Texas Nonprofit Fundraisers and Sales Tax

Now that the holiday season has arrived, I’m seeing many nonprofits promoting their holiday fundraising sales. Everything from candy and fruit cake to gift wrap and candles is available as well as events such as carnivals, breakfasts with Santa, and more. Are you aware of how Texas sales tax may affect your fundraiser?

Most people answer that question with, “Oh, that’s not an issue. We are tax-exempt.” That misunderstanding of the Texas tax laws could lead you into trouble.

Texas sales tax is the burden of the purchaser, not the seller. Your organization may be exempt from sales tax for the things you purchase. That, however, is not related to your obligation to collect sales tax on the things you sell—even if the proceeds are for charity!

There are many considerations in determining if you need a sales tax permit and must collect sells tax from your customers and event attendees.

  • Are the goods or services taxable? From tangible retail items to services, you must determine if what you are selling is deemed a taxable or non-taxable item or service by the state.
  • Is served food taxable? Different situations have different answers to this question. From event concession stands to the annual gala, it depends on when, where, and by whom the food is served.
  • What about magazines and books? It depends on who published and distributes it.
  • What if we are working with an outside fundraising company? This relationship requires that you determine if you or the third-party company is responsible for your sales tax obligation based on the circumstances.
  • What about the auction at our event or our garage sale? This is determined by the type of organization, your IRS tax-exemption, and the frequency of your event.

From the neighborhood pee-wee football league and chess club to nationally-known hospitals and museums, many nonprofits are engaged in activities that require a Texas state sales permit and the collection of taxes on goods and services sold.

Understanding your organization’s obligation for collecting sales tax is just one of the many responsibilities of nonprofit board members. Training for board members and other volunteers of Texas nonprofit, tax-exempt organizations is available through the two-day Nonprofit Management Academy. If you are engaged with a nonprofit organization, you owe it to yourself as well as your organization to seek training about your role and responsibilities in running your organization.

Don’t let a lack of knowledge about Texas sales tax jeopardize your organization.

Mona Fluitt is not an attorney nor tax advisor. This article is for discussion purposes only and should not be considered legal or tax advice.

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