Really good point JHB! I had never thought about collecting sales tax. Yet another reason I am glad we went down the path for full non-profit (and yet another headache avoided).
Phil - you are right about state exemptions being totally separate. Each state sets its own rules as to what this means and what the process is. It's up to the state whether or not they link it to having 501(c)(3) or a federally granted non-profit status.
On state sales tax exemption, you have two issues:
1) When (if ever) do you need to PAY sales tax on items you buy in the normal course of PTO business?
2) When (if ever) do you need to COLLECT (and remit to the state) sales tax on things you sell (t-shirts, pizza, event tickets, school supplies, etc.)
For states that have income tax, that would also come into play with state tax exemption. But I've no experience there.
I applied for our FEIN today online at the IRS website and got one immediately. I just thought people might want to know if they are going through these same steps.
I'm from MA, so MI law may vary. I am also not a tax expert, but this is my opinion based on my groups experience getting 501c3 and Tax-Exempt Public Charity in our state.
When did your group officially approve your Charter (IRS calls it Articles of Organization)?Once you are officially organized, your group has 15 months to apply for 501c3 (there is also a 27 month extension - check the IRS publications for details). I think if you apply within the 15 months, and are appoved, then the approval covers the time that you have existed as an organization (and so donor money would be to a Non-Profit org and be deductible).
Sales tax is a state issue. I believe that if your state has approved you as a Tax-Exempt Public Charity (or equivilent title) then you are able to buy things for the organization without paying the state sales tax.
I had thought you needed to get the Federal approval prior to getting state approval, but another thread here indicates that you can apply with the state first and then the IRS. So I think they are 2 separate issues (although since we got 501c3 first, I think including that info in the state application made that process much easier).
We are in the process of completing the IRS application for tax exempt status. I am getting confused by whether our PTO would be a supporting organization and if we have a public or private charity status.
My understanding is that we need to get a FEIN, incorporate in the state of Michigan, and then apply for the tax exempt status. For those of you who've already been through this (especially in Michigan) does that mean that we do not have tax exempt status while we are waiting? I guess I want to know 2 things: a)Is the money/donations people make to the PTO in the meantime not tax deductible to them and b)Do we have to pay sales tax on items we use within the organization until we are approved and have received our letter?
I would appreciate help going through the application and the process - especially someone who has done it in Michigan. Can anyone help?
