A guide to understanding sales tax for school fundraisers
There’s a reason tax accountants make so much money. They’re the only ones who can figure out our complex tax laws. If doing your own taxes was easy, everyone would be able to do it, and they’d be out of a job. Fortunately understanding how to handle school brochure fundraiser sales tax doesn’t have to be as difficult.
Before starting a brochure sale it’s important that you understand both your local and state tax laws. Some states don’t require that you collect sales tax at all, while others charge tax on every item in your brochure, regardless of whether it contains food or not.
Before hiring a fundraising company to handle your brochure sale, make sure you understand your tax responsibilities. This way, if you know you’ll need to collect the tax, there will be no surprises in the end. If your state requires you to pay tax on your fundraiser, you the company can remit it on your behalf, or you’ll need to pay it yourself.
Here are some questions that you’ll want to know the answers to:
Do We Have a Sales Tax Obligation?
Just because your organization is a nonprofit doesn’t mean you’re not obligated to pay sales tax. The first thing you should do is find out what your state’s tax laws are on school brochure fundraiser sales. There are basically 3 possible scenarios:
- You’ll be required to remit sales tax, unless you’re able to provide a tax exempt certificate.
- You’ll need to pay sales tax regardless. Some states don’t accept tax exempt certificates.
- Your state doesn’t collect sales tax. However, you should still check with your local city or county for any local tax obligations.
Are We Taxed on the Wholesale or Retail Amount?
The difference between wholesale and retail can be summed up using the following equation:
Retail (Brochure List Price) = Wholesale (Invoice Amount) + Group Profit
There’s a big difference between wholesale and retail. If you’re being charged tax on the wholesale price you’re not obligated to pay tax on your profit. For example, if your group’s making 40% profit, you’ll need to pay tax on the $6.00 invoice amount. This is the amount you’re being billed for. On the other hand, paying tax on the retail amount means you’ll be charged tax on the full $10.00 sales price listed in the brochure.
For more information, see our brochure fundraising tax guide.
Are All School Fundraisers Alike?
Your state may not handle two different types of fundraisers the same way. So don’t assume that your brochure sale will be just like selling t-shirts. For example, in Texas, schools that do a brochure sale are considered an ‘agent for the seller’ which automatically obligates them to pay sales tax. On the other hand, if you go out and purchase items that you then plan to sell, you get two 24 hour tax-free days to sell off your inventory. This state does not look at these 2 fundraisers in the same way. With the second one, they see that you’re taking on financial risk so they’re willing to offer the 2 tax free days.
If you have additional sales tax questions, it’s a good idea to contact your state department of revenue (DOR) and mention that you’re planning to do a school brochure fundraiser.