As a non-profit organization, you may receive many perks that can help you in your mission to apply as much of your organization’s donations to the root cause of your project. These include the familiar 501c3 status, which exempts most non-profit organizations from federal income tax, as well as a potential exemption from state income tax, as well. These rules vary by state.
However, in addition, purchases made by your organization may also be exempt from paying state sales tax on purchases you make. More rarely, some organizations may also be exempt from charging sales tax on items they sell to the public.
Sales tax exemption rules vary from state to state. In general, a non-profit organization can be exempt from paying state sales tax on items purchased to directly be used in the service of the organization. For example, if you run a soup kitchen for the homeless, you may not have to pay sales tax on the food purchased that will be prepared in the soup kitchen and fed to homeless patrons.
In some circumstances, non-profits may also be exempt from collecting sales tax on goods and services they sell to the public to raise money for their organization. This is much more rare than the exemption from paying state sales tax.
If you’re starting a non-profit organization, it’s a good idea to consult an attorney that specializes in working with non-profit organizations. They can assist you in applying for all exemptions for which you qualify, and ensure you don’t take advantage of exemptions to which your organization is not entitled. The laws on sales tax exemptions can be quite complicated, and are very different depending upon the state in which you do business.
To determine if you qualify for Minnesota sales tax exemption, talk to a local attorney.
