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 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, you must understand local and state tax laws. Some states don’t require you to collect sales tax at all, while others charge tax on every item in your brochure, regardless of whether it contains food.
Understand your tax responsibilities before hiring a fundraising company to handle your brochure sale. This way, if you know you’ll need to collect the tax, there will be no surprises. If your state requires you to pay tax on your fundraiser, 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. First, you should find out what your state’s tax laws are on school brochure fundraiser sales. There are three possible scenarios:
- You must remit sales tax unless you 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 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 total $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 similarly. So don’t assume your brochure sale will be like selling t-shirts. For example, in Texas, schools having a brochure sale are considered an ‘agent for the seller’, which automatically obligates them to pay sales tax. On the other hand, if you purchase items you plan to sell, you get two 24-hour tax-free days to sell off your inventory. This state does not look at these two fundraisers in the same way. They see you’re taking on financial risk with the second one, so they’re willing to offer the two 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 plan to do a school brochure fundraiser.
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Clay Boggess has been designing fundraising programs for schools and various nonprofit organizations throughout the US since 1999. He’s helped administrators, teachers, and outside support entities such as PTAs and PTOs raise millions of dollars. Clay is an owner and partner at Big Fundraising Ideas.