ST 2007-03 - Sales and Use Tax: Sales by School Support
Groups and Other Charitable Organizations – Issued August,
2007
The purpose of this release is to explain a recent change in
Sub. H.B. 119 of the 127th Ohio General Assembly that expands
the authority of certain school-related organizations to make
sales without being required to collect Ohio sales tax.
The release will also address the application of Ohio sales
tax law to sales by other nonprofit organizations that are
operated exclusively for charitable purposes.
Under prior law, nonprofit organizations operated exclusively
for charitable purposes and school-related groups such as
student groups, parent teacher associations and other booster
organizations were permitted to make otherwise taxable sales
exempt from the tax so long as the organization did not make
such sales on more than six days in any calendar year.
Effective July 1, 2007, Ohio Revised Code (“R.C.”) section
5739.02(B)(9) was amended to provide an exemption from Ohio
sales tax for:
(a) Sales of services or tangible personal property, other
than motor vehicles, mobile homes, and manufactured homes, by
churches, organizations exempt from taxation under section
501(c)(3) of the Internal Revenue Code of 1986, or nonprofit
organizations operated exclusively for charitable purposes as
defined in division (B)(12) of this section, provided that
the number of days on which such tangible personal property
or services, other than items never subject to the tax, are
sold does not exceed six in any calendar year, except as
otherwise provided in division (B)(9)(b) of this section. If
the number of days on which such sales are made exceeds six
in any calendar year, the church or organization shall be
considered to be engaged in business and all subsequent sales
by it shall be subject to the tax. In counting the number of
days, all sales by groups within a church or within an
organization shall be considered to be sales of that church
or organization.
(b) The limitation on the number of days on which tax-exempt
sales may be made by a church or organization under division
(B)(9)(a) of this section does not apply to sales made by
student clubs and other groups of students of a primary or
secondary school, or a parent-teacher association, booster
group, or similar organization that raises money to support
or fund curricular or extracurricular activities of a primary
or secondary school.
(c) Divisions (B)(9)(a) and (b) of this section do not apply
to sales by a noncommercial educational radio or television
broadcasting station.
R.C. 5739.02(B)(9)(a) - Sales by Charitable
Organizations Generally
The revision to R.C. 5739.02(B)(9) makes no changes for sales
by churches or most nonprofit charitable organizations.
These entities can make sales of otherwise taxable items
exempt from sales tax so long as the organization does not
make taxable sales on more than six days in any calendar
year. If, in any year, an organization exceeds the
six-day limitation, it must obtain a vendor’s license and
begin collecting tax. Once it has exceeded the six-day
limit, the organization must collect tax on any taxable sales
it makes thereafter. In other words, the statute does
not provide a blanket six days of exempt sales every
year. Once the six-day limit is exceeded in any year,
tax must be collected on all future taxable
sales.
R.C. 5739.02(B)(9)(b) - Special Provisions for
Certain School-Related Groups
Am. Sub. H.B. 119 changed the provisions of R.C.
5739.02(B)(9) for certain school-related groups. This
change is embodied in division (b) of the statutory language
quoted above. This division eliminates the six-day
restriction on sales by:
*** student clubs and other groups of students of a primary
or secondary school, or a parent-teacher association,
booster group, or similar organization that raises money to
support or fund curricular or extracurricular activities of
a primary or secondary school.
Beginning July 1, 2007, all sales by such organizations are
exempted from the Ohio sales tax. As a result, such
organizations will no longer be required to hold a vendor’s
license or collect sales tax on their sales in Ohio.
Those that have obtained vendor’s licenses in the past may
cancel them effective June 30, 2007.
An organization that was required to collect tax prior to
July 1, 2007 must remit tax on all its taxable sales made
through June 30, 2007. If any tax is collected after
that date, it cannot be retained by the school-related group
and must be refunded to the purchasers or remitted to the
state. R.C. 5739.02(E) provides, in pertinent part,
“*** no person other than the state or such a county or
transit authority shall derive any benefit from the
collection or payment of the tax ***.”
The provisions of the new R.C. 5739.02(B)(9)(b) apply only to
sales by organizations such as student groups, parent-teacher
associations or booster groups. These provisions do not
apply to sales by a school itself. If a school
qualifies as an nonprofit organization operated exclusively
for charitable purposes, it would be entitled to make sales
under the provisions of R.C. 5739.02(B)(9)(a), discussed
above, so long as it does not exceed the six-day limit
imposed by that section. For example, a school that
operated a store where school supplies and logo clothing are
sold throughout the school year would be required to obtain a
vendor’s license and collect tax on those sales. [Sales
of food to students in a cafeteria are exempt pursuant to
R.C. 5739.02(B)(3).]
R.C. 5739.02(B)(9)(c) - Noncommercial Educational
Radio or Television Broadcasting Station
Division (c) of R.C. 5739.02(B)(9) provides that sales of
taxable tangible personal property or services by a
noncommercial radio or television broadcasting station are
not entitled to any exemption under that section. Sales
of taxable property or services in Ohio by such broadcasting
stations are subject to the Ohio sales tax. This
provision existed in prior law and was not affected by H.B.
119.
If you have any questions regarding the matters discussed in
this release, please call 1-888-405-4039 (Ohio Relay Services
for the Hearing or Speech Impaired: 1-800-750-0750).