Each year, nonprofit organizations can choose two one-day tax-free sale days. Although an organization can be exempt from paying sales tax based on IRS designation (501 c 3, 4, 8, 10 or 19), they must collect and remit sales tax on non-food items sold outside of designated days. By planning your fundraiser, auction, garage sale, school spirit wear or uniform sale on a designated tax-free day, you can promote the ‘no sales tax’ benefit. Organizations that qualify have the flexibility to choose dates for a 24-consecutive hour tax-free day, and the two days can be back-to-back for 48 hours. Items sold for over $5,000 don’t qualify, unless the item is manufactured by the organization.
Student organizations affiliated with colleges or universities can hold a one-day, tax-free sale each month to raise funds for the organization. The tax-free day doesn’t apply for student business for profit or for items sold for over $5,000. The exception is if the item is manufactured by the organization or the item is received as a donation and not sold back to the donor.
If you have any questions about tax-free days or other nonprofit tax related issues , please contact Christina Nichols Morris, Tax Senior at Salmon Sims Thomas & Associates.