Sales Tax

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 State Board of Equalization).

Sales tax is paid at the time of purchase by units. Consequently, resale use 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 Tax Tips for Nonprofit Organizations (available from the California State Board of Equalization website at boe.ca.gov), 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 vendor absolutely refuses to collect sales tax and no other vendor is available to satisfy the unit’s requirement, sales tax for items purchased can and should be remitted by the unit to the Board of Equalization via written letter. This is not the usual action, but it is available if other actions as previously described are unsuccessful. Board of Equalization local office locations are available from the Board of Equalization website at boe.ca.gov.

Council and district PTAs do not meet the same criteria as units and, therefore, are required to have resale use permits obtained from the California State Board of Equalization 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 Tax Tips for Nonprofit Organizations Publication 18, Sales and Use Tax Guide for Volunteer and Nonprofit Fundraising Organizations, available from the California State Board of Equalization website at boe.ca.gov to determine what may and may not be taxable.

If an out-of-state vendor does not have a resale certificate permitting him/her to do business in the state of California, then the unit must secure a one-time-only Resale Use Permit and the forms and instructions necessary to maintain records, file returns and pay use tax on gross sales from the State Board of Equalization office; contact via website at boe.ca.gov.

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