Are PTOs and booster clubs required to pay sales tax on purchases? Yes. According to state statute, non-profit organizations in Arizona must pay sales tax charged by vendors. (In Arizona, sales tax is technically known as a “transaction privilege tax.)
Are PTOs and booster clubs required to charge sales tax for retail sales, like fundraiser sales? No. According to state statute, non-profit organizations in Arizona are exempt from charging and collecting sales tax on items sold for fundraising or other purposes.
Vendors sometimes ask me for an Arizona Form 5000. What is this form and do I need to provide it? This form is a “Transaction Privilege Tax Exemption Certificate.” Since Arizona non-profits are NOT exempt from paying sales tax on purchases from vendors, you need to explain to the vendors that the Chandler School Boosters, Inc., (and its member PTO and booster groups) are not exempt, and that you must pay sales tax. Therefore, you should NOT provide Arizona Form 5000 to vendors.
Then why do people sometimes refer to 501(c)(3) non-profit organizations as “tax-exempt” organizations? 501(c)(3) non-profit organizations are exempt from paying federal income tax; that doesn’t mean they are exempt from paying sales tax (or transaction privilege tax, as it’s officially known in Arizona).
If my club has to pay sales tax on items I purchase for fundraisers, that means I won’t make as much profit. Any suggestions? You will need to take the additional cost of sales tax into consideration when you are determining your sales price for items you are selling. Mark up your sales price to recoup the amount of sales tax paid, so you can maintain a desired profit margin.