08 Apr Sales Tax in New York State for Exempt Organizations
WHO IS ELIGIBLE? Tax exempt status may be granted by New York State to any not-for-profit corporation, association, trust or community chest, fund, foundation, or limited liability company organized and operated exclusively for religious, charitable, scientific, literary or educational purposes, testing for public safety, fostering national or international amateur sports competition, or preventing cruelty to children or animals. These organizations are referred to as religious, charitable, educational, and other organizations throughout this publication. Organizations of these types are often referred to as section 501(c)(3) organizations because that is the section of the Internal Revenue Code (IRC) under which they would qualify for federal income tax exemption, if they chose to apply. An organization that has applied for and received a federal income tax exemption must still apply to receive a New York State sales tax exemption. However, an organization does not need to obtain a federal income tax exemption to be granted a New York State exemption from sales tax under section 1116(a)(4) of the Tax Law. Examples of these types of organizations include: • parent-teacher associations; • private schools; • nonprofit hospitals; • churches; • museums; • charitable relief organizations (for example, American Red Cross, Salvation Army); and • youth sports organizations. Publication 843 (12/09) 13 Please note: Being organized and operated as a not-for-profit organization does not, by itself, qualify an organization as a sales tax exempt organization. Religious, charitable, educational, and other organizations must apply to the Tax Department to obtain sales tax exempt status.
QUALIFYING FOR EXEMPT STATUS In order to qualify as an exempt organization under section 1116(a)(4) of the Tax Law, an organization must be formally organized and must prove that it is organized and operated exclusively for one or more of the exempt purposes listed above (for example, religious purposes, charitable purposes, etc.). An organization will be considered formally organized only if it has an organizing document defining its purposes and activities, and a code of regulations (commonly referred to as bylaws) describing how the organization will function (for example, how to elect officers, conduct meetings, and establish committees). Types of formal organizing documents include the following: • a certificate of incorporation and bylaws; • a constitution and bylaws; • articles of association and bylaws; or • a declaration of trust and bylaws. An organization’s formal organizing documents must: • limit the purposes of the organization to one or more exempt purposes; and • not empower the organization to participate (other than as an insubstantial part of its activities) in activities that do not further one or more of the exempt purposes.
FOR MORE INFORMATION SEE: NYS PUBLICATION 843