ST 2007-03 - Sales and Use Tax: Sales by School Support Groups and Other Charitable Organizations – Issued August, 2007; Updated May, 2017
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. Additionally, if the 501(c)(3) organization knows that it will have more than six days of sales in a calendar year, it must register with the Department and collect and remit the tax beginning with the first day retail sales are made.
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).