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New Law Exempts Some Nonprofit Fundraising Purchases from Sales Tax

January 4th, 2013

Senate Bill 1337, signed into law over the holidays, extends the sales tax exemption for nonprofit organizations to items purchased for fundraising purposes, up to a limit of $5,000 per item.

Under the previous law, only items purchased to further the mission of the organization were exempt from state sales tax. This bipartisan bill, introduced by Sen. Marc Jansen (R-Grand Rapids) and co-sponsored by Senators Tupac Hunter (D-Detroit), John Proos (R-St. Joseph) and Rebekah Warren (D-Ann Arbor), recognizes that items purchased for fundraising do further the mission of nonprofit organizations when the raised funds are used to further the organizational mission.

MUCC affiliate clubs may want to look into whether or not they would qualify for the sales tax exemption for items up to $5,000 purchased for their fundraisers. This exemption applies to nonprofits incorporated under sections 501(c)(3) and 501(c)(4) of the IRS Code or those that received a sales tax exemption letter prior to 1998, though, so it may not apply to all clubs.

In order to claim the exemption, the organization would have to provide the exemption letter or a signed statement stating that the purchase item is to be used in furtherance of the organization’s operation, to carry out its purpose or purposes, or to raise funds or resources necessary to its operation. Clubs may also have to present their federal exemption letter, unless they are exempt from having to apply for an exemption letter from the IRS.

The exemption would not apply to items not purchased in support of the organization’s mission, to raise funds for the organization’s operation, or those which exceeded $5,000.

Click here for the full text of SB 1337.

This exemption may not apply to all affiliate clubs. This blog is intended for general information only and does not constitute legal advice nor create an attorney-client relationship. Please consult with an attorney or tax professional to determine how this legislation would apply to your organization.

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