Should You Be Collecting Fundraiser Sales Tax?

How to know whether you should be collecting sales tax.

Many think nonprofit organizations don't need to collect fundraiser sales tax. It turns out that this is one of the most confusing issues when conducting sales campaigns. Sponsors usually fall into one of two camps: 1. they've done their homework and understand their tax laws, or 2. they don't have a clue but assume that since they're raising money for their school, they don't need to worry about collecting tax.

You don't want to be in a situation where you're unnecessarily collecting sales tax more than you're not collecting it when you should be. In other words, just because you're a nonprofit organization doesn't mean you're automatically tax-exempt. Before your next fundraiser, here are some questions that you'll want to know the answers to:

What is My Local Tax Policy?

Every state handles tax differently. Some states, like Delaware, Montana, and Oregon, don't charge taxes. Other states, like New York, collect tax on the retail price while a few collect on the wholesale amount.

States also differentiate based on the type of product sold. For example, many states won't charge tax on prepackaged food items like cookie dough. However, food that doesn't meet specific nutritional requirements might be taxed.

For more information, see our brochure fundraiser tax guide.

What About Tax Exempt Certificates?

Some states require that you collect fundraiser sales tax unless you have the proper exemption certificate, while others require that you pay the tax regardless. On the other hand, in Texas, you're allowed two 24-hour tax-free days; however, specific other requirements must also be met.

What if We Have to Collect Sales Tax?

Many school fundraising companies provide sales brochures with the tax already added to the price of the items. This makes it easier for you and your customers because no extra sales tax needs to be collected. However, the tax amount will be added to your invoice. The company then pays the tax to your state's Department of Revenue on your behalf.

What about Online Fundraising Sales?

Some states will charge tax directly to your supporters for online purchases. Since this is a consumer tax, you're not responsible, even when the school profits from the sale.

The bottom line is before you assume you don't need to collect fundraiser sales tax, consult with your state revenue department. You may be surprised at what you'll be required to do, if anything.

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.