Take a moment from contemplating an escape to the warm shores of Costa Rica to read this reminder from our friendly Texas Comptroller. Who wants us to remember exempt organizations doing business in Texas still have to collect and remit sales tax for items it sells. And as we gear up for a new year of fundraising, this couldn’t be a better time for a reminder.
Not sure whether you’re handling sales tax correctly? Here’s a brief refresher and links for more information.
Unless exempt, anyone doing business in Texas (who sells taxable services or sells/leases personal property) has to apply for a sales and use tax permit. At the time of application, you find out when you’ll be responsible for sending taxes in. How to report sales taxes will depend on the amount of taxes paid in the previous year. And what happens if you don’t file on time? There could be a monetary fine, along with a certain percentage of money due as a penalty.
Yep. Certain organizations can apply for an exemption from sales and use taxes, so they won't have to pay taxes on specific items. But there’s confusion around when the sales tax exemption applies. The sales tax exemption applies when an exempt organization is purchasing, not when the organization is selling. And even when an exempt organization is purchasing, the purchase has to be something that helps the organization carry out its mission. So sorry, no break on that Snuggie for the office.
Most organizations build the tax into the price for whatever is being sold. But remember, if you build sales tax into your price you have to include a statement that the price includes tax.
The Comptroller’s article (linked below) walks through this. Most attorneys don't do numbers, and the decimal points started to make me a bit anxious, so I’ll defer to article.
Exempt organizations sales and purchases: https://www.comptroller.texas.gov/taxes/publications/96-122.pdf
Guidelines to texas tax exemption: https://www.comptroller.texas.gov/taxes/publications/96-1045.php
Link to the page for exempt organizations: https://www.comptroller.texas.gov/taxes/exempt/
Link to the newsletter: https://www.comptroller.texas.gov/taxes/tax-policy-news/2016-october.php