By Marie Palacios
“Events are often more trouble than they are worth!”
Chances are, if you work in the nonprofit sector you have expressed that sentiment a time or two.
All too often, staff and volunteers are so preoccupied with the LOGISTICS of an event that we forget to consider the LEGALITY of our procedures. Today we are not here to provide you with a checklist for an A-List event but we are here to share a few reminders from our certified public accountant (CPA) friends.
Remember, CPA’s are always here to guide us through financial best practices and ensure that our organization’s daily operations and special events are in full compliance with state and federal laws…so make sure yours is on speed dial the next time you plan an event!
1. Merchandise Sales- one event per year, sales are not taxable. All events/sales after are taxable. Most recent guidelines state: sales by a nonprofit organization are exempt from the collection of sales tax if they are conducted only on an annual basis for the purpose of raising funds for the organization’s activities, the proceeds are actually used for the organization’s activities, and the products sold are delivered to the purchaser within 60 days of the first solicitation made during the organization’s annual sale period. (in other words, the 2nd event item is out)
2. Out of state contracts- All personal service contractors (could be entertainer, or any other personal service provided in relation to an entertainment or athletic event, speech or the creation of a film, radio or television program) or individuals with an ITIN (individual taxpayer identification number, rather than a SSN) from out of state that are paid more than $1,500 (other than wages) are subject to a 4% withholding unless the contractor is a nonresident tax-exempt organization, provided you obtain and keep on record documentation of the exemption from tax (federal determination letter or letter of tax exemption from the DOR). Individuals with an ITIN may also be exempt. See below Nonprofit Booklet from the NCDOR (page 12) for more details.
3. Raffle guidelines- Legislature in NC allows organization’s with tax exemptions status to host up to two raffles annually to support their cause. However, there are several key restrictions that your organization should know about prior to planning a raffle. Did you know that the current ceiling for raffle prizes is $125, 000 unless the prize is a house? In the case of houses, the total prize value cannot exceed $500,000. Did you know that you could be convicted of a Class 2 misdemeanor for conducting a raffle that violates provisions of state law H.R. 85? For the full list of restrictions check out the following link: http://www.ncleg.net/Sessions/2009/Bills/House/PDF/H85v4.pdf
Each state’s department of revenue requires businesses, both for profit and not for profit, to stay informed and comply with a myriad of tax laws. A few important sales tax requirements and exemptions for nonprofits can be accessed on the NC Department of Revenue. Click here: http://www.dornc.com/publications/nonprofit_booklet.pdf
Call your organization’s CPA prior to an event to discuss expected sales and expenditures. The state even released new sales tax laws regarding the rental of linens that went into effect on August 11, 2017!
When running a business, compliance is key, and most of the time staff are too busy serving the community or putting out fires to stay up to date with all the department of revenue laws. Our advice? When in doubt, check it out!