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SherriB13 · Oct 13, 2013, 11:09 AM

I am the President of a 501(c)(3). We are having a fund raiser and have asked "vendors" to sell at the fund raiser. Question - do we need to ask the vendors to charge tax on items sold or are they beneath our umbrella of the 501(c)(3) and do not need to collect taxes? All of the money received from the event will go to the charities we support.

ebaines · Oct 13, 2013, 01:02 PM

Please clarify your relationship to these vendors. Are the vendors being paid for their wares by their customers and then donating some $$ to you? Or are you being paid directly by customers, and if so how do the vendors get reimbursed for the cost of their wares?

Also, rules about sales tax for items sold by a 501(c)(3) vary by state, so please tell us what state you are in.

SherriB13 · Oct 13, 2013, 11:51 PM

Originally Posted by ebaines

Please clarify your relationship to these vendors. Are the vendors being paid for their wares by their customers and then donating some $$ to you? Or are you being paid directly by customers, and if so how do the vendors get reimbursed for the cost of their wares?

Also, rules about sales tax for items sold by a 501(c)(3) vary by state, so please tell us what state you are in.

We are in Arizona. We will handle all of the sales and write a check to the vendors minus 15% of their sales which they are giving back to our organization.

ebaines · Oct 14, 2013, 04:56 AM

In AZ it seems that 501(c)(3) organizations do not have to collect sales tax on retail sales, though the city where the fund raiser is taking place may have its own rules. From: http://www.azdor.gov/Portals/0/Brochure/501.pdf :

"The following types of transactions are not subject to the state's TPT. (Cities impose their taxes separately from the state. Contact the cities for information about exemptions from city privilege and use taxes.) ..... 6. Retail sales made by a non-profit charitable §501(c)(3) organization that is recognized by the IRS as anon-profit charitable organization. (This pertains to sales by the organization, not purchases.)"

The bad news is that I believe the 501(c)(3) will have to pay sales tax to the vendors, since you are in effect buying the goods for resale. Sales to a non-profit in most cases except for health care organizatins are not exempt from sales tax in AZ. I don't believe your "charitable umbrella" covers them, unless they use the proceeds of their sales for charitable purposes.

I think you might be better off having the vendors sell their wares directly to customers and pledge to donate a percentage of their proceeds to you. That approach saves you from dealing with the sales tax issue and gives them a charitable deduction they wouldn't otherwise have, so everyone comes out ahead.