Taxes on Fundraising Events: What Georgia Non-profits Must Know
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Tax-exempt organizations rely on dinners, auctions and other special events to raise money and awareness.
But could these activities bring penalties for tax noncompliance?
All non-profits need to know about the taxes on fundraising activities in their state. So, evaluate your fundraising activities to determine if your non-profit should collect sales tax and pay it to the state.
Here are some important factors to consider for non-profits in Georgia and around the country.
The non-profit sector is an economic force in Georgia.
The state has almost 40,000 non-profit organizations, says non-profit coalition Independent Sector. They are a significant contributor to Georgia’s economy, with a total value of $96 billion in assets and $43 billion in expenditures every year, according to the Georgia Center for Nonprofits.
Georgia law does not guarantee sales or use tax exemption to churches, religious, charitable, civic and other non-profit organizations. A nonprofit should apply if they believe they qualify for an exemption. They must pay the tax on all purchases of tangible personal property.
When a non-profit gives tangible property or non-deductible benefits in appreciation for a donation, the non-profit is the end user and liable for sales and use tax on the price of the gift.
If a non-profit hosts a dinner that a member may attend for a minimum donation of $500, the non-profit will not collect sales and use tax on the $500 donation. But it does owe sales and use tax on all tangible personal property and taxable services purchased for the dinner and dance.
Non-profits involved in fundraising activities must not assume exemption from state sales tax.
Items sold at special events, including auction items and food, are subject to state and county sales tax unless the organization has received sales tax exemption. Entrance fees or tickets are generally subject to sales tax, as well. And for donated items later auctioned off at fundraising events, the organization must pay sales tax on the value of revenue generated.
If a non-profit organization intends to sell or serve alcohol at a special event in Georgia, state and local licenses are required, according to Pro Bono Partnership of Atlanta. The non-profit must pay sales and excise tax on any wine it sells. The same holds true for non-profits auctioning wine for later consumption at a special event. State and local permits must be obtained, and the non-profit must also pay sales and excise tax on any wine it auctions.
Interested in Non-Profit Tax Issues?
Fundraisers like casino nights, bingo events and raffles may constitute illegal gambling. Under Georgia law, paying an entrance fee to play a game of chance and win prizes constitutes illegal gambling. Raffles are also considered illegal gambling, but tax-exempt organizations may conduct legal raffles if they obtain a license in advance.
Remember These Tips
Ensuring tax compliance is complicated. Don’t let your organization fall victim. Consider these important factors before planning your next event:
- Check your state’s requirements: This is the first step you should take when holding a special event.
- Keep excellent records: This is especially true when tracking money and any products sold. Maintain proof of payment of sales and use tax on all tangible personal property and taxable services purchased for the event.
- Be aware of crossing jurisdictional lines: Online tools are a great way to broaden your reach, but they could expose you to jurisdictions with their own sales tax regulations.
- Get your permits: Non-profit organizations may be required to file permit applications for special events in the county and city in which the events will be held. Types of events that usually require a permit include parades, block parties and events held at public parks, plus those like raffles, bingo and gambling.
Be sure you’re complying with state tax obligations.
Consult with your tax advisor today to ensure you’re properly collecting sales tax on your organization’s fundraising events.
In today’s challenging environment, getting hit with hefty penalties can jeopardize your organization’s financial stability and, ultimately, its reputation.