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Non-Profit Tax Issues

The code specifically lists sales of tangible personal property or services to churches, organizations under 501 (c)(3) of the internal Revenue Code, and any other nonprofit organizations operated exclusively for charitable purposes in this state are exempt. Sales made by a nonprofit entity could be affected by the "Six Day Rule". Please refer to the information release for Nonprofit Charitable Organizations on the tax.ohio.gov website as well as 5739.02 (B)(12) of the Ohio Revised Code and the questions and answers section on tax.ohio.gov.

Taxable situations can still occur if the entity does not have charitable purpose.

The customer may apply for a refund if sales tax was charged in error on an exempt purchase. Pursuant to R.C. 5739.02(C), all sales are presumed taxable until the contrary is established. Pursuant to R.C. 5739.03(B)(4), if no certificate is obtained nor provided within 90 days after the date on which the sale is consummated, it is presumed that the tax applies. Therefore, after the 90 day period discussed above, it is suggested that the customer provide a refund claim to the Department, because additional documentation may need to be provided to substantiate the claim. In general, in a situation where a fully completed exemption certificate has been received within 90 days of the sale, the sales tax has been paid to the State of Ohio, and the transaction is determined to be exempt and the vendor applied for the refund, the vendor would need to refund (or credit) their customer the tax (or provide a letter from the customer stating they agree to wait until the state refunds the tax to the vendor) to be entitled to qualify for a refund. The customer is entitled to receive the tax that was improperly charged if the refund is approved. Please review 5739.07 of the Ohio Revised Code and Administrative Code 5703-9-07 for additional information. If an exemption certificate is not fully completed and a vendor is audited for sales tax. The vendor would be allowed 120 days to obtain fully completed exemption certificate accepted in good faith or a letter of usage from the customer.
If the lease is for a building which falls under the definition of real property the transaction would not fall under a taxable category for sales tax. (Review 5701.02 ORC for additional information). The organization may want to review that there is not a taxable situation such as a rental of tangible personal property included within the lease along with that of the lease of real property. Ohio law requires any person or business making retail sales of tangible personal property or taxable services to register for the sales tax by obtaining a vendor’s license. 5739.31 (A)(1) “No person shall engage in the business of selling at retail or sell at retail or sell at retail incidental to any other regularly conducted business without having a license therefore, as required by sections 5739.01 to 5739.31 of the Revised Code.” If you determine that your entity does not make any retail sales of tangible personal property or sell any taxable services you would not need to register.
An exemption certificate can be completed for exempt jobs. The material incorporated into the real property on an exempt job such as that of a church can be purchased exempt using the proper exemption certificates specific to construction contractors under 5703-9-14 of the Administrative Code.

Per statute - see R.C. 5739.02()(12) and (13). Some 501(c) organizations may not qualify for an exempt status for Sales and use tax treatment in all situations. Some entities may not have an exclusively charitable purpose.

Receiving and maintaining a fully completed exemption certificate will protect you as a vendor and allow you to prove under audit why sales transactions were not taxed. However, if the entity is clearly exempt like the City of Columbus or State of Ohio then an exemption certificate would not be necessary. See 5739.03(B)(5). 5739.02 (B)(9)(a) and 5739.02 (B)(9)(b) will provide additional information for your research requested in regards to sales by schools/PTAs. Keep in mind school groups and PTAs are not subject to the six day rule as long as they are making the sales. Even if an entity is structured as a non-profit entity there can be a situation where sales are made by the entity in a taxable manner, such as making sales beyond six days. Some entities may not have a completely charitable purpose, which can have an effect on their tax status for sales and use tax.

Review your sales to see if they fall under the six days. Once six days of sales is reached, the entity is determined to be engaged in business and would need to obtain a vendor's license.

No, this is a rental of real property and not tangible personal property. (This is assuming only the hall is being rented with nothing else included in the charge, only the real property). Generally, separately stated charges for tangible personal property (tables, chairs, etc.) would be subject to sales tax.

The exemption is for purchases made by a 501(c)(3). In general, the discs are tangible personal property being sold to your customer by an exempt 501(c)(3) entity, then the “Six Day Rule” would have to be taken into consideration. If sales are made for more than six days then the taxpayer is engaged in business and must be properly licensed to make retail sales and collect sales tax. If the entry fee is not a mixed transaction and only includes an entry fee with no tangible personal property then the entry fee alone would be exempt.