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Legal
Counsel > Frequently Asked Questions
> State Sales Tax Issues
How can our congregation avoid
paying state sales taxes? Sales taxes, and exemptions from
sales taxes, are determined by each individual state. Some states
have no sales tax at all. Other states have sales tax on certain
merchandise and not other merchandise. While some states grant a
broad exemption to churches and other nonprofit organizations, many
states grant no exemption at all.
The best way to determine what the
laws in your state are is to check with your synod office or another
church in your state that has already looked into this matter. Many
state government websites also provide the information you will
need.
If you determine that your state does
exempt churches from sales taxes, the next step is to determine what
branch of state government grants this exemption and what the
paperwork requirements are for the exemption. Again, your synod
office is the best source on this information. Typically, it is the
state’s Department of Revenue, Department of the Treasury, or
Comptroller’s Office that is responsible for granting sales tax
exemptions. 1
In many states an application form is
required. As part of the required paperwork that must be submitted
to the state agency, it is often necessary to show proof of
exemption from federal income taxes. (The proof that the church
organization is a 501(c) entity) The ELCA is authorized by the IRS
to issue an exemption letter to qualifying ELCA organizations as
explained in Group Exemption
Procedure for Subordinate Organizations of the Evangelical
Lutheran Church in America. Some additional requirements will
often include an application form and proof of incorporated status.
Many states will grant the exemption
for a set number of years and then the exemption will expire. It is
necessary prior to the end of that period to renew your exemption
with the state. The church office should calendar this date so a
renewal request can be filed.
Once a state sales tax exemption is
granted, it is important that the congregation monitor its
distribution and use. The authorized user will often need to present
to the merchant a copy of the letter issued from the appropriate
state authority or the state tax exempt identification number. It is
certainly proper for the congregation to use the exemption for
purchases of church supplies, foodstuffs, and other materials used
directly for church purposes. However, it is important that all
staff and members understand that it is illegal to use the tax
exemption for personal purchases.
As stated above, sales tax laws vary
greatly from state to state. Most often such laws will not cover
hotel or entertainment taxes.
1 The
following site is provided as a possible guide to your state’s
laws. http://www.cvnp.org/statescomparison.pdf
Please realize that laws change and you should check with your own
synod or state agency to make sure that this information is current.
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