Sales Tax Imposed on Nonprofits
A Note from Shamrock’s Board of Directors
Shamrock has been notified that the 6% sales tax Kentucky is imposing will impact our organization as well as other nonprofit organizations trying to help animals across the state. This includes:
- Pet care services, including grooming, training, and pet sitting. Also small animal veterinary services, including spay and neuter services, and adoption fees charged by municipal shelters, rescue groups, or other animal welfare organizations.
Richard Dobson says an animal adoption is essentially a retail transaction for tangible property, so it should be subject to the sales tax.
- Tickets to fundraisers, cultural performances, and charity events put on by nonprofit organizations.
Richard Dobson says the tax applies to the full amount of the ticket price required to gain admission to the event. (Whether that full amount can be claimed as a charitable contribution is a separate issue, he says). Dobson says businesses or individuals that sponsor a charitable event would have to pay sales tax on the sponsorship if it includes tickets or admission to the event. If the sponsor only receives name recognition or some other promotional consideration, the sales tax would not apply.
- Auction and silent auction items, t-shirts, magnets, other branded items, and fundraising sales efforts.
Nonprofits will also have to collect sales taxes on the amount paid to win an item in a silent auction (the sales tax will not be based on the value of the item), as well as other items like t-shirts or tote bags sold by the organization. However, Dobson says small nonprofits that have less than $1,000 in annual ticket or other sales are excluded from having to collect the sales tax.
This change is actually the result of a Kentucky Supreme Court decision from earlier this year. Dobson says the court ruled that nonprofits in the commonwealth are only exempt from property taxes. They do have to pay sales and use taxes, according to the Court.
If you have a concern about this, please contact your legislator’s office and ask them to assist in the repeal of this tax!