By: Angela Crawford, CPA, Senior Manager
The recently enacted Senate Enrolled Act (SEA) 382 (2022) makes significant changes in the way not-for-profit organizations purchase and sell items exempt from sales tax. Sales tax information Bulletin 10 has been revised to reflect these changes. While sales tax-specific changes are detailed within the bulletin, here are the key highlights of all changes impacting not-for-profits.
1. There are changes to the sales tax exemption certificates not-for-profits use to purchase items without paying sales tax. Note, this is not an exemption for collecting sales tax on sales of goods. The department will begin distributing specially issued exemption certificates through the Indiana Department of Revenue’s portal, INTIME (Indiana Tax Information Management Engine), for not-for-profits. This official electronic sales tax exemption will provide vendors more assurance when accepting the certificates and is expected to reduce abuse by unauthorized organizations. The department has delayed the initial distribution of these forms from July 1, 2022, to January 1, 2023.
2. Upon applying for the exemption certificate, the organization will agree to file a report with the department on or before the fifteenth day of the fifth month every five (5) years following the date of its formation. The report must be filed electronically with the department. If the organization is not compliant, they risk losing its tax-exempt status. Reinstatement will require petitioning and appealing to the department demonstrating the failure to file was due to reasonable cause. An adoption schedule has been developed as follows:
A taxpayer filing a report after December 31, 2021, and before January 1, 2023, will be required to file the next required report on or before the following dates:
- May 15, 2024, if the taxpayer does not have a federal employer identification number or has a federal employer identification number ending in 00 through 24
- May 15, 2025, if the taxpayer has a federal employer identification number ending in 25 through 49
- May 15, 2026, if the taxpayer has a federal employer identification number ending in 50 through 74
- May 15, 2027, if the taxpayer has a federal employer identification number ending in 75 through 99
3. SEA 382 changes the threshold for when a not-for-profit organization’s sales are tax-exempt. Previously, an organization was exempt from collecting sales tax if they had sales of tangible personal property less than 30 days in a calendar year. This has been repealed and replaced with a dollar threshold. Not-for-profits who sell less than $20,000 in sales in a single calendar year will not be considered a retail merchant and will not be required to collect and remit state gross retail tax. For 2022, the calendar year is split. Specific guidance is available in the information bulletin on how to adopt these changes for 2022.
If you have any questions on the applicability of the new law to your organization, please reach out to your Blue & Co advisor.
