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Tax Exempt does not mean sales tax exempt

"My organization is a non-profit, so I don't have to pay sales tax, right?" Unfortunately, the answer is no. According to the CA Board of Equalization (who collect CA sales tax):

“Nonprofit organizations generally need a seller’s permit if they make sales of goods or merchandise in California. This is true even if the sales are not taxable.”

Imprint Revolution is required by CA law to charge sales tax on every sale unless you have provided a valid CA Resale Certificate wherin you attest that you have a valid CA seller's permit and that the goods you are purchasing from us are for resale. We must have this certificate on file before you take possession of your items, or we must charge sales tax.

Many organizations present us with a document from the IRS, which appears to indicate that they are exempt from Federal income tax.  However, the IRS is a federal agency and has no jurisdiction over state sales tax.

California (specifically the Board of Equalization) has jurisdiction over state sales tax.  Here is a link to a document from the CA BoE regarding non-profits and income tax exempt organizations with respect to sales tax:
http://boe.ca.gov/pdf/pub18.pdf

Some relevant points:

“Although many nonprofit and religious organizations are exempt from fedĀ­eral and state income tax, there is no similar broad exemption from California sales and use tax. Generally, nonprofit groups’ sales are taxable, as are their purchases. In other words, nonprofit and religious organizations, in general, are treated just like other California sellers and buyers for sales and use tax purposes.”

And
“Nonprofit organizations generally need a seller’s permit if they make sales of goods or merchandise in California. This is true even if the sales are not taxable.”

Many business owners and their staffs do not understand tax very well, and many do not understand that an IRS letter cannot exempt you from State sales tax.  Because of this, some of these businesses unknowingly break the law by failing to charge sales tax to non-profits.  If they are audited by the CA BoE, they will be liable for this tax, along with penalties. Please don't ask us, or other businesses, to break the law in this way.

If you have more questions, feel free to contact us, though calling the BoE would be more productive, as this is their perview.  We are not a tax attorneys, but we do check up with the BoE about this matter annually, and they always say that we (and any other business who sells you products) must charge you sales tax unless you have a valid Seller’s Permit and a Sales Tax Exempt Letter signed by the CA Board of Equalization, which virtually no 501(c) organizations are eligible for (we yet to encounter one).

They invite you to call them at 800-400-7115 if you have further questions.




 

 

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