part 3 in a 4-part series about Church Tax Exemption
An easily-overlooked bit of paperwork for new plants is the church sales tax exemption. If you’re still paying sales tax, you could be throwing away hundreds of dollars each year, money that could be used to further your mission.
No state is going to require that a new nonprofit file for a sales tax exemption. In fact, chances are good they won’t even bring it up. Maybe that’s why it’s so easy to miss. But a lot of states that have a sales tax give churches and other nonprofits a sales tax exemption.
I offer you 4 categories of states in relation to church sales tax exemption:
- States that don’t have sales tax at all
- States that offer a church sales tax exemption
- States that offer a church sales tax rebate
- States that don’t cut any nonprofits a break
The lists for each of those 4 categories are incomplete but growing. If your state isn’t mentioned and you happen to know how it works in your state, I’d sure appreciate a comment below, or give me a shout over on FaceBook or Twitter.
Ah, the 501c3 Letter
Some states will take your word for it. Others I’ve worked with won’t give you the time of day until your church gets its own 501c3 Nonprofit Determination Letter. Sadly, you can be 6+ months waiting for that to come back from the IRS. Here are my tips on getting it back faster in case your state plays hard ball.
How You Pay Matters
How is the store going to know whether you’re buying stuff for yourself or for your church plant? Some states require that you pay with a church check or card in order to qualify for the exemption. But whether or not it’s required, it’s just good sense to do that anyway. Of course, that brings up a whole other issue about who should have access to the church accounts, but we’ll tackle that some other day. I will say that if at all possible, the church planters and their immediate family should not sign on church accounts.
Maybe it goes without saying, but you should also make separate purchases if you’re at a store and you’re buying some things for the church and some things for your own family. Paying for church stuff with a church payment instrument and paying for your own stuff with your own money helps keep things straight.
Stores Do it Differently
Oh, and some stores will be OK with you showing a sales tax exemption form or card at the time of purchase. Hopefully the cashier will be trained on how to nuke the tax on the purchase. If not, what a great opportunity to show some encouragement and make a new friend!
Other retailers, especially nationwide chains, often prefer you to set up a nonprofit account with them, often by applying online. For those stores, you’d swipe the church’s store card when you’re making a purchase for your church. That’s probably easier for them, but you may end up with a fist full of cards, one for every store you frequent.