Arkansas exempts sales by noncompeting nonprofits
- Sep 21, 2017 | Gail Cole
The Arkansas Legislature has enacted a tax exemption for certain sales by charitable organizations — but only if they don’t compete with sales by for-profit businesses.
Starting Oct. 1, 2017, Arkansas House Bill 1221 (Act 665) will allow a charitable organization to exempt a sales transaction when:
- All proceeds from the sale go to the charitable organization
- The sale does not compete with a sale by a for-profit business
- The sale is conducted by a member of the charitable organization (not a franchisee or licensee)
- The sales transaction is not a continuing one and isn’t held more than three times in a year
In so doing, Arkansas joins a handful of other states that exempt sales by nonprofits.
Nonprofits in other states
Every state treats nonprofits differently with respect to sales and use tax, but most do tax certain sales by nonprofits. For example, the state of Washington generally waives the requirement to collect sales tax for nonprofits engaged in “periodic fundraising activities.” Yet nonprofit organizations with $12,000 or more per year in gross receipts from sales, and/or gross income from services subject to the state’s business and occupation (B&O) tax, are required to register with the Department of Revenue and collect and remit sales tax.
Georgia is another state that generally requires nonprofit organizations engaged in business to collect and remit tax on retail sales. However, the state allows a limited number of businesses to makes sales exempt from tax. These include the Boys Scouts and Girl Scouts, licensed nonprofit adoption agencies and orphanages, and private and public K–12 schools. In California, certain sales by nonprofits are exempt, while other are taxable. Details are available in California State Board of Equalization Publication 18.
On the other hand, Missouri exempts all sales “made by or to not-for-profit civic, social, service, or fraternal organizations.”
Getting sales tax compliance right is tricky, whether you operate a small nonprofit or a large for-profit business. Tax automation software facilitates sales and use tax compliance for businesses of all ilks. Learn more.
photo credit: BRITISH COLUMBIA 1971 MUNICIPAL EXEMPT plate via photopin (license)
