Wisconsin: Nonprofits and Sales Tax Exemptions
- Oct 9, 2013 | Gail Cole
The word “nonprofit” evokes certain thoughts: good deeds, Sally Struthers, and tax exempt. Nonprofit organizations are usually exempt from income tax, both federal and state. Sales tax, however, is a different beast. Sales by a nonprofit may be exempt from sales tax, and they may not be. Nonprofits can usually purchase items tax free, although sometimes they cannot.
To clarify the issue, the Wisconsin Department of Revenue has released a fact sheet, “Occasional Sale Exemption for Nonprofit Organizations.” It explains when a nonprofit’s sales are exempt from sales tax.
Sales may be exempt if all of the following conditions are met:
- The nonprofit organization is not engaged in a trade or business;
- Entertainment is not involved at an event for which charges by the nonprofit organization constitute admissions; and
- The nonprofit organization does not have and is not required to have a seller’s permit.
The nonprofit organization is not engaged in a trade or business
Nonprofits may sell taxable products without sales tax, but only for 20 days or less in a calendar year. If the nonprofit hosts an event that involves sales of tickets, only the days of the event are counted towards the 20 days, not all days during which tickets for the event are sold.
In addition, sales of otherwise taxable products may not exceed $25,000 annually.
Sales by a nonprofit are subject to sales tax after the $25,000 and 20-day thresholds have been met.
Bingo alert: bingo receipts must be included in the 20-day, $25,000 standard. Additional information is available here.
Entertainment is not involved at an event for which charges by the nonprofit organization constitute admissions
In fact there may be entertainment, but all entertainers must be paid $500 or less during a single event. That includes amounts for entertaining, prize money, and reimbursement of expenses.
The nonprofit organization does not have and is not required to have a seller’s permit
It’s best to quote the Department of Revenue fact sheet directly on this one: “A nonprofit organization that would otherwise qualify for exempt occasional sales, except for the involvement of entertainment, may do the following:
- Obtain a seller’s permit …for the day or days of the event involving entertainment;
- Pay sales tax on sales of tangible personal property and taxable services on these days; and
- Request inactivation of the seller’s permit after the event."
WARNING: A nonprofit must request inactivation of the seller’s permit in order to qualify for the occasional sale exemption on taxable sales and services after the event.
Wisconsin nonprofit organizations “organized and operated exclusively for religious, charitable, scientific, or educational purposes, or for the prevention of cruelty to children or animals are exempt from Wisconsin sales and use tax on all purchases of tangible personal property or taxable services.” They must apply for the exemption on a Form S-103 and supply sellers with a valid exemption certificate. Many (but not all) out-of-state nonprofit organizations are also exempt, provided they give the seller a valid exemption certificate (Form S-211 or Form S-211-SST).
Out-of-state public schools, however, must pay sales tax on taxable Wisconsin purchases.
Learn more about sales tax exemptions for nonprofit organizations; read the department’s booklet on the subject, available here.
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