CVmom,
JHB did a great job of explaining the differences. Just to add someting, your state normally dictates what is required for your organization sales tax status. Here in CT, we are required to obtain a non-profit determination from the IRS in order to be exempt for sales tax.
The other issues to consider are how much you raise in fundraising and what, if any, grants or donations are recieved from businesses. These will help make your mind up on filing for non-profit status.
I think I answered you in another post, but I think gaining non-profit determination is worth the time, effort and cost.
Good luck.
Not a lawyer - but I believe the following is correct:
Non profit or not-for-profit is a business term that characterizes a type of business in which the "owners" (i.e., organizers, trustees, or shareholders) do not financially benefit from its activities. Such an organization is usually established for a religious, charitable, educational, literary or scientific purpose rather than the intent to make a profit. (This is not to say a non-profit cannot make a profit on activities - it means the OWNERS do not profit.)
A tax exempt charitable organization is a non-profit that has applied for and been granted status as tax exempt charitable organization under Internal Revenue Code Section 501(c)(3) by the IRS.
An organization can also apply for tax exemption at the state level to avoid sales tax. But again, first these are non-profits who meet the stated criteria and apply for this benefit.
I think it would be true to say that all tax exempt charitable organization are non-profits. But not all non-profitswould be tax exempt charitable organizations.
Why bother to apply (i.e., fair amount of paperwork, $500 fee, and rules that must be followed)? Becoming a 501(c)(3) legitimizes the organization, allows donors to get charitable credit for contributions/donations, is often required before applying for state tax exemptions, is often necessary before applying for grants.
