed and you sign corporate bylaws, your nonprofit is official, but you will still need to obtain the licenses and permits that all new businesses must have to operate.

Do nonprofits have to register in Virginia? ›

Yes. Charities in Virginia must renew their registration annually by re-filing the Registration Statement For A Charitable Organization each year.

How much is a 501c3 in Virginia? ›

Apply for 501(c)
Agency:Internal Revenue Service (IRS)
Filing Method:Mail
Agency Fee:$275 for organizations filing Form 1023-EZ and $600 for organizations filing Form 1023.
Turnaround:1023-EZ average: <1 month. 1023 average: 3-6 months.
2 more rows

How many board members does a 501c3 need in Virginia? ›

Virginia Nonprofit Board Member Requirements

The organization structure of your nonprofit in Virginia MUST include at least 3 directors not related to each other.

How many board members are required for a nonprofit in Virginia? ›

A 501(c)(3) eligible nonprofit board of directors in Virginia MUST: Have at least three board members that are not related to each other.

Do nonprofits need a local business license? ›

If you operate a nonprofit and are incorporated in the state where you operate, you must adhere to state laws and regulations, including business licensing and registration requirements.

Do nonprofits have to register with the IRS? ›

Nonprofit with gross receipts of more than $50,000 in the year must file the Exempt Organization Annual Information Return (FTB Form 199) (Instructions) – This is the State of California's annual return.

Is there a difference between a not for-profit and a nonprofit? ›

Nonprofit vs not-for-profit organizations

Nonprofits are formed explicitly to benefit the public good; not-for-profits exist to fulfill an owner's organizational objectives. Nonprofits can have a separate legal entity; not-for-profits cannot have a separate legal entity.

Can a 501c3 have too much money? ›

As we stated above, there is no limit to how much money a nonprofit can have in reserve. The key is in the organization's financial management, whether that means reinvesting the reserve back into the nonprofit's mission or ensuring financial security by saving money.

Do 501c3 founders get paid? ›

The nonprofit founder sits on the board and is NOT paid for the time they put into the organization. Nonprofit board members need to be volunteers (getting paid can get you into some real legal trouble).

What is the best state to form a 501c3? ›

5 Best States to Incorporate a Nonprofit Organization
  • Delaware.
  • Arizona.
  • Nevada.
  • Wisconsin.
  • Texas.
25 Nov 2022

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