Thanks - I appreciate any feedback and welcome more. As you say, it varies from state to state, but my interest is very general so any discussion is beneficial.

I've seen the sales tax summaries like the link posted and agree that type of chart needs to be taken with a grain of salt. It's fine as a generic starting point, but they aren't always accurate.

We do have franchise tax in Texas, but (here) that wouldn't apply to organizations like PTOs.

Anyone else have experience with state income tax?

Like state sales tax issues, my limited experience indicates that this varies widely from state to state, and it's also called different things. Some states also call it a franchise tax.

Here in Virginia, they do call it a corporate income tax. But nonprofits only have to file if they file any unrelated business income on the federal level. I've often wondered how they enforce that--if they have some reporting thing with the IRS, or what--because if you didn't incorporate, Virginia might not even know you exist. There is no requirement to file anything in Virginia to be tax-exempt (for state income tax--sales tax is another story).

Here's some info on other areas that I know about, although this information might be a little stale at this point--but just to give you an idea of the differences.

In North Carolina, you actually have to get a letter from the state saying that you are exempt from state income tax. I think that they give it to you when you incorporate in the state, and there's not a separate application, but I'm not sure. Some types of nonprofits (but not PTOs/PTAs) then need to file a copy of their 990 with the state; they don't have a special state form. As with Virginia, though, if you have unrelated business income at the Federal level, you need to file at the state level.

In Massachusetts, you would just send in a copy of your Federal exemption letter, and you're set in the state. But all nonprofits also have to file an "annual report" with the Corporations Division--basic info on officers and stuff like that. I believe you also have to file a return if you have unrelated business income (that's probably a general rule throughout).

In Washington DC, you used to have to send a copy of your Federal 990 in every year, and it went to the Corporations Commission or something like that--not the Department of Revenue. I'm pretty sure that's changed now, though, so that you have to actually fill out an application for exemption with the Revenue office. You can file for exemption prior to receiving the Federal exemption, but I think they make a "preliminary" determination, subject to whatever the IRS ends up saying.

I've never seen a website like Pals showed for the state sales tax filings that outlines the income tax requirements, but even if I did, I don't know that I would trust it. (Especially since the info on Virginia sales tax exemption is incorrect on that website she references!) It's always better to go directly to the taxing jurisdiction.

JHB I just posted a site but here it is again, maybe it will help some.
www.labyrinthinc.com/charities/stateexem...ns.asp?page=6&subs=5

I fully understand how a PTO gets set up to be a 501(c)(3) with the IRS regarding federal income tax and with the state to be exempt from state sales tax. What about state income tax? My state (Texas) doesn't have that.

For those of you who have been through this, what was involved. I'm sure it varies state to state. But was it yet a third step? Was it granted automatically with your 501(c)(3)? Is it a combined filing when you request sales tax exemption?

Or is state income tax only applied to individuals and not businesses, and therefore moot?

Lastly, what are your annual filing requirements? Do you have to file an informational return? Nothing?

I know nothing about this area and would love to learn from any of you who know.