Page 189 - Washington Nonprofit Handbook 2018 Edition

(a) Retail Sales Tax Exemption for Items Purchased for
Fundraising Activities

Organizations that purchase items to be resold as part of a qualifying
fundraising activity may either purchase the items to be resold without payment of
the retail sales tax if the organization has a reseller’s permit, or pay tax at the point
of sale and take the credit for tax paid at the source. For example, a qualifying
nonprofit has an annual auction at which it serves a meal. If the attendees pay a
fee to the nonprofit to come to the event, the nonprofit is reselling the meal to the
attendees. Therefore, the nonprofit gives the caterer or hotel a reseller’s permit for
the meals and does not pay retail sales tax on the purchase of the meals because of
the resale exemption. The nonprofit also does not collect retail sales tax on the fee
received from attendees due to the fundraising exemption discussed earlier.

(b) Other State Tax Consequences of Fundraising
Activities

Nonprofit organizations must still pay the retail sales tax on consumable
items incorporated into fundraising activities. For example, if as part of an auction,
an organization rents a hotel ballroom, buys decorations, or pays the caterer or
hotel table rental fees, those purchases are consumable items, and the
organization must pay sales tax or use tax on the purchases.

A limited use tax exemption exists for buyers of tangible personal property
for purchases of applicable items at any fundraiser. Effective until July 1, 2020, any
article of personal property valued under $12,000 and acquired at a fundraiser is
exempt.

(See discussion on the use tax in Chapter 55.)

Nonprofit organizations exempt from real or personal property taxes are
allowed to use their exempt property for fundraising purposes for limited time
periods without impairing their property tax exemptions. The use of exempt
property for fundraising activities sponsored by an exempt organization does not
subject the property to taxation if the fundraising activities are consistent with the
purposes for which the exemption was granted. For property tax exemption
purposes, the term “fundraising” means: any revenue-raising activity, limited to
less than five days in length, that disburses 51% or more of the profits realized from
the activity to the exempt nonprofit organization conducting the fundraising
activity.

WASHINGTON NONPROFIT HANDBOOK -178- 2018