When PTAs sell items but use profits exclusively to support the purpose of the association, they are considered consumers and not retailers of certain items that they sell (California Department of Tax and Fee Administration).
Tax exempt does not mean PTAs do not have to pay sales tax. It means you are not subject to tax on your sources of income such as donations, membership, and sales of merchandise that you have purchased for fundraisers.
Sales tax is paid at the time of purchase by units. Consequently, sellers permits are not required by units to conduct sales of those items. Note carefully that the condition for this exemption requires that the profits from sales must be used exclusively to further the association’s purposes.
Vendors do not always charge sales tax to units for items purchased for sale at fundraisers. At times, vendors have stated that units are never charged sales tax, or they have argued that units need a seller’s permit, because they are selling merchandise to the consumer.
According to Nonprofit Organizations Publication 18 (available from the California Department of Tax and Fee Administration website at https://www.cdtfa.ca.gov/formspubs/pub18.pdf), units are excluded from collecting and remitting sales taxes for items sold, and have been determined to be consumers of the items purchased. The proceeds from items sold, however, must be used exclusively to further the association’s exempt purpose. This means units must pay sales tax to vendors for such items intended for sale when they purchase items from vendors. Units are not considered to be sellers of items as a result of this special exclusion and, therefore, do not have to obtain Sellers’s permits or file sales returns.
Units may have to inform vendors of their exclusion status and insist on paying sales tax to the vendors. Units may need to adjust vendor invoices to include sales tax and pay the adjusted amount. Units may have to consider using different vendors if they are unable to obtain cooperation or agreement regarding the payment of sales tax to the vendors.
If a PTA is not sure who is responsible for reporting and paying tax on sales it arranges with a fundraising company, it should call the California Department of Tax and Fee Administration customer service center for assistance at 1-800-400-7115 (CRS: 711).
Council and district PTAs do not meet the same criteria as units and, therefore, are required to have sellers permits obtained from the California Department of Tax and Fee Administration if they are engaged in fundraising that involves the sale of tangible items.
Because of the great diversity of fundraising activities by council and district PTAs, consult Nonprofit Organizations Publication 18, available from the California Department of Tax and Fee Administration website at https://www.cdtfa.ca.gov/formspubs/pub18.pdf to determine what may and may not be taxable.
Beginning April 1, 2019, out-of-state vendors are required to register with the California Department of Tax and Fee Administration (CDTFA), collect the California use tax, and pay the tax to the CDTFA based on the amount of their sales into California. PTAs should refer out-of-state vendors to the CDTFA online guide at https://www.cdtfa.ca.gov/industry/wayfair.htm.
