Do You Owe Sales Tax?

As a nonprofit organization you may qualify for exemption from paying both federal and state income tax, but sales tax is a different matter. With some exceptions, a nonprofit’s sales and purchases are taxable. In other words, nonprofit and religious organizations, in general, are treated just like other California sellers and buyers for sales and use tax purposes.

For example, one of our local nonprofits held a day-long yard sale. All of the items sold had been donated to the organization for this purpose. Some members of the organization were surprised to learn that they needed to pay sales tax to the State of California based on the amount of their sales that day.

Some other examples:

• Sales of food, meals, beverages, and similar items under a number of different circumstances.
• Sales of tickets that buyers will exchange for food, beverages, or other physical products.
• Sales of booklets, books, pamphlets, etc.
• Sales of tickets for fundraising events when the ticket price includes amounts for food or beverages.
• Sales of merchandise in Internet, live, and silent auctions.

Thankfully, the California Department of Tax and Fee Administration has published a guide specifically for nonprofits. Download your copy here.