Form Tb2 - Non Profit Organizations Exemption printable pdf download

TB2

TAX: Sales and Use Tax

SUBJECT: 501(c)(3) Non Profit Organizations Exemption

To define exemption criteria of Section 9743(3),as amended by 1995 Legislature.

ISSUED: 8/18/95

Effective Date: The changes to 32 VSA Section 9743(c) become effective July 1, 1995.

Exemption Available: Exemption from Vermont sales and use tax is granted to organizations which qualify for

exempt status under the provisions of section 501(c)(3) of the United States Internal Revenue Code. An

organization may qualify for 501(c)(3) status, but not receive Internal Revenue Service designation, and still be

eligible for the sales and use exemption.

Definition of organization: Designated organizations are those that made application to, and received 501(c)(3)

status from the Internal Revenue Service.

Qualified organizations are those whose purposes conform to the description contained in section 501(c)(3) of

the United States Internal Revenue Code, or organizations excused from making application for 501(c)(3) status

under the provisions of section 508(c) of the United States Internal Revenue Code. Text of IRC Sections 501(c)

(3) and 508(c) are on page 4 of this bulletin.

Proof of 501(c)(3) qualification: A designated organization must submit a copy of the Internal Revenue Service

ruling letter designating the organization as an exempt entity.

A qualified organization must submit its articles of association, evidence of the exempt purpose, and any other

documents that may support the organization’s claim as a qualified organization eligible for exemption from the

sales and use tax. The Department will use Internal Revenue Code sections and guidelines to evaluate the

organization's supporting documentation. If the evaluation shows the organization would have a reasonable

likelihood of receiving 501(c)(3) status if a federal application were made, the Department will qualify the

organization and grant sales and use tax exemption.

Receiving Vermont Sales and Use Tax Exemption: The organization must first be certified eligible by the

Commissioner of Taxes. This is done by completing and submitting to Vermont Department of Taxes a Form S-1,

Application for Vermont Business Tax Account Number, along with documents as proof of 501(c)(3) qualification.

The Department will notify the organization whether it has qualified for or been denied the exemption.

Appropriate certificates of exemption will be issued to eligible organizations as evidence of exemption from sales

and use tax as provided by 32 V.S.A. Section 9743(3).

Purchases Made By 501(c)(3) Organizations: Purchases made by the 501(c)(3) organization are exempt from

Vermont sales and use tax. The 501(c)(3) organization must present its certification of exemption to the vendor

to make the purchase free of sales tax.

Sales Made by 501(c)(3) Organizations:

Tangible Personal Property: The 501(c)(3) organization does not collect sales tax on items it sells when the

gross sales of tangible personal property and services, which would otherwise be subject to sales tax if not sold

by an exempt entity, did not exceed $5,000 in the prior year. The term gross sales of tangible personal property

and services means sales of items or services taxed by the sales tax law; sales taxed under other tax laws, such

as meals and rooms, are not included. The term prior year means the exempt organization's financial reporting

year which may be a fiscal year or calendar year.

The Department will ask for annual certification of the prior year's sales to determine whether the sales tax

account should be activated.

Examples include, but not limited to: A school operates a book store. Sales from the book store in 1994

exceeded $5,000. Any tangible personal property sold in 1995 is subject to sales tax. An organization operates a

Form Tb2 - Non Profit Organizations Exemption