It is easy to assume that entities operating in a tax exempt capacity are free from most, if not all taxes. In fact, many have a misconception on this issue, as their view of Non Profit entities as tax exempt can and may be incorrect at times. Although most qualified Non Profit entities are free from Income Taxes, it is not always the case as it relates to other State and Local taxes.
Unfortunately, many states like California impose sales and use taxes on all entities with the exception of the Federal Government, which is deemed tax exempt in all states. Although there are many exceptions to this rule, it is important to understand how your home state evaluates the taxability of not for profit entities to avoid unnecessary state and local exposure. Here are a few Sales and Use tax facts regarding the taxability of tax exempt entities across the United States:
- 9 States have Limited Exemptions for non-profit companies.
- 11 States have no exemption for non-profit companies.
- 26 States have exemptions for non-profit companies.
- The remaining 5 States do not currently have a state sales tax.