The Indiana Department of Revenue (IDOR) issued "Information Bulletin #10 Dated May 2022," which outlines changes in sales tax collection and tax-free purchases for nonprofit organizations. This post will provide a brief overview of the changes imposed by this revision.
When does my nonprofit need to register with IDOR?
An IRS §501(c) nonprofit organization must register with the Nonprofit Section of IDOR and receive a taxpayer identification number before it (1) makes taxable retail sales or (2) makes tax-exempt purchases. In order to make tax-exempt purchases, a nonprofit must file Form NP-20A via INTIME.
New Sales Tax Exemption Standard.
Prior to July 1, 2022, Indiana nonprofits could make unlimited retail sales for fundraising and be exempt from sales tax as long as such sales were conducted within a thirty (30) day period. Effective July 1, 2022, fundraising through sales of products by a nonprofit are exempt from sales tax up to $20,000 in total sales per calendar year. Once your nonprofit hits the $20,000 mark in a calendar year, it must collect and remit sales tax on an ongoing basis for the remainder of said calendar year.
This new $20,000 exemption limit does not apply to sales of books, periodicals, or other property that is intended to primarily further a nonprofit's educational, cultural, or religious purposes, or the professional qualifications of a nonprofit's members. Items meeting this definition may be sold tax-exempt year round.
Retail Merchant Certificate & Sales Tax Filing Requirements.
All nonprofit organizations required to collect sales tax must register with IDOR and obtain a "Retail Merchant Certificate," and must be registered as nonprofit organizations (such registration can be completed via inbiz.in.gov). Once registered for the first full year, a nonprofit will be required to file a sales tax return based on the prior year's sales volume. Even in periods where no tax is due, a nonprofit is still required to file a sales tax return (this is known as a "zero return").
Tax Exempt Purchases by Nonprofits.
In order for a nonprofit to make purchases exempt from sales tax, it must register with IDOR no later than 120 days after its formation, after which it can obtain a Form NP-1 (exemption certificate) from INTIME. Purchases by social organizations (where 50% or more of purchases are related to social activities) are NOT exempt from sales tax.
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