I am going to build something for a non-profit. (in NYS)
Ordinarily I can buy supplies tax free, but then I have to charge the buyer sales tax. In this case I will be donating it rather than selling it, so I can't charge them tax. So, can I still buy it tax free?
Alternately I could use their tax exempt certificate, but then I suppose they would have to reimburse me for the purchase, and I would have to make a cash donation. Or not?
This isn't just for income tax is it?
Depends on which state you're in. In some states nonprofits may be exempt from sales and use taxes, and in some states they are not.
If your nonprofit is exempt from sales tax, I'd donate the cash to buy the supplies and have them buy them.
But be careful. Just because an organization is a nonprofit for income tax purposes does not automatically give them an exemption from sales and use tax. In California, for example, nonprofits have to pay sales tax - at least they did the last time the issue came up.
Stu
He said New York, in which they are exempt from paying sales tax on stuff they purchase for their own use.
Seth
By "they" I presume you mean the non-profits.
It isn't about income tax at all; it's sales and use tax.
In New York, the sale of tangible personal property to a contractor for use in constructing or repairing real property owned by a tax exempt organization is exempt from sales and use tax. The property must become an integral part of the real property owned by the exempt organization, so this would not apply to supplies that are consumed by the contractor in the course of construction, only to materials that become part of the property. N.Y. Tax Law §1115(a)(15) ; N.Y. Tax Law §1115(a)(16) ; N.Y. Tax Law §1116(a) ; NYCRR 20 §541.1(e) ; NYCRR 20 §541.3(b) ; NYCRR 20 §541.3(d).
The contractor must obtain a properly completed exemption certificate from the exempt organization to support the exemption. NYCRR 20 §541.3(c).
If you are going to purchase supplies that you will consume in the construction process, i.e., that will not become part of the completed structure, you should contribute the cash to the exempt organization and let it purchase the supplies. Then the purchase will be exempt.
Katie in San Diego
501(C)(3) organizations are exempt from paying NYS sales tax on purchases for their own use. (I don't know about other categories of non-profits.) There are some filing requirements to get the exemption, I think (but it's automatic).
Seth
Exempt organizations apply on form ST-119.2. A 501(c)(3) organization attaches a copy of the IRS letter; other organizations need documentation per the instructions.
Don EA in Upstate NY
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