TR 09: Charitable, Religious and Governmental Exemption

The Boulder Revised Code allows exemptions for charitable, religious and governmental entities from paying sales, use, food service, accommodations and admissions tax on items and services purchased. This exemption does not exempt these organizations from collecting and remitting sales tax on the sale of tangible personal property and taxable services , food service tax on the sale of food and beverages, accommodations tax on accommodations sold by or on behalf of the exempt organization.  The organization is exempt from collection of admissions tax on admissions provided that the organization holds a proper City of Boulder exempt license.

To qualify for the charitable, religious and governmental exemption, the organization must meet the following provisions:

• Qualify as a governmental or charitable organization;( see below)
• The purchase is of property or services to be used in the conduct of the organization's regular activities to foster its religious governmental or charitable purpose; (example: a bible study conference would be exempt, but a church sponsored ski trip would not be exempt)
• The purchase is paid for directly by the organization without reimbursement therefor, and the purchase generates for the organization no "unrelated business taxable income" as defined in Section 512 of the United States Internal Revenue Code; (example: members cannot make specific donations to the organization for an event and then have the organization pay for an event tax free)
• If religious or charitable, the organization obtains from the city manager an exempt institution license under section 3-2-12, "Exempt Institution License," BRC, 1981, and presents the license to the vendor at the time of the purchase or sale; and
• The property or service purchased or sold is not for use in construction projects, as defined in section 3-1-1, "Definitions," BRC 1981, when provided under construction contract to the charitable, religious or governmental organization by an independent contractor.

The following persons are exempt:

Governmental Exemptions: "The United States government and all departments and institutions thereof, the State of Colorado and the departments, institutions, and political subdivisions thereof, and the city, but only in the exercise of their governmental functions and only when purchases are supported by official government purchase orders and paid for by draft or warrant drawn on the government's account directly to the seller." (subsection 3-2-1(a), BRC, 1981)

Charitable Organization defined at section 3-1-1, BRC, 1981: "Charitable organization means any entity which has been qualified by the Untied States Internal Revenue Service as a tax exempt organization under Section 501(c)(3) of the United States Internal Revenue Code."

Charitable organizations must be licensed as a tax exempt entity by the City of Boulder in order to make tax exempt transactions in the City. Not all not-for-profit organizations are exempt. An organization must apply for a license to be tax exempt by the City of Boulder (section 3-2-12 BRC, 1981).

Acceptable forms of payment to comply with the above payment requirement shall be:

• Check from the exempt entity
• Purchasing card from the exempt entity, US Bank State of Colorado Purchasing Cards, "State Tax Exempt" MasterCard or Visa cards, Federal GSA SmartPay cards or other purchasing or procurement cards billed directly to the exempt organization (other credit cards in the employee's name are not acceptable as they are billed to the employee and not directly to the exempt entity). (See TR35 "Purchasing Cards" for more detailed information)
• Purchase order resulting in a direct bill to the exempt organization and direct payment from the exempt organization.

Examples:

1. A federal government employee is staying in Boulder, and the visit is within the scope of their duty as a government employee. The employee is billed accommodations charges at the hotel, meal charges at local restaurants and charges for toiletries from the hotel gift shop. The employee presents a tax exempt GSA SmartPay credit card to pay for the hotel, and a personal credit card for the meals and gift shop purchases. The hotel charges would be exempt from accommodations tax, because the payment will come directly from governmental funds. However, the payment for meals and gift shop purchases would be subject to sales tax. The meals would not be paid directly from government funds and the purchase of toiletries are not purchases used in the conduct of the organization's regular activities and are also not paid directly from governmental funds.
2. A properly licensed Boulder exempt organization holds a fund-raiser at the Boulder Reservoir. The organization charges $10.00 for admissions and sells food, beverages and t-shirts. The organizations rents volley ball set-ups, picnic tables and umbrellas from the Reservoir. The organization is exempt from paying tax on the rental items from the Reservoir, and collection of admissions tax on the $10.00. The organization must collect food service tax on the food and beverage and sales tax on the t-shirts. (see TR22 "Fund Raising" for more details)

Last Updated on Tuesday, 10 July 2012 15:18