Are 501(c)(3) Non-Profit Organizations Exempt from Sales Tax in Georgia?

Sales tax is an important part of doing business in Georgia. The Georgia sales tax impacts sellers throughout the state, as well as businesses selling online or remotely from out of state to customers in Georgia.

However, the Georgia sales tax rules for 501(c)(3) non-profit organizations are unique.

Non-profits that are exempt from federal taxation are not necessarily exempt from sales tax in Georgia.  Only non-profits that fit into a specific exemption category are allowed to enjoy an exemption from the Georgia sales tax.

Georgia Sales Tax Exemption

Churches, religious, charitable, civic and other nonprofit organizations are required to pay Georgia sales tax on all purchases of tangible personal property.

When these organizations engage in selling tangible personal property at retail, they are required to collect sales tax and send it to the state.

However, Georgia provides limited exemptions from the payment of Georgia sales tax to a specific list of qualifying non-profit organizations.

Purchases Exempt from Sales Tax in Georgia

The following is a list of 501(c)(3) organizations that do not have to pay sales tax on purchases in Georgia:

• Orphanages
• Adoption agencies
• Maternity homes
• In-patient hospitals
• Mental hospitals
• Nursing homes
• Hospices
• Non-profit private schools (grades 1-12)
• Groups that raise money for public libraries
• Organizations that provide services to the developmentally disabled
• Non-profit health centers
• Volunteer health clinics
• Blood banks
• Construction materials for qualifying private colleges, zoological institutions and aquariums

Sales Exempt from Sales Tax in Georgia

The following is a list of 501(c)(3) organizations that do not have to collect sales tax from customers when they sell goods in Georgia:

• Boy Scouts and Girl Scouts
• Licensed orphanages, adoption agencies, and maternity homes (Limited to 30 days in any one calendar year.)
• Parent Teacher Organizations
• Religious institutions (Limited to 30 days per fundraising activity in any calendar year.)
• Nonprofit groups whose primary activity is raising money for public libraries
• Public and private schools (grades K-12)

Are Churches Tax Exempt in Georgia?

Churches and other houses of worship are not exempt from sales tax in Georgia.  They are required to pay sales tax on their purchases.  And they have to charge sales tax, file sales tax returns, and remit sales taxes to the state when they sells goods to the public.  However, religious institutions are allowed to make tax-free sales for up to 30 days per year, if such sales are part of a fundraising activity.

Georgia Sales Tax Exemption Extended to Food Banks

The list of of organization exempt from the payment of Georgia sales tax was indefinitely extended to food banks, according to a bill signed by the Governor on August 5, 2020.

A food bank qualifies for the exemption if the food bank is exempt from taxation under Section 501(c)(3) of the Internal Revenue Code.  In addition, it must operate primarily for the purpose of providing hunger relief to low-income persons residing in Georgia.

Letter of Authorization

To make tax-exempt purchases, a qualified non-profit organization must present a valid Letter of Authorization (“LOA”) to the seller.   The seller must retain a copy of the LOA for audit purposes.  Sellers are permitted to deliver items purchased with an LOA to any location operated by the organization.

To receive a refund of tax paid on purchases, a qualifying exempt organization must hold an LOA that is valid for the period in which the purchase was made.

To obtain an LOA, qualifying exempt organizations must apply online through the Georgia Tax Center.   You will need to submit with your application a copy of your IRS Letter of Determination of Tax Exempt Status, as well as your certificate of incorporation from the Georgia Secretary of State.

Organizations must apply for a new LOA annually.  LOA’s expire on June 30 each year.

What Items are Exempt from Sales Tax in Georgia?

Some items  are exempt from sales tax in Georgia, regardless of the identity of the buyer or seller.  Examples of exempt items include:

• prescription drugs
• medical supplies
• manufacturing equipment
• non-prepared foot items (exempt from state sales tax, but subject to local sales taxes)

Sales Tax Audits and Sales Tax Audit Defense

Sales tax audits are on the rise in Georgia, as in most states. This is due to budget shortfalls of states across the country. In fact, state auditors are much more aggressive than the auditors at the IRS.

The Georgia Department of Revenue  has the power to do massive damage to a business as a result of a sales tax audit, including tax assessments, interest and penalties that continue to accrue over time.

All sellers in Georgia, whether for profit businesses or 501(c)(3) organizations, should work closely with a CPA firm to ensure that they remain in compliance with the state’s sale tax laws.

Check out our article on sales tax audits (how to avoid them and what to do if you are audited) for more detailed information and guidance.

For more information about sales tax, non-profit organizations, IRS matters, or other tax and accounting matters,  give our Atlanta office a call at 678-235-5460.   If you would like to learn more about the tax and accounting services we provide, visit our Home Page!

The Tax Department at Massey and Company CPA prepares applications to the IRS for tax exempt 501(c)(3) status.  Please reach out to us if you need this type of assistance.

Massey and Company CPA is a boutique tax and accounting firm serving individuals and small businesses in Atlanta, Chicago and throughout the country.  Our services include tax return preparation, tax planning for businesses and individuals, IRS tax problem resolution, IRS audits, sales tax, and small business accounting and bookkeeping.