Does Your Nonprofit Qualify for the Occasional Sale Exemption?

For purposes of the occasional sale exemption, a governmental unit is considered a nonprofit organization.

All purchases by a governmental unit and a nonprofit organization are exempt from tax, as long as the nonprofit holds a CES number.

All of the three standards listed below must be met by a nonprofit organization for its sales to qualify as exempt occasional sales:

1. The organization is not engaged in a “trade or business.”

• The sales of the organization must not exceed 20 days during the calendar year.

• The sales must not exceed $25,000 during the calendar year.

• Both standards must be exceeded before the organization is considered to be engaged in a trade or business.

• The organization’s bingo receipts are not included in the above standards.

2. Entertainment is not involved at an event for which charges by the organization constitute admissions.

• Entertainment of $500 or more provided for an “admission” event will eliminate the occasional exemption.

3. The organization does not have and is not required to have a seller’s permit.

An organization qualifies for the occasional sales exemption on non-bingo sales, even though it holds a seller’s permit, if it otherwise meets standards 1 & 2, and the organization meets one of the following:

• If the organization holds a seller’s permit solely for the purpose of conducting bingo games.

• The organization obtains a seller’s permit solely for an admission event involving entertainment, if the seller’s permit is inactivated immediately after the event.

• It holds a seller’s permit solely for the purpose of conducting bingo games and making taxable sales at an admission involving entertainment.

Effective January 1, 2017

The standards to determine when an organization’s sales qualify for the occasional sale exemption have been increased:

• The standard relating to the number of days on which sales of taxable products can occur will be increased from 20 days to 75 days in a calendar year.

• The standard relating to an organization’s receipts will be increased from $25,000 to $50,000 per calendar year.

• The standard to determine whether entertainment is involved at an event will be increased from $500 to $10,000.

Please contact a Hawkins Ash CPA professional with any questions.

Brittany Leonard

I am a Partner for Hawkins Ash CPAs. I focus on providing audit services to tax credit projects, educational agencies, municipalities, nonprofit organizations, commercial enterprises, and housing authorities.