This information is not current and is being provided for reference purposes only
TSSN-38
The State Tax Guide for Nonprofit Organizations
This TSSN is revoked by SN 98(11)
Many nonprofit organizations may not be taking full advantage of the number of tax exemption benefits available in Connecticut. This brochure is designed to help new and old organizations understand and utilize the laws, rulings and procedures affecting their tax exempt status.
1. Q. What state taxes can be exempted?
A. Corporation Business, Sales and Use, Admissions and Inheritance.
2. Q. What type of nonprofit organizations qualify?
A. Corporation Business Tax exemption - a 501(c) organization;
Sales and Use Tax exemption - many 501(c)(3) organizations which are operated exclusively for charitable, religious or educational purposes and are open to the general public;
Admissions Tax exemption - a 501(c) organization;
Inheritance Tax exemption - an accredited charitable, religious, educational, literary, scientific or historical institution will be recognized.
3. Q. What type of nonprofit organization does not qualify for Sales and Use Tax exemption?
A. A political, veteran, fraternal, sororal, professional, trade, alumni or social, etc., organization.
4. Q. How does an organization obtain state tax exempt status?
A. Corporation Business Tax exemption: Submit a copy of your Internal Revenue Service Determination Letter indicating your exemption from federal tax to the Registration Section of this Department.
Sales and Use Tax exemption: Please contact DRS Forms Section at (860) 297-5962 to obtain LSN 91-1 which will explain the requirements of the application process. You will also be required to submit the following documents to the Legal Division of this Department:
- a certified copy of the Articles of Incorporation, (if your organization is a corporation), or a certified copy of the Articles of Association or By-Laws (if your organization is not a corporation).
- a financial statement identifying the organization's sources of income (and amounts of income from each source) and the disposition of such income for each of the 3 years immediately preceding the year of application.
- a letter from the town assessor in any town in which your organization owns real or personal property, stating that such property is exempt from property tax under Section 12-81(7) of the Connecticut General Statutes. If your organization owns no real or personal property, then an affidavit from the organization's president should so state.
- a complete copy of the 501(c)(3) letter obtained from the Internal Revenue Service. This letter is evidence that the organization is recognized as charitable for Federal Income Tax purposes. (IRS Form 1023 must be filed with the Internal Revenue Service to secure such a determination letter. Form 1023 may be obtained by calling the IRS at 1-800-TAX-3676).
Admissions Tax exemption: Submit a description of the event planned by your organization with a copy of the contract naming your co-sponsor to the Taxpayer Services Division at this Department.
5. Q. Whom do we contact to obtain a federal tax exemption?
A. Call the Internal Revenue Service at 1-800-TAX-1040 for information and/or 1-800-TAX-3676 for forms.
6. Q. How may we use the Sales and Use Tax Exemption Permit?
A. Your organization may purchase supplies, services and equipment without paying Sales and Use Tax if the purchases are made by the organization and are exclusively for the purposes for which the organization was established. Purchases must be made by giving the Vendor a bona fide State of Connecticut "Charitable &; Religious Organization Exemption Certificate," Regulation 15 and paying by a check drawn on the organization's account.
Officers, members or employees cannot make purchases for personal use.
Cash purchases of $10 or less are permitted providing organization funds are used and the purchaser complies with exemption requirements.
7. Q. May we purchase meals and/or lodging this way?
A. No. The exemption from Sales and Use Tax for meals and lodging requires the following conditions to be met:
1. the seller charges the organization directly
2. the organization pays the seller directly, with a check drawn on the organization's account
3. the organization will not be reimbursed, directly or indirectly, by donation or otherwise.
If these conditions are to be met, the organization must submit a completed form, "Bulletin 34A" to this Department three weeks prior to the event.
8. Q. Does that mean that meals at a fund raiser sponsored by an organization holding a Sales Tax Exemption Permit would be taxable?
A. Yes.
9. Q. What other type of event does not qualify for exemption from the taxes on meals and/or lodging?
A. Any event where there is: a charge to attend, donations are accepted, or the cost is underwritten by another entity.
10. Q. How do we get a refund of Sales and Use Tax, paid in error, for what should have been an exempt purchase?
A. If your organization has met all of the exempt purchase criteria, submit the following to this Department, Attn: Internal Control Officer:
- a copy of the itemized bill
- a copy (both sides) of the organization's cancelled check
- the Exemption Permit number
- the federal exemption number (9 digits)
- and if the refund is for taxes on meals/lodging, a completed form "Bulletin 34A" must also be submitted.
No refunds will be made on purchases made prior to the issuance date of your Exemption Permit.
11. Q. Where can we get additional copies of the Reg. 15 Exemption Certificates?
A. Exemption Certificates will be sent to qualifying organizations when an exemption number is granted. Write to the Forms Section of this Department or call (860) 297-5962 for additional copies.
12. Q. Can an out-of-state organization purchase items or services with their state's exemption certificate in Connecticut?
A. No. There is no reciprocity among the states in honoring other exemption permits. However, the organization may apply for a Connecticut Sales Tax Exemption Permit.
13. Q. We are considering holding a raffle. What does my Connecticut tax exempt organization have to do?
A. Contact the Department of Special Revenue to register.
A raffle has a special tax treatment - no one pays Sales and Use Tax.
14. Q. Our organization is having an automobile raffle. Who pays the Sales and Use Tax?
A. No one. Your organization will give a completed Exemption Certificate to the car dealer and the dealer will issue a Certificate of Origin. The winner of the auto will, likewise, have no Sales and Use Tax liability providing your organization assigns the Certificate of Origin and a statement written on organization letterhead to him declaring "John Doe" is the winner of your raffle. The winner must present both documents to the Department of Motor Vehicles when registering the car.
15. Q. My organization wants to solicit donations. What should we do?
A. Contact the Charities Section of the Office of the State Attorney General.
16. Q. For a fund raiser our organization is considering showing movie films, having a circus or other entertainment. Are these events exempt from the Admissions Tax?
A. Yes. There is an automatic exemption if the organization has qualified for federal tax exemption, will assume the financial risk associated with the event, and will receive all proceeds from the showing.
17. Q. My exempt organization is sponsoring an entertainment event, in conjunction with a nonexempt organization. How do we get Admissions Tax exemption?
A. If your organization will receive net profit equivalent to more than 10% of the gross receipts of the event, you may apply to this Department, Attn: Taxpayer Services Division for this specific exemption.
18. Q. May we sell articles to raise money without collecting Sales and Use Tax?
A. In general, sales by an exempt organization are subject to taxes. However, you are allowed two one-day events a year where you may sell taxable items without collecting Sales and Use Tax providing you pay the tax to your supplier for the merchandise to be sold. In purchasing items to be resold at these events, you may not use an Exemption Certificate.
19. Q. We want to have an auction. Do we collect Sales and Use Tax on the merchandise sold?
A. When you hire a professional auctioneer all merchandise sold is subject to Sales and Use Tax. The auctioneer is responsible for collecting this tax.
If you operate the auction yourselves and you have not used your two exempt events in that calendar year, all merchandise may be sold tax exempt.
If you already held two one-day events, you must register as a Vendor and collect Sales and Use Tax on all taxable merchandise sold.
20. Q. How do we register as a Vendor?
A. An officer of the organization may register either in person or by mail. When you apply in person, your organization will be issued a Seller's Permit and assigned a Tax Registration Number that same day.
A $20 permit fee is required and you must complete Form REG-1 which requires you to furnish your organization's federal identification number and a general profile of your business.
If registering at one of the Regional Offices you must pay by check or money order. Cash payments are allowed only at the Hartford Office.
If you anticipate Sales and Use Tax collections of less than $1,000 per year, you may request an annual filing of your tax return rather than the normal quarterly filings.
21. Q. If our organization registers as a Vendor, will it lose its Sales and Use Tax Exemption?
A. No.
22. Q. How do we purchase promotional items that we give to donors in return for their donations?
A. You will pay the Sales and Use Tax to your supplier for purchases of taxable, promotional items because your organization is regarded as the final consumer of the items it gives away. You may not use an Exemption Certificate purchasing promotional items.
QUESTIONS FREQUENTLY ASKED BY ACADEMIC INSTITUTIONS
23. Q. Do schools, colleges or universities need a Sales and Use Tax Exemption Permit to purchase goods or services for their institution?
A. Privately operated educational institutions must obtain an Exemption Permit and use an Exemption Certificate in making purchases.
A State of Connecticut or a Connecticut municipal educational institution is exempt under Connecticut General Statutes, Section 12-412(1) and does not need a permit. When making purchases this institution will use a "Governmental Agency Exemption Certificate."
24. Q. Are the sales of year books, school rings, caps and gowns, etc. exempt from Sales and Use Taxes?
A. No.
25. Q. What about proms, picnics or field trips, etc.?
A. The meal or package price is subject to Sales and Use Tax.
26. Q. What purchases are not subject to Sales and Use Tax?
A. School supplies, services and equipment purchases made by the school, for the school.
STUDENT, YOUTH OR SCHOOL ORGANIZATIONS
27. Q. How can we raise money by selling items without collecting Sales Tax?
A. Sales of goods by a charitable organization formed to support and sponsor youth activities or by any accredited elementary or secondary school may be made on an on-going basis without collecting the tax if the merchandise is sold for $20 or less for the purpose of youth activities. The organization may purchase this merchandise without paying tax by furnishing the supplier with a "Certificate of Exempt Sales by Youth Groups and Schools." This certificate must be issued to the supplier each time the organization or school purchases items for resale.
If your organization or school sells items costing more than $20, you must register as a Vendor with this Department and collect Sales and Use Tax on the sales. In this situation, you may issue a Resale Certificate to the supplier for the merchandise to be resold without payment of the tax.
28. Q. Who qualifies as a student or youth organization?
A. A student group or private organization formed exclusively for the benefit of youth activities. Some examples are: Boy, Girl & Cub Scouts; Little League; P.T.A.; P.T.O.; Boy & Girl Clubs; Junior Achievement.
For further information please call or write:
Department of Revenue Services
1-800-382-9463 or (860) 297-5962
PLEASE NOTE THE FOLLOWING NEW INFORMATION ABOUT DRS.
FOR FURTHER INFORMATION: To order forms and publications or for further information, call the Department of Revenue Services at 860-297-5962 (Hartford area or out-of-state) or 1-800-382-9463 (in-state). Forms and publications may be ordered through voice-mail 24-hours a day by choosing Option 3 on your touch tone telephone.
Electronic Delivery Options: You can also obtain tax forms and publications 24-hours a day from our Web site
Telecommunications Device for the Deaf (TDD/TT) users only call 860-297-4911 during business hours.
TSSN-38 (New 11/90)