Why We May Need to Charge Sales Tax – Even When You're a 501(c)(3)
As a fellow nonprofit organization, we understand the challenges of staying compliant with complex tax rules while advancing a charitable mission. One common point of confusion we often hear from our nonprofit customers is:
"Why are we being charged sales tax if we’re a 501(c)(3)?"
We want to take a moment to explain why this happens and how you can avoid unnecessary sales tax charges if your organization may qualify for an exemption.
Federal Tax-Exempt Status ≠ Automatic Sales Tax Exemption
While your organization may be recognized by the IRS as a 501(c)(3) tax-exempt nonprofit, that designation applies only to federal income tax. Sales taxes are governed by state law—and the rules vary significantly from state to state.
Some states automatically exempt certain nonprofit purchases from sales tax, but most require nonprofits to apply for a separate state-level sales tax exemption certificate (in the state where the nonprofit operates). Without that certificate on file, vendors (like us) are legally required to charge applicable sales tax on their products and services—even to other 501(c)(3) organizations.
Why We're Required to Charge Sales Tax
As a registered business, our organization is responsible for collecting and remitting sales tax in states where we do business and sell to our customers. Unless we have a valid sales tax exemption certificate from our customers on file for their respective state, we are legally obligated to charge sales tax on taxable purchases.
Even though we are a nonprofit ourselves, our tax obligations as a seller are the same as any for profit business when it comes to sales tax collection.
How You Can Avoid Being Charged Sales Tax
If you think that your organization is exempt from sales tax in your state, here’s what you can do:
- Check with your State's Department of Revenue and your tax provider and/or accountant.
- Apply for your state’s sales tax exemption (if you haven’t already). You can usually do this through your state’s department of revenue or taxation.
- Send us a copy of your exemption certificate.
- Once we have it on file, we’ll update your account to reflect your exemption and remove sales tax from future invoices.
Disclaimer: Please note that we are not a tax advisor or tax provider; the information shared is for general guidance purposes only and should not be considered legal or tax advice. We recommend consulting your accountant or tax professional to determine your organization’s specific tax obligations or exemption status.
Thank You for Understanding and For Your Assistance!
We know that navigating nonprofit tax rules can be confusing. We’re committed to supporting your organization’s mission—and doing so in a way that keeps us all in compliance with state tax laws. If you have an exemption certificate or are in the process of applying for one, please feel free to send it to us at
accounting@edovo.org. Thank you for your partnership and for all the important work you do!