The Indiana Department of Revenue has updated its Sales Tax Information Bulletin (No. ST10, 06/01/2023) relating to the application of sales tax to nonprofit organizations. The update reflects changes to the law that affect how much sales tax nonprofits have to collect and remit when they sell goods to raise funds for their causes.
Changes At a Glance:
- Nonprofits in Indiana generally won’t need to charge sales tax on sales made for fundraising activities, so long as they make less than $100,000/year in sales in the current or prior calendar year
- Indiana’s previous requirement that nonprofit sales take place within a 30-day window in order to not charge sales tax has been repealed.
What are Indiana’s sales tax changes for non-profits?
Previously, sales of goods by nonprofit organizations that were carried on for up to 30 days in a calendar year as a fundraising activity were exempt from sales tax. This means that nonprofits did not have to charge sales tax to their customers or pay sales tax to the state for these sales.
New Tax Exemption Threshold for Nonprofits: Overturn of the 30-Day Rule
Effective July 1, 2022, the 30-day rule was repealed and replaced with a threshold exempting sales of goods less than $20,000 in a calendar year used to raise funds to further the nonprofit purposes of the organization. This means that nonprofits can sell goods for more than 30 days in a year without charging or paying sales tax, as long as their total sales do not exceed $20,000 in that year.
Significant Increase to Nonprofit Tax Exemption Threshold: Exceptions and Conditions
Effective May 4, 2023, the $20,000 per year threshold is increased to $100,000 in either the current or previous calendar year. This means that nonprofits can sell goods up to $100,000 in a year without charging or paying sales tax, as long as their total sales did not exceed $100,000 in either the current or previous year.
The $100,000 threshold applies to all qualified nonprofits except:
- Churches and other places of worship
- Monasteries and convents
- Schools that are part of the Indiana public school system
- Parochial schools regularly maintained by a recognized religious denomination
- Youth organizations focused on agriculture
- These six types of nonprofits are exempt from the requirement to collect and remit sales tax regardless of the dollar amount of sales in a year.
What does this mean for Indiana nonprofits?
- Nonprofits should keep track of their total sales of goods in a calendar year and compare them with the applicable threshold to determine if they have to charge and remit sales tax.
- Nonprofits should review their sales tax exemption certificates and update them if necessary. Nonprofits can apply for a sales tax exemption certificate online at https://www.in.gov/dor/online-services/sales-tax-exemption-certificate/.
- Nonprofits should consult with a tax professional if they have any questions about how the changes affect their specific situation.