State Regulatory Information

This section has been prepared to provide general, not specific or all-inclusive, information to Parent Organizations regarding state tax regulations. Steps have been documented to aid a Parent Organization in abiding by the regulations; however, these steps are only general guidelines and do not ensure that a Parent Organization will remain in compliance with all state tax regulations.

Each Parent Organization should strive to remain in good standing with all state agencies. Therefore, each Parent Organization is responsible for obtaining its own competent independent counsel on accounting and tax matters related to its specific circumstances. This counsel may include a Certified Public Accountant (CPA) or an attorney. The cost of these services would be the Parent Organization's responsibility.

General State Regulatory Information.

Parent Organization officers are solely responsible for ensuring that their Parent Organization is in compliance with all state regulations. Therefore, the District, including any District employee, is not responsible for a Parent Organization not being in good standing with all state agencies. However, the District has provided the following information that includes detailed steps Parent Organizations should take to comply with state tax regulations.

This information is organized as follows:

Qualifying for Exemption from Texas Sales and Use Tax
Obtaining a Texas Sales Tax Permit
Franchise Tax
Change in Address
Further Questions

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Qualifying for Exemption from Texas Sales and Use Tax

To apply for exemption based on the federal exempt status, See website at https://www.irs.gov/charities-non-profits/application-for-recognition-of-exemption-1. On this webpage, you may also do an Exempt Organization Search to verify if your Parent Organization is exempt.

The sales and use tax exemption allows approved organizations an exemption from sales tax when purchasing items to further the organization's exempt purpose. This exemption process is separate and in addition to applying for federal tax-exemption from the IRS.

Although sales tax exemptions apply to purchases necessary to an organization's exempt function, the exempt organization must collect tax on most of its sales. When making purchases of taxable items for resale, the organization would issue a resale certificate(Form 01-339) in lieu of paying tax. When making purchases of items for the organization's exempt function or to purchase taxable items for resale during its designated tax-free sale days, the organization would issue an exemption certificate (Form 01-339).

Parent organizations with sales tax exemptions are entitled to two (2) 'one-day, tax-free' sales or auctions per calendar year. A fund-raiser qualifies for the 'one-day, tax-free' sale/auction if all items are to be delivered on one day. Each "one-day" sale/auction may not exceed 24 consecutive hours. If a designated tax-free sale or auction exceeds a consecutive 24-hour period, the organization may not hold another tax-free sale or auction that calendar year.

Sales of items such as T-shirts, candles, cups, etc. are subject to sales tax when sold on days other than the two (2) 'one-day, tax-free' sale/auction days.

A qualified organization must designate in its records prior to the sale which two one-day sales will be exempt that calendar year. This would require careful planning and coordination on organizations who operate on a fiscal year basis. Parent organizations should verify the number of tax-free fundraisers conducted by the organization during the prior fiscal/school year that occurred during the current calendar year.

If a qualified exempt organization collects sales tax on a sale, the tax must either be remitted to the state or refunded to the purchaser. The organization cannot collect the tax and keep it under the tax-free sale provision.

All catalog fund-raisers are considered taxable, and CANNOT be considered as one of your two (2) 'one-day, tax-free' sales per calendar year. Your Parent Organization is considered an agent of the vendor and, therefore, must collect sales tax for items sold that are taxable.

If you plan to hold a catalog fund-raiser, tax must be collected for those items in the fund-raiser that are taxable. For instance, gift wrap is taxable, but cookie dough is exempt from sales tax by law. The vendor should remit the applicable sales tax to the Texas Comptroller's Office.

For more information, please read the Taxes - School Fundraisers page at https://comptroller.texas.gov/taxes/publications/94-183.php

If you are exempt from sales tax and are planning to make any taxable sales outside of the two tax-free days, you would need to apply for a sales tax permit and charge sales tax on taxable items not sold during the two tax-free days. Of course, if you have not previously applied for sales tax exemption and been approved for such an exemption, you do not have two tax-free sale days. You would have to apply for a sales tax permit and charge tax on all taxable sales.

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Obtaining a Texas Sales Tax Permit

To sell any taxable items within the State of Texas, a company, organization, or person must apply for a Sales Tax Permit. Parent Organizations should obtain a Texas Sales Tax Permit if you intend to sell goods or taxable services in Texas. The sale of goods does include fund-raisers, such as sales of candles, t-shirts, and other items. In addition, some Parent Organizations sell services that may be taxable.

Parent Organizations may obtain a Texas Sales Tax Permit by submitting the completed application to the Texas Comptroller's Office. You must apply on-line for the Texas Sales Tax Permit.

Note: Go to the Texas Comptroller of Public Accounts website at https://comptroller.texas.gov/taxes/permit/.

A Texas Sales Tax Permit will be issued to the Parent Organization along with a Sales Tax Permit Number. 

Parent Organizations cannot use the District's Sales Tax Permit Number.

To determine if your Parent Organization has a permit you may use the searchable Taxpayer Information Database at https://mycpa.cpa.state.tx.us/staxpayersearch/.

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Franchise Tax

Every profit and nonprofit corporation in Texas must file all franchise tax reports and public information reports with appropriate payment until the Comptroller's office has granted tax exemption. Failure to do so will cause the loss of corporate privileges as well as the forfeiture of charter by the Texas Secreatary of State.

Parent Organizations that have received their Determination Letter from the IRS granting 501(c)(3) tax exemption may also request exemption from the Texas franchise tax through the Texas Comptroller's Office.

Although a nonprofit corporation that is exempt from federal income tax under Internal Revenue Code 501(c)(3) is exempt from franchise tax, the exemption is not automatically granted. Parent Organizations must apply for exemption with the Texas Comptroller's Office based on the federal exempt status.

For additional franchise tax information, go to the Texas Comptroller's Office website at https://comptroller.texas.gov/taxes/franchise/faq/exemptions.php.

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Change in Address

If the mailing address for the Parent Organization changes, immediately notify the Texas Comptroller's Office. Failure to do so may result in important correspondence being lost. To avoid frequent mailing address changes, the Texas Comptroller's Office recommends that each Parent Organization obtain its own post office box (PO Box) or private mailing box (PMB) to be used for official Parent Organization mail. In addition, the post office box address and keys can be given easily to the new officers at the beginning of each new year.

 

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Further Questions?

Texas Comptroller's Office

Sales & Use Taxes: 1-800-252-5555 (toll-free)

Franchise Tax: 1-800-252-1381

Certificates of Account Status/Good Standing: 1-800-252-1386

Exempt Organizations Department: 1-800-531-5441 ext. 34142

Website addresses

Texas Comptroller's Office: www.window.state.tx.us

Sales Tax Information: www.window.state.tx.us/taxinfo/sales

Exempt Organizations: https://comptroller.texas.gov/taxes/exempt/

 

For frequently asked questions concerning Exemptions for Nonprofit Organizations, please go to:
https://comptroller.texas.gov/taxes/exempt/faq.php

For frequently asked questions concerning Sales and Use Taxes, please go to:
https://comptroller.texas.gov/taxes/sales/faq/local.php

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