Congratulations, you have received your Determination Letter from the IRS granting your nonprofit organization 501(c)(3) tax-exempt status! So, this means that you can head to your local grocery store and start purchasing items needed for your nonprofit’s mission and be exempt from paying the sales tax, right?
Unfortunately, this is not the case. Obtaining your 501(c)(3) status happens at the federal level through the IRS, but sales taxes are regulated at a state level. In several states, there is another step that is required before becoming exempt from sales taxes. Since sales taxes are regulated by the Secretary of State, that means that the process and regulation varies from state to state. Some states do not have sales taxes, so no application is necessary. And unfortunately, some states do not allow any organization to be exempt from sales taxes, even if you are exempt from federal taxes.
Of the 50 states, approximately half provide an application for a nonprofit organization to become sales tax-exempt within their state. Generally, the application is short and requires you provide general information regarding your nonprofit’s mission and Board of Directors, a copy of your IRS Determination Letter, and a signed copy of your organization’s bylaws. Once this application is submitted with all of the necessary attachments, you will receive your sales tax-exempt status within your state!
To see if your state requires an application to obtain sales tax-exemption, you can check your Secretary of State Department website for the sales tax-exemption application.