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Tax Exempt Sales by Nonprofit Organizations

The following sales made by nonprofit organizations are exempt from the Maryland sales and use tax:

  • Sales by churches or religious organizations for their general purposes.
  • Sales of food by schools other than post-secondary institutions.
  • Sales of food by a nonprofit organization if there are no facilities for food consumption on the premises and the food is not sold within an enclosure for which a charge is made for admission.
  • Sales of food served by a volunteer fire, ambulance or rescue company or an auxiliary if the proceeds are used to support the organization.
  • Sales of magazine subscriptions in a fundraising activity by an elementary or secondary school in the state if the net proceeds are used solely for the educational benefit of the school or its students.
  • Sales made in hospital thrift shops operated entirely by volunteers selling only donated articles for the benefit of the hospital.
  • Sales made by an auctioneer for a bonafide church, religious organization or other non-profit organization exempt from taxation under Section 501(c)(3) of the Internal Revenue Code if the proceeds are used for exempt purposes. Unless the organization is a church or religious organization, only the portion of the price that qualifies for a deduction as a charitable organization under IRS quidelines is exempt from the sales and use tax.
  • Sales by out-of-state nonprofit organizations that are exempt from income tax under Section 501(c)(3) or Section 501(c)(19) of the Internal Revenue Code that have  a location in Maryland or are located in an adjacent jurisdiction and satisfy one of the following conditions:
    • The organization provides its services in Maryland on a routine and regular basis;
    • The adjacent jurisdiction does not impose a sales or use tax on a sale to a nonprofit organization made to carry on its work; or,
    • The adjacent jurisdiction has a reciprocal exemption from sales and use tax for sales to nonprofits located in adjacent jurisdictions similar to Maryland's exemption.

Only churches, religious organizations and government agencies may use an exemption certificate to purchase items for resale without paying sales and use tax. All other organizations must issue a resale certificate, with their Maryland sales and use tax license number, to purchase items tax-free for resale.

Any organization making ordinarily taxable sales of tangible personal property, including meals, must obtain a sales and use tax license and collect and remit the tax, even though the organization has an exemption for items it purchases. The organization must collect tax on sales to anyone, including members, students and beneficiaries, even if the item has been donated or sold at or below cost.

Tax should not be collected on sales of goods to PTAs and similar groups associated with non-public schools if the property will be donated to an exempt school. Local PTAs may use their school's exemption certificate when claiming exemptions. Tax should be collected, however, on sales of items to PTAs that they will use in their operations, but which are not donated to schools.

NOTE:  The Maryland sales and use tax exemption certificate applies only to the Maryland sales and use tax. A nonprofit organization that is exempt from income tax under Section 501(c)(3) or Section 501(c)(19) of the Internal Revenue Code, and holds a valid Maryland sales and use tax exemption certificate, is still be liable for other state and local taxes in Maryland, such as local hotel taxes.



 
Links for Exemption Certificates
Business Tax Types
Sales and Use Tax
Filing Information
Tax Exemptions
Exemption Certificates
  Accepting Exemption Certificates
  Verify Exemption Certificates
  Applying for Exemption Certificates
  Requesting Duplicate Exemption Certificates
  Renewing Exemption Certificates
  Veterans Organizations
  Sales by Nonprofit Organizations
  Tax Exempt Sales for Contractors
  Sales to Government Employees
 
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