Many nonprofit organizations believe they're exempt from paying Idaho sales tax because they qualify for tax-exempt status with the Internal Revenue Service (IRS). However, the IRS exemption applies only to income tax. Therefore, most religious, charitable, and nonprofit groups must pay sales tax on goods they buy for their own use and must collect tax when selling goods. Property tax exemptions and exemptions from other state taxes aren't included on this page.
You must call the IRS at (877) 829-5500 to request approval for an income tax exemption. For more information on how to apply for exempt status, visit the Charities and Non-Profits section of the IRS website or contact your professional tax advisor.
If the IRS grants the exempt status, your organization will also be exempt from Idaho income tax, unless it reports unrelated business income on a federal Form 990-T. Nonprofit organizations reporting unrelated business income must file an Idaho Corporation Income Tax Return and pay the Idaho tax on this income.
The IRS exemption doesn't exempt an organization from other Idaho taxes, such as sales tax. To see a list of those organizations with Idaho sales tax exemptions, and their classifications, see Idaho Sales Tax Law, Chapter 63-3622O: Exempt private and public organizations.
All nonprofits in Idaho must register with the Idaho Secretary of State. For more information, visit www.sos.idaho.gov/corp/corindex.htm or call (208) 334-2300.
You may also need to register to get a seller's permit or an Idaho withholding account from the Idaho State Tax Commission. If your exempt organization is in Idaho and you make retail sales, you need an Idaho seller's permit. If you have employees, you need an Idaho withholding account. You can register through the Idaho Business Registration application.
Most religious, charitable, and nonprofit organizations are required to pay sales tax on the purchase of goods they buy for their own use and they must collect tax when they make taxable sales, such as retail sales, admissions, and charges for the use of facilities for recreation. For more information, see Sales Tax Brochure #50, Nonprofit Groups & Churches. Idaho Code section 63-3622O (Revenue and Taxation, Sales Tax) discusses Exempt private and public organizations.
If you follow the procedures detailed here, an auctioned item at a charitable event is only subject to sales tax on its fair market value. For example, if you sell a cake for $100 and you could buy it at the store for $10, tax applies only to the $10 if you keep the proper records.
To do this, you must first post a sign by each of your auction items indicating its suggested market value. For example, the cake could display a sign saying "suggested retail value: $10." If you give the buyer an invoice, write "cake: $10; tax $.60 (if the tax rate is 6%); donation $89.40." Then, you must post the sale to your records in the same way.
If you don't follow these procedures, you must charge tax on the full $100. The payment of sales tax is the responsibility of the buyer, and the seller must collect and remit it. The tax should be added to the sales price and not be subtracted from the seller's revenue.
NOTE: Donated services (such as bookkeeping or lawn mowing) aren't taxable auction items. Gift certificates aren't subject to tax when auctioned either. However, customers will be charged sales tax when they use the certificate.
- Sales Tax Law Chapter 63-3622KK: Incidental Sales by Religious Corporations or Societies
- Sales Tax Law Chapter 63-3622O: Exempt private and public organizations
- Sales Tax Law Chapter 63-3622J: School, church and senior citizen meals
- Sales Tax Rule 85 Sales to and Purchases by Nonprofit Organizations
- Sales Tax Rule 86 Sales and Purchases by Religious Organizations
- Sales Tax Rule 89 Boy Scout, Girl Scout and 4-H Groups