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Indiana Department of Revenue

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Sales Tax Exemptions for Nonprofits

Nov. 24, 2014

Nonprofits seem to be especially active during the holiday season. During this time of year we show the famous “Hoosier hospitality” through food kitchens, holiday craft shows, toy collections, bake sales and much more.

But, during this time, it’s sometimes difficult for nonprofits to remember the rules about when they are or aren’t exempt from sales tax. Here’s a quick refresher.

But first, are you a qualified nonprofit?

If you have an organization that buys and sells tangible personal property but does not make a financial profit, you would generally be classified as a nonprofit corporation. To register as a nonprofit and qualify to receive sales tax exemptions, you must:

  • Qualify properly as a nonprofit: You must secure a nonprofit, or tax exempt, status from the Internal Revenue Service (IRS). The IRS will provide you with a Federal Determination letter, showing the exemption from federal tax.
  • Nonprofits who wish to have the Indiana sales tax exemption next must file a Nonprofit Application for Sales Tax Exemption (Form NP-20A) and annually file a Nonprofit Organization’s Annual Report (Form NP-20) with the Indiana Department of Revenue.

Nonprofits making sales

If you sell items for 30 days or less during a calendar year (it doesn’t matter if they are consecutive or not), your sales will be exempt from sales tax. That means during your annual ornament sale you do not need to collect Indiana’s seven percent sales tax!

If you engage in sales for 31 or more days during a calendar year, you must register as a retail merchant and collect sales tax. Find details at www.in.gov/dor/3968.htm if you think you’re in this category.

Nonprofits making purchases

If you’re a qualified and registered nonprofit, you will be exempt from paying sales tax on some of your purchases. Here are some of the requirements for exempt purchases:

  • The item purchased must be used for the same purpose for which your organization is exempt.
  • The transaction must be invoiced directly to your nonprofit organization and paid directly via your organization’s funds
  • Purchases for the private benefit of any organization member, such as meals and lodgings, are not eligible for exemption.

For each of these exempt purchases, you will need to complete Form ST-105 and provide it to the vendor from whom you are purchasing an item. The form tells the vendor it is ok to not charge you sales tax. The vendor must use the form to verify you are sales tax exempt, and keep a copy to show the Department of Revenue if audited.

Here are a few notes about completing Form ST-105:

  • It should be signed by a responsible business representative – a board trustee, a secretary/treasurer or in some cases a pastor/minister.
  • It should be updated periodically as circumstances, staff, or other details change.
  • It can be issued to a vendor on a “blanket” basis (there is a checkbox on the form) for vendors from whom you purchase regularly. In these cases, you would not need to repeatedly provide the form.
  • It is a vendor’s responsibility to grant sales tax exemptions only to those who present qualified and correctly completed exemption certificates, so be sure your Form ST-105 is correctly and completely completed.

Resources
As always, don’t hesitate to contact the department if you have questions about your nonprofit. Here are a few resources to help:

Black Friday and Cyber Monday: Sales Tax vs. Use Tax

Nov. 18, 2014

Cyber MondayWhat’s your shopping style? Do you wake up early to snag the Black Friday deals, or do you prefer to shop virtually on Cyber Monday?

We hate to be the ones to ruin the holiday fun, but remember that whichever way you shop, both carry a tax: sales tax or use tax.

So, what’s the difference between sales tax and use tax?

Sales tax is a common tax paid on most items at retail stores. When you buy an item from a retailer, you’ll pay Indiana’s 7 percent sales tax on that purchase (though there are a few exceptions). The retailer collects the tax and sends it to the state.

On the other hand, use tax is owed when a sales tax is not paid on purchases made over the internet or while traveling outside Indiana. Hoosiers shopping on Cyber Monday should check and see if their online purchases charge a sales tax; if not, they will owe use tax to Indiana. Although less known, this tax has been collected on the state income tax return since 1969.

While sales tax is collected at the time you buy something, you usually won’t pay the use tax on your purchase until you file your Indiana income tax return. Because state tax returns will be filed in a few months time (tax season begins in January), here’s the two step process:

Step 1: Complete the worksheet in the IT-40, IT-40EZ or IT-40PNR instruction booklet (2014 forms will be available online the beginning of December) to help you figure how much use tax is owed.

Step 2: Enter the amount owed on Schedule 4 of Form IT-40, on Schedule E of Form IT-40PNR, or on line 8 on the Form IT-40EZ, depending on which form is filed.
For example, you paid $100 for a new winter coat and snow pants in 2014 and no sales tax was charged. You would report $7 use tax when filing your Indiana income tax return ($100 x 7%) during the upcoming 2015 tax season.

To learn more about Indiana’s use tax, read the Use Tax FAQs.


If you would like to submit a question or topic suggestions, please send them to feedback@dor.in.gov
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