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New Indiana Sales Tax Rules for Nonprofits and Churches Go Into Effect on July 1

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Indiana is changing the circumstances under which nonprofit organizations, including churches, are exempt from collecting sales tax. The new rules are effective July 1, 2022.

Through June 30, 2022, sales by nonprofit organizations carried on for 30 or fewer days in a calendar year and engaged in as a fundraising activity are exempt from sales tax.

As of July 1, 2022, sales of no more than $20,000 in a calendar year engaged in as a fundraising activity are exempt from sales tax. Once a nonprofit organization passes the $20,000 threshold, it must collect state gross retail tax on subsequent sales for the remainder of the calendar year.

As with the prior rule, the $20,000 threshold applies to each calendar year. Therefore, sales counted toward the $20,000 threshold reset on January 1 every year. Consequently, a nonprofit organization or church may be required to collect sales tax in one year (because it exceeds the $20,000 threshold in that year), but may not be required to collect sales tax in the next year.

For the 2022 calendar year, organizations should use the 30 days rule through June 30 and the $20,000 rule as of July 1. In its Information Bulletin about the change, the Indiana Department of Revenue notes that:

… a nonprofit that has over 30 selling days before July 1 will be required to collect sales tax throughout the entire year, even if they do not reach $20,000 in sales after July 1. Conversely, a nonprofit that has reached $20,000 in sales for the year any time before July 1 will not count those sales towards determining whether they should collect sales tax. Only the sales made after June 30 should be counted.

This new rule does not change the long-standing exemption from sales tax for sales of periodicals, books, or other property that are intended primarily to further the educational, cultural, or religious purposes of the organization or for the improvement of the work skills or professional qualifications of the organization’s members, and where the sales are not used in carrying out a private or proprietary business. Thus, for example, sales of religious materials in a church bookstore remain exempt from sales tax as they were before.

Please contact us with any questions about how this may affect your organization.

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