Nonprofits Can Profit From Tax Law

 A close examination of N.C. sales tax law reveals that sales taxes paid by most nonprofit organizations and charities can be fully recovered. In fact, the State Revenue Office annually refunds $150 million to some 10,000 different qualifying organizations. But incredibly, many others who are entitled to these legitimate sales tax refunds don't apply. Other nonprofit organizations such as private secondary schools, colleges, universities, nonprofit hospitals and religious organizations can also avoid "rendering unto Caesar" more than Caesar is due. Whether or not lawmakers were divinely inspired or subject to secular, but effective, lobbyists, the resultant sales tax laws are good for those who seek to do good for their fellow men.

For entities to qualify for these favorable tax breaks, they must be focused on charitable, educational or religious goals. Civic clubs, fraternal and patriotic organizations, while well-meaning and nonprofit, do not qualify for these tax exclusions. In addition, qualified organizations can file for the recovery of the sales taxes paid through contractors and subcontractors for materials on construction projects.

For example:
If your church or private school builds a $2 million structure with $800,000 in materials cost, the 6% sales tax paid by the contractor would result in a $48,000 tax refund for your organization. That's a lot easier than having to net $48,000 from a fund raising event.  

Because of the wide diversity of organizations which qualify for these refunds, the following is a further list of types of entities in addition to those already identified:
Parent-Teacher Associations
Habitat for Humanity
Children's Homes
Entities that assist with medical care for the poor
Historic Foundations
Nursing homes for the aged, sick or infirm whose property is excluded from property taxes. 

To find out if your organization is eligible, submit your articles of incorporation and bylaws to: N. C. Department of Revenue, Sales and Use Tax Division, P.O. Box 25000, Raleigh, N.C. 27602 and ask for their written opinion. If you qualify, you can go back for up to three years to recover sales taxes paid for purchases.

While a penalty may reduce the full recoverable amount, in many cases the penalty may be waived. You are required to file Form E- 585 twice a year: For the time frame of January through June, the deadline is Oct. 15; and, for the July to December period, the deadline is April 15. If in doubt about the status of your organization in regard to these refunds, it may be well worth while to check it out. After all, the more money saved, the more good your organization can do for those who need your help.

The taxman is on your side ... at least, on this one. Walter Church Jr. is president and co-founder of CFG Associates Inc., a taxation review and recovery consulting firm, based in Valdese, with offices in Atlanta and Columbia. He can be reached at (828) 879-2855 or via e-mail at wchurchjr@cfgassociates.com.

This article appeared in the November 30, 1998 issue of The Business Journal. It has been reprinted by The Business Journal, and further reproduction is prohibited. Copyrighted 1998 by The Business Journal of North Carolina, LLC, 200 West Morehead Street, Suite 200, Charlotte, NC 28202. (704) 973-ll00. tbj113098.jpg (27730 bytes) The Business Journal - November 30, 1998 Click on one of the links below to bring up another article. bullet Consultants Say Most Firms Overpay Their Taxes bullet North Carolina, December 1998 bullet Nonprofits Can Profit From Tax Law bullet The Business Journal, November 30, 1998 bullet Can You Take Some Red Ink Out Of Your Printing Bills? bullet The Business Journal, August 17, 1998 bullet Increase Profits with Tax Knowledge bullet Triangle Business Journal, September 18, 1998