Nonprofit Organizations that Hold a Seller’s Permit Must Collect Tax
When a Wisconsin nonprofit organization sells taxable products, it is required to charge Wisconsin sales tax unless certain exemptions apply. The tax may apply to sales, licenses, leases, and rentals of tangible personal property, certain coins and stamps, certain leased property affixed to realty, and certain digital goods. A full list of taxable products is available in Part X of Publication 201, Wisconsin Sales and Use Tax Information.
A common exemption from having to collect sales tax is the occasional sales exemption, the application of which requires that the organization meet three standards: (1) the organization is not engaged in a “trade or business,” (2) entertainment is not involved at an event with an admission charge, and (3) the organization does not and is not required to have a seller’s permit. Currently a nonprofit organization is considered engaged in a “trade or business” if its sales of otherwise taxable products and services and events occur on more than 75 days per calendar year, and its receipts (the sales price from all sales in Wisconsin of otherwise taxable products after subtracting allowable exemptions) are more than $50,000. If either one of these two standards is not met, an organization is not engaged in a “trade or business.”
If the occasional sales exemption does not apply, then the organization must obtain a seller’s permit. During the period an organization holds an active seller’s permit, the organization must collect tax on the sale of any taxable products.
Tax must be collected even if the organization later requests an inactivation of its seller’s permit due to a change in activities—any sales made before inactivation remain subject to a sales tax. If an organization inactivates its seller’s permit in good faith but, due to unforeseen circumstances, later exceeds both the $50,000 and 75-day standards, only sales occurring after the standards are exceeded are subject to sales tax. Similarly, if an organization did not anticipate that its sales would exceed the standards, but the sales did, then only sales occurring after the standards are exceeded are subject to sales tax. In either case, the inactivation of or failure to obtain a permit must have been done in good faith.
DISCLAIMER: The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.