It’s easy to crunch numbers when you are calculating your favorite student athlete’s RBI or rebound average for the season. If you have been part of your booster club for a while, you can probably run through these formulas with your eyes closed.
But when it comes to taxes, you undoubtedly have some questions. This is understandable — your booster club has to adhere to both state and federal tax laws, which can make things a bit confusing. Figuring out whether you need to collect sales tax can be particularly tricky, as some items are tax-exempt and others are not.
So Do I Need to Collect Sales Tax or Not?
The answer depends entirely on what state you operate within and what you are selling. Generally speaking, your booster club will need to collect and subsequently pay sales tax for consumer products like shirts, hats, cups, and select food items.
Fortunately, concession stands are probably one of your biggest revenue drivers. If so, you are in luck, as lots of states provide tax exemptions for groceries and non-prepared food. Check out this grocery tax rules by state chart to learn more about the sales tax rules in your area.
While the rules in your state will vary, the general rule works like this: If you sell items that are pre-packaged and don’t require any preparation, like chips or candy bars, you don’t have to collect or pay sales tax. But if you sell burgers or hotdogs, you do.
Isn’t the Booster Club’s Revenue Tax Exempt?
Here is where some booster clubs get themselves into a jam come tax time. (And trust us, tax troubles are far worse than losing the annual game to your school’s local rival.)
As a nonprofit organization, booster clubs are exempt from paying federal income tax. But that does not exempt them from paying state sales taxes.
With that said, make sure you are collecting the appropriate amount of sales tax on eligible items, such as clothing, prepared food, etc.
State vs. Federal Tax Exemptions
Remember, most booster clubs are exempt from paying federal income taxes. But it is vital that you consult with a tax professional to ensure that your booster club is classified as a 501(3)c organization so you don’t pay unnecessary taxes each year.
Additionally, ask your tax professional about state tax laws so you can capitalize on any exemptions and generate more revenue for your school.
Brush Up on Your Tax Laws Before Next Fundraising Season
As your booster club gears up for next season, make sure to brush up on your state and federal tax laws. While these laws remain relatively consistent from year to year, taxing authorities will sometimes make changes to sales tax rates, exemption rules, etc.
If you really want to simplify tax tracking and sales processes, consider implementing some booster club tech. Pairing a user-friendly solution with some tax knowledge will help you make the most of this fundraising year.
