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Are there restrictions on the fundraising activities of a tax-exempt organization?
Tax-exempt organizations may engage in a very limited amount of retail selling, as described in Illinois Administrative Code, Title 86, Sections 130.2005(a)(2) through (a)(4) without incurring Retailers' Occupation Tax liability. A tax-exempt organization may engage in sales to members, noncompetitive sales, and up to two times a year, certain occasional dinners and similar activities without incurring Retailers' Occupation Tax liability. In regard to sales to members, note that the population to whom sales are made is limited to persons specifically associated with that tax-exempt organization, and note also that the sales must be for the primary purpose of the selling organization. Organizations can use their E-numbers to purchase items for these limited sales.
However, if an organization engages in ongoing selling activities (e.g., Little league concession stands or sales of items in a thrift shop run by a church), the organization must register with the Department as a retailer. For these types of ongoing sales, the organization would provide its supplier with a Certificate of Resale for the items purchased to resell and collect and remit Retailers' Occupation Tax on the gross receipts from these sales. See Illinois Administrative Code, Title 86, Section 130.1405 for the requirements of a valid Certificate of Resale.
See 86 Ill. Adm. Code 130.2081 for information about tax-free purchases by exempt organizations and documenting sales to tax-exempt organizations.
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