OK guys, second hand tax expert. I just asked my husband who is a CPA and tax preparer to explain this situation to me. I know that as Treasurer of my school's PTO we do not pay sales tax on any fundraisers. For example, we hold a wrapping paper fundraiser each fall and 2 book fairs and we just did a school logo item sale. We are a non-profit organization with a tax-exempt Fed. ID#. In some cases, we have sent the fundraising organization a copy of our tax exempt certificate, but in other cases we have not had to.
Of course, my husband could not give me a quick, simple answer. He made it very complicated. But, in a nut shell. The organizaion or individual who will be the end user of the product should pay the sales tax in sales that are made within the same state. The seller is obligated to collect and remit the tax to the state. Sales made between different states, are not obligated to collect sales tax for the other state.
So, for example, in the case of our wrapping paper fundraiser, the wrapping paper vendor is located in another state. That company is not obligated to collect our state's sales tax. So they do not need to ask for our ID#. However, both our book fair vendor and our school logo merchandise vendor are located in the same state we are. Therefore, they are obligated by the state to collect the sales tax and remit it to the state. However, by providing these companies with our tax exempt ID#, they are no longer obligated to collect or remit the tax to the state. These regulations may be different in a few states, but the majority of the state follow these same regulations or ones very similar. Your PTO Treasurer should be able to at least tell you if your PTO has a tax exempt ID# and maybe the laws in your state. If the Treasurer is not aware of the laws, it may be beneficial for her or he to call the state revenue dept. and ask a few questions.

amthrof2 -- this has the potential to be a fairly complex issue, and I think we're missing some facts to be able to help you out. Who is actually responsible for remitting the sales tax to the state? The PTO or the fundraising company (sounds like the latter)? Were these items where you got to set your own sales price? What was the profit sharing agreement? Why did you decide to change the way the sale was done in the past and have the PTO pay the sales tax?

It sounds to me that what happened here is that somewhere along the way (after you did your report), someone decided that the gross sales price was going to include the sales tax, so that the PTO wouldn't have to pay it out of its pocket. This isn't necessarily wrong or illegal.

Here's an example. Let's say the sales tax rate is 5%. You sold items for $1.00, meaning to then pay the fundraising company and the state a combined total of $1.05 ($1.00 for the item and $0.05 for the tax). Someone decided that they didn't want the PTO to have to eat the $0.05. So, they say that the price of the item was $0.95, and the tax was $0.05, and they send off the $1.00 to cover the item sales price and the tax. Either way, the appropriate sales tax will still get remitted.

Where are the tax experts on this one?? Even a 501(c)(3) tax-exempt organization has to collect state sales tax on items the group sells, right? If you are supposed to collect the sales tax, you are also obligated to remit it to the state (or maybe in this case back to the wholesaler who in turn pays the state???). Hopefully this forum will provide some insight into this often mis-understood situation - when does a "non-profit" have to collect/remit sales tax?

In your case, even if the past chairperson did it one way, she didn't necessarily do it the right way. If you believe you are correct, then stick by your convictions. Maybe you can collect enough support here or from your state or from the wholesaler to educate the new officers. Ignorance is not excuse for failing to remit sales tax if it is due. I would call the company first and compare the payment to your records. Then educate your board and get the PTO to pay the tax if it's necessary. It's not worth 5% to put the PTO at risk. I doubt anyone is trying to commit real fraud, I don't think most PTO volunteers think that way. They are probably just trying to get the most money for the kids and overlook that fact that a PTO is a small business in the government's eyes. Good luck.

I was the chairperson for a sale sponsored by my son's school's PTO. It was held before the elections were held to elect new officers. I filled out all of the paperwork for the sale to be submitted with amount sold, tax owed and grand total to be paid, then I gave it to the treasurer (returning). Today, I went to a meeting with the newly elected president to go over paperwork and make sure she had everything she needed. When I informed her that I had received a phone call from the company looking for their payment, she replied that it had been sent the day after the elections. The Treasurer came into the room at that moment and they had a small discussion concerning the news about the phone call. They then discussed the amount of the check. RED FLAG the amounts do not match. At the election one of the mothers that had been the sale chairman in the past wanted to know why we owed money. I informed her we did not owe money we had to pay the taxes (we provided the sale tax free to the children so they could get the most for their dollar and we would pay the tax), her response was that she never owed and never charged the kids tax. I believe that she just never paid the taxes on the sales. My name is on the sales receipt that was turned into the company, now without the tax being included (I believe). Do I have the right to ask to see the books to make sure that my name was not used to break the law. I believe the new President and the Treasurer took her up on the offer to "fudge the numbers so we don't owe." Would I get into trouble? What recourse do I have? Do I call the company to see if the numbers I have match what they paid? Do I call them on what they did or do I go straight to the School Board or authorities? I am angry and hurt.