First you have to understand there are different kinds of taxes. Federal income tax is handled by the IRS. Sales tax is handled by your state.

1) On the federal level, the rule of thumb is:

Does your organization bring in more than $5000 per year?
This is gross income, not net. So, not after expenses. Do you have $5000 coming into your organization?

If no, you can rock along without doing anything special. If yes, the IRS expects you to apply for 501(c)(3) status. As such you are exempt from most federal income taxes, you have more credibility as a charitable org, and donations to you are tax deductible. As a 501(c)(3) there are filing requirements. What you file may range from nothing, to a e-postcard (in process) to a 990/990EZ return. But almost always you are filing an INFORMATIONAL return - merely reporting activity, not actually paying anything. (Note - there are fines for NOT filing when you should have, even though no taxes are due.)

2) Each state sets the rules for sales tax exemption. Many require that first you be set up with the IRS as 501(c)(3). Sales tax exemption affects you as both a buyer and as a seller. As a buyer, you are exempt from paying sales tax on most purchases. As a seller you may not need to collect/remit sales tax. For instance, in Texas most the times we buy something - we use our exemption and purchase taxfree. On the other side, we can have two fundraisers per year where we don't need to COLLECT sales tax on items we SELL. For addtional sales activities - like our yearlong t-shirt sales - we charge sales tax and file it with state just like everyone else. (One note, not everything is taxable. And filing is very easy. Thousands or orgs do it.)

Many organizations make more than $5000 and operate in limbo. Either they don't know the rules or don't want to invest the time to organize properly. Technically these organizations are not operating legally.

:confused:
I have a dumb question, I was reading some of the messages posted and see something about filing taxes. We are suppose to do that? I was never told anything. Two years ago all the board members left the school and I was asked by the principal if I wanted to be president, I accepted but knew nothing and worked my tail off to build a good relationship with the school and parents. So, needless to say we haven't filed anything for a few years, but I didn't know about it wither. I do remember asking someone once and they said pto didn't have to do any taxes. So, can you help me?