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Q&A with the KY Dept. of Revenue: Part Two

We have continued to monitor House Bill 487 and have been in contact with the KY Dept. of Revenue, submitting your questions directly.

This is the second installment of the questions we asked and the answers we were given:

1. If we are a historical site and charge admission do we have to charge this tax? No, there is an exemption for admissions to historic sites in KRS 139.482.

2. With fundraising event ticket sales taxed, how does that affect sponsorship packages for those events (e.g. if you sell sponsorship packages that include a certain number of tickets to the event)? – You should charge separately for the tickets. Do not include them with the sponsorship charge. If you charge for the sponsorship and include the tickets the entire amount is subject to sales tax.

3. It states on Tax Answers that entry fees for fishing tournaments, bridge tournaments and other competitive events are taxable. Does this mean that entry fees for golf scrambles are taxable as well? – Yes.

4. If we have an event at a location out of state, will event entry fees be taxable – Not to Kentucky.

5. If the non-profit holds events outside of the state of Kentucky but is based in Kentucky is the revenue from those events taxable? Not for Kentucky sales tax.

6. Will a non profit have to pay taxes on income for educational events or conferences? – No.

7. We are a 501 (c) (3) If our retreat center is used for a workshop, must we charge sales tax? – No.

8. Will the new tax law affect donations? – No.

9. Are event sponsorships now taxed? – See #2 above.

10. “The first $1,000 of a charitable organization’s fundraising proceeds annually are exempt from sales tax”. What exactly does this mean? It means that you do not charge sales tax on the first $1,000 in sales in any calendar year.

11. Our 501(c)3 is receiving corporate sponsorships for an upcoming community (fundraising) walk. The sponsorships help to defray minor costs associated with the event – but largely are donations to our organization. The sponsorships include registrations for a set number of Walk participants. We believe we would only collect sales tax on the actual value of the Walk registrations and NOT the actual donation (total sponsorship less the Walker registration fee) – See #2 above.

12. Our organization sells memberships to garner general financial support. It’s how most people contribute to our 501c3. It’s not for the purposes of admission to entertainment or recreational events. Still, members are admitted free if they choose to come to educational lectures, etc. (Only a small percentage of our members ever attend anything.) Are these memberships taxable? – No, memberships to fraternal, civic or professional organizations are not subject to sales tax.

13. We are a 501(c)(3) public “educational” charity. We host workshops and retreats that have an educational and spiritual components. We do charge a fee to attend the programs. Do we need to charge sales tax on these fees? – No.

14. With our special events, we have corporate sponsors for the event. They pay a higher amount to get their logo displayed as a sponsor of the event. They may or may not get tickets for their sponsorship, how should this be handled with the next tax regulation? See #2 above.

15. Rather than charge an admission fee could we ask for a suggested donation instead? Would it be taxed? – Not if you would allow someone to participate even if they don’t make a donation.

16. Still will not let me get on the wait list – Not sure of the question.

17. Are membership fees for community choral organizations subject to KY sales tax under the new laws? – No, memberships to fraternal, civic or professional organizations are not subject to sales tax.

18. My group has an annual conference for its members. We have a silent auction for fundraising – is this newly taxed? If so, on what amount – the value of the item or the prices paid. – Silent auctions were already subject to sales tax based upon the amount paid.

19. Does this apply to individual citizens raising money on behalf of nonprofits? – It depends upon what the individual is doing. If it is just raising donations that is not subject to sales tax but if they are selling tangible personal property or admissions to raise money that would be subject to sales tax.

20. Will simple donations be taxed with the new regulation – No.

21. Will Agency”s fundraising events be tax? – Admissions to those fundraiser will be subject to sales tax, as will silent auctions held at the event or other items sold.

22. If a church or synagogue offers classes in the study of religion or a religion’s history and practices, is the tuition for same subject to tax? – No.

23. As a 501c3 nonProfit arts organization, we charge a fee for members wishing to jury in. This fee covers a workshop to educate members on the jury process, room rental for said workshop. Will the jury fee be taxed? – No, this is educational in nature.

24. We have a golf scramble and we charge $250 per player and the course charges us $80. Do we collect sales tax from our player on the $80 greens fee or the $250? The $250.

25. I serve on the board of a nonprofit dedicated to the teaching and preservation of American dance and song traditions. We host a weekly event which includes a free 30 minute lesson followed by an open community dance with a $6 door fee; the goal of these dances is instruction and recreation. We are under the umbrella of a national 501c3 organization that is registered in good standing with the Kentucky Attorney General. Would the door fee be exempt from the new sales tax requirements due to the event’s educational and recreational purpose – No, it would be a charge to participate in an event or activity.

26. The organization is engaged in environmental advocacy and assistance and is supported by donations from individuals and family foundations (no government or corporate donations). There is no set membership “fee,” nor requirement that one donate in order to be a member. Are the donations subject to the new tax? – No, memberships to fraternal, civic or professional organizations are not subject to sales tax.

27. Does the tax on event tickets apply only to the portion of the ticket that goes towards the value of benefits received? For example, if tickets sell for $100 but only $45 per every ticket is tax deductible, will sales tax apply to only that $45 portion? – It will apply to the entire $100.

28. We are a historic site that already submits information and sales tax on our museum store. Do we need to set up a new account for new taxed items or use the existing account? Admissions to historic sites are exempt under KRS 139.482.

29 .Will memberships for 501c4 Neighborhood Associations be subject to sales tax? – No, memberships to fraternal, civic or professional organizations are not subject to sales tax.

30. We are a church and rent our facility to another non profit spiritual group do we have to charge them sales tax – If the church is renting their building they would not charge sales tax as this is a general facility rental. If the church owns a gym or recreational center and is renting it to a group for a recreational event they would charge sales tax.

31. Non-profits already receive a large number of tax relief giving them a competitive advantage over for profit companies. We all know of non-profits that are great and others that are much less. Why should I as a taxpayer give any or more when the poorly run non-profits benefit? Where are the non-profit police when their boards fail to lead? – This is not a sales tax question.

32. For items subject to sales tax (e.g. tickets to fundraiser, tickets to performance, etc.) is the organization required to break out the sales tax amount separately? – The sales tax can be included in the price as found in 103 KAR 28:01 (2) (2) (a):
If the tax is included in the total price, a statement shall appear on the ticket to the effect that the sales tax is included in the price unless the tax is separately stated on a sign posted in a conspicuous place at the ticket window and all sales are made at the ticket window

33. Would corporate sponsorships to support events be taxable? – See #2 above.

34. Are admission tickets to educational events taxed? No.

35. Using Raiser’s Edge – how do you plan on referencing the tax in the gifts and receipt amounts? Not sure what the question is?

36. Does the tax apply to registration fees for an event being held in Kentucky by an out of state based nonprofit? – The registration would be subject to Kentucky sales tax.

37. Kentucky Office of Vocational Rehab is hosting an conference, will that need to be sales taxed? Not if it is educational.

38. Do we have to collect sales tax when re-selling donated items? Giveaways? Yes for donated items. For giveaways there would be no sales tax due. However the person buying the item which will be given away will have to pay sales tax, unless it is the exempt organization that makes the purchase.

39. Regardless of its enforcement obligations, does the department actually support (i.e., agree with) applying these changes to receipts from tax-deductible charitable payments? The department will not answer this question. The Department’s mission is to enforce the tax laws as written.

40. Are donated fundraising items we sell, taxable? – Yes.

41. Our organization owns and maintains an historic home. We rent the home for events such as weddings. Are we required to collect sales tax on the rental fee? – No, rental of general facilities is not subject to sales tax

42. Clarity on Landscaping Services – They are subject to the sales tax. An exempt organization would be allowed to issue their exemption certificate in order to make the purchase exempt from sales tax.

43. Will sales tax be collected on donated and resold items in a silent auction, or a used book sale? Yes, at their sales price.

44. Effective date of this bill? July 1, 2018.

45. Will my organization have to collect sales tax on tickets for events? – Yes, admissions are subject to sales tax.

46. Are membership dues subject to sales tax? – No, memberships to fraternal, civic or professional organizations are not subject to sales tax.

47. Has the legislation passed for sure? – Yes.

48. As a membership organization we charge dues each year. Will those now have to be taxed? Can members still deduct on their taxes? – No, memberships to fraternal, civic or professional organizations are not subject to sales tax.

49. Does the sales tax requirement apply to program fees for youth development programs run by nonprofits? – No, charges to be on a team that include an education aspect such as Little League baseball team membership fees will not be subject to sales tax.

50. If we are taxed on membership fees, does this include Board member dues? – No, memberships to fraternal, civic or professional organizations are not subject to sales tax.

51. Does this apply to non-profit organizations that are exempt 501(c) (3) for educational purposes, such as the Kentucky Science Center? – What fees for these organizations are you referring to? If it is an admission to the Center they would be subject to sales tax. If it is a fee to attend an educational class it would not be.

52. Any registration with the state that we need to make on or before July 1? You would need to register for Sales Tax before that date. You can do so at this site: www.onestop.ky.gov.

53. Will a trade association have to charge sales tax on its’ member dues? No, a fee to join a trade association would not be subject to sales tax.

54. We are a museum, are our memberships taxed? – If the membership includes access the museum the charge would be subject to sale tax.

55. Our big question and concern is about events – what exactly will be included as taxable? The statute assesses the sales tax on admissions which are defined as the right of entrance to a display, program, sporting event, music concert, performance, play, show, movie, exhibit, fair, or other entertainment or amusement event or venue; and the privilege of using facilities or participating in an event or activity.

56. In regards to educational summer camp programs, would we as a nonprofit be required to charge sales tax to campers attending an overnight, residential camp? – No.

57. Why should a non-profit pay sales tax on auction items? You are actually collecting sales tax from the buyer, not paying sales tax.

58. Does this apply to all c(3) corporations? Yes.

59. We are a 501c3 collaborative that focuses on improving health and the health care delivery system. We collect membership dues from the organizations that belong to the collaborative to carryout initiatives to improve health in our region. Are these membership dues taxable? – A fee to be a member of the organization would not be subject to sales tax.

60. How do you see this affecting ticket prices for nonprofit fundraisers? The department cannot answer that question.

61. I’ve heard some say that the nonprofit can just “eat” the sales tax after the fact (nonprofit pays themselves – ticket buyers don’t know the difference). I thought sales tax regulations did not allow this, that the buyer had to see the item amount and the tax amount? KRS 139.210 does require the separate display of the tax. There is a provision that allows for the retailer to note on the ticket that sales tax was included in the sales price.

62. Sales tax applicable to fundraiser sales (bake, T-shirt)? Yes, sales of tangible personal property are subject to sales tax.

63. For association with nationwide members that is based in Kentucky, are memberships taxable? – No, memberships to fraternal, civic or professional organizations are not subject to sales tax.

64. Will a non profit have to pay taxes on a charity online fundraiser? The same rules will apply if the fundraiser is done on-line as apply in a physical fundraiser.

65. If a religious or non-profit uses our facility, do we charge sales tax? If they are using the facility in the charitable function of their organization then they can issue their purchase exemption and make the purchase exempt from sales tax.

66. How do we address multiple membership levels; do we need to incorporate the tax into the level? No, memberships to fraternal, civic or professional organizations are not subject to sales tax.

67. How does the sale tax expansion apply to organizations with purchase exemption certificates? They can issue their purchase exemption and make the purchase of any tangible personal property, digital property, service or admission that is used in the charitable function of their organization exempt from sales tax.

68. How do your statutes or regulations define educational events (nontaxable) versus recreational or entertainment events (taxable)? – Educational events will be led by an instructor and those will be exempt from sales tax. Recreational events with no instructor involved will be subject to sales tax.

69. We provide services in both KY and IN. If we have a special event in IN, like a golf event, do we collect sales tax? Not Kentucky sales tax.

70. Would vendors be taxed for a space at a market or conference? – No, vendor space at a conference would not be subject to sales tax.

71. Are tuition fees for our Children’s choirs subject to KY sales tax under the new laws? – No.

72. My group has an annual conference for its member. We have an awards banquet that is ticketed separately from registration. Ticket price is set to just cover the cost of the meal (2018: $30 ticket, $28.50 meal cost). Is this a newly taxed item? – Yes, it is subject to sales tax.

73. Will tickets sale to the event be tax, Live and Silent auction items? – Yes, they are both subject to sales tax.

74. Using the same facts as #1, is there a tax if another nonprofit collects and remits the tuition for the church or synagogue, to the church or synagogue? – Educational tuition is not subject to sales tax.

75. As a 501c3 non-profit arts organization, we sponsor an arts and crafts fair for juried members and charge artists a booth fee. These fees Booth space with electricity and drapes, insurance, ball room rental, advertising, cost of programs. All booth fees collected are spent on the show. The show is free to the public. Will the booth fees be taxed? – Booth fees are not subject to sales tax.

76. If the golf course now has to pay sales tax on the $80 greens fee, and we have to collect sales tax too for the same event/round of golf–isn’t that a double charge? – The golf course charges sales tax on their fee and if the exemption organization charges an entry fee for an event both are subject to sales tax.

77. If membership includes benefits like museum admissions, but we’ve been told that historic site admissions are not themselves taxed, do we pay the tax on memberships? – Historic sites have an exemption found in KRS 139.482 which exempts their admissions.

78. If we hold a wedding or funeral do we charge sales tax? – No.

79. Are memberships that include discounted admission tickets to an educational event taxed? – No, neither the membership nor the admission to the educational event are subject to sales tax.

80. Will the tax apply to a silent auction held at an event in Kentucky by an out of state based nonprofit? – Yes.

81. One of the events is Cultural Enrichment night and charge 10.00 per ticket for that event, sales taxed? – Yes.

82. Is sales tax passed on by a charitable organization deductible with the rest of the tax-deductible payment? – Not for income tax purposes.

83. Are services we receive from another nonprofit, taxable? Which organization owes the taxes, the service provider or the service recipient? – If the services provided for the charitable function of the organization then you could issue your purchase exemption certificate to make the purchase exempt from sales tax.

84. Clarity on what is considered a ‘membership’ under the new rules – No, memberships to fraternal, civic or professional organizations are not subject to sales tax as long as it does not allow you access to a facility or participate in an event or activity.

85. What documentation will be required of nonprofits to – Not sure what the question is.

86. Are auction items subject to sales tax even though the proceeds go to a 501(c)4 – They are if the items are subject to sales tax and they were prior to this tax change.

87. Do we collect sales tax on ballet performance ticket sales, events, ballet school tuition, spring shows? – Yes for the ticket sales. No on the tuition.

88. Do we have to charge taxes for merchandise sold as a fundraiser? – Yes.

89. Does the sales tax apply to registration fees for charity runs/walks? – Yes.

90. How often do we need to remit sales tax to the state – monthly, quarterly, annually? – It will depend upon how much tax you anticipate collecting.

91. Will a trade association have to pay sales tax on registrations for annual conferences, workshops, webinars, etc.? – No.

92. We hold a fundraiser every year, are the tickets for the fundraiser taxed? – Yes.

93. How will the basis for the tax calculation be determined on things like auction items? Based upon the sales price that the customer is charged.

94. If we as a nonprofit rent a campsite from a religious organization for the purpose of an educational, overnight, residential camp for children – does the campsite tax us? Or is the campsite exempt from this as it is a religious institution? – It will be exempt if you issue your purchase exemption certificate to the camp.

95. We have several community educational forum during the year that we collect admission fees from non-members of the collaborative. Are these fees taxable? – Educational forums are not subject to sales tax.

96. Who will calculate the required tax? – The seller will figure the 6%.

97. Do individual overnights, weddings, & school groups have to pay us sales tax? – I am not sure what type of facility asked this question so it cannot be answered. Purchases paid for directly by a school or exempt organization would be exempt if they issue a purchase exemption certificate.

98. What tax forms do we submit? – You will need to register for a sales tax account at www.onestop.ky.gov and once you are registered you will begin receiving a return to file either on a monthly or quarterly basis.

99. Should we now itemize our tax receipts and/or acknowledgement of ticket sales related to fundraising events? – You should separately state the sales tax on the receipt.

100. Are Jefferson County Public Schools subject to sales tax for performances (e.g., student matinees, touring shows)? – Sales by elementary and secondary schools are not subject to sales tax.

101. What documentation do we need to provide when we pay these taxes? – You will need to register for a sales tax account at www.onestop.ky.gov and once you are registered you will begin receiving a return to file either on a monthly or quarterly basis.

102. What is the law concerning children’s choir tuition fees that are partially or scholarshipped by our organization? – They are not subject to sales tax.

103. Will total funds raised be or over a certain amount tax? – There is an exemption for the first $1,000 in sales in any calendar year by nonprofit organizations.

104. We hold a summer camp and raise money from tuition and scholarships do we have to pay sales tax on the money we raise – No, summer camp admissions are not subject to sales tax.

105. How, specifically, is the department reaching out to nonprofits, other than the media? Why am I just hearing about these changes in the media a week away from the implementation date? Why has the department not bothered itself to communicate effectively with charitable entities registered with the state? – The department has made many outreach efforts, in person, in the media, through mailings and through our website, www.taxanswers.ky.gov .

106. Clarity on silent auction items – They are subject to sales tax.

107. Are the income for conference registration fees subject to sales tax? – No.

108. When do we start to collect the tax? 7/1/18.

109. Do we have to charge taxes on fundraising events? Yes.

110. On membership taxes, do we tax the entire amount or only the amount that corresponds with the benefit provided? – No, memberships to fraternal, civic or professional organizations are not subject to sales tax.

111. Will a trade association have to charge sales tax on exhibitor space at a conference? – No.

112. Will raffle tickets be taxable? – No. They are not a fee to participate in an event or activity.

113. What steps will we have to go through with the IRS regarding taxation? – That question would have to be asked of the IRS.