The Nonprofit Sales Tax Misconception

Do you still think your school is tax-exempt?

There seems to be an ongoing misunderstanding regarding fundraisers and sales tax. While many nonprofit groups challenge it, others assume they're tax-exempt and don't bother to verify. They assume tax is not an issue because they're a "nonprofit".

Depending on the state, groups may be required to pay tax and usually fall into 1 of 6 categories. One, they're not required to pay tax but must possess a tax-exempt certificate. Two, the group's not exempt. Three, the groups allowed a defined period to fundraise tax-free. Four, they're allowed a certain number of tax-free fundraisers. Five, only certain types of sales are eligible for tax exemption. Or six groups are automatically tax-exempt with no conditions.

Tax Fundraisers on Retail or Wholesale?

If you find your state does require the collection and payment of tax, you'll also need to know whether you must pay tax on the retail or wholesale price. In other words, do you pay tax on the retail price in the brochure or the billable amount? The wholesale price is what you owe the school fundraising company. So, for example, if an item is priced at $10 in the brochure and you are making 40% profit, then your wholesale or invoice amount would be $6. You would then be taxed based on the $6 amount if you had to pay tax on wholesale.

For more information, see our brochure fundraiser tax guide.

Tax-Included Fundraising Brochures

Many companies offer the service of collecting and paying your tax for you. They will even include the tax in the retail amount listed in the brochure. This way, the tax you end up paying the company will not affect your net profit. Otherwise, you would need to pay the tax out of your profit or have your parents collect the additional tax.

You have nothing to worry about if a nonprofit sales tax is not required in your state. However, we recommend confirming this with your state Department of Revenue first.

See our brochure fundraisers.

Author Bio

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.