(a)
Purchases for use by exempt organizations. The exemption to
which an exempt organization shall be entitled is limited and does not extend
to all purchases by the exempt organization. The Department may issue an
assessment against an exempt organization for sales and use tax owed on
nonexempt purchases, whether or not an exemption certificate or declaration of
sales tax exemption was tendered to the vendor. Moreover, the exemption is
personal and is not transferable to another. Individuals making purchases of
tangible personal property on behalf of the exempt organization are not
entitled to claim the organization's exempt status.
(1)
Payments. The purchases
referred to in subsection (a) shall be billed to, and paid for by, the exempt
organization.
(2)
Taxable
and exempt purchases. The exemption applies to the purchase and use of
tangible personal property or services billed directly to the exempt
organization, including office supplies, motor vehicles, food and beverages,
fund raising supplies, utilities and furniture with the exception of the
following:
(i)
Unrelated trade or
business. Tangible personal property used in the performance of an
unrelated trade or business. Examples of taxable purchases are the following:
(A) The purchase of kitchen equipment by a
hospital in operating a cafeteria for use by the general public.
(B) The purchase of tables, chairs and a
refrigerator by a volunteer fire company in operating a bar or
restaurant.
(C) The purchase of
liquor or malt beer by an exempt organization which is licensed by the Liquor
Control Board.
(ii)
Materials and supplies. Materials, supplies and equipment used
and installed in the construction, reconstruction, remodeling, repair and
maintenance of real estate so as to become a permanent part thereof. However,
materials and supplies used for routine maintenance and repair of real estate
are exempt from tax. "Routine maintenance and repair" means minor repairs and
regular maintenance performed to restore or preserve real estate or to prevent
deterioration resulting from ordinary wear and tear.
(A) Examples of taxable purchases are the
following:
(I) A church's purchase of a
furnace which will be installed by its membership.
(II) A volunteer fire company's purchase of
building blocks which will be used by the organization to construct a new
firehouse.
(III) A hospital's
purchase of five light fixtures to replace the existing fixtures in the
administrative offices.
(IV) A
private school's purchase of wall-to-wall carpeting which the school will have
installed by someone other than the seller.
(B) Examples of materials and supplies
qualifying as routine maintenance and repair are the following:
Paint, paint brushes
Light bulbs
Floor wax
Carpet shampoos
Replacement window panes
Cement to repoint bricks
Patch asphalt
Roofing tar
Expendable mops, brushes
(C) Tools and equipment for routine
maintenance and repair are taxable.
(iii)
Equipment. Equipment
used but not installed in the construction, reconstruction, remodeling, repair
and maintenance of real estate. Examples of taxable purchases are the
following:
(A) A school's purchase or repair
to a lawn mower or snowblower.
(B)
A church's purchase of a hammer and saw.
(C) A hospital's purchase or repair of a
floor polisher.
(iv)
Hotel and motel occupancies. Charges for occupancy of a hotel,
motel or similar establishment. Example: Church "A" is billed $100 for 2 days
use of a conference room at Motel "X." Church "A" would be required to pay
Hotel Occupancy Tax upon the $100.
(v)
Purchases on behalf of
others. Purchases by an exempt organization acting as a collection
agent for its membership. An example of a taxable purchase is as follows:
College "B" engages the services of Photographer "Y" to
photograph the individual members of the senior class. Photograph "Y" bills
College "B" which, in turn, bills each senior. College "B" shall be required to
pay tax to Photographer "Y" unless College "B" itself is licensed with the
Department for the collection and remission of sales tax upon its billing to
each senior.
(b)
Procedures for claiming
exemption. Use of the exemption shall conform with the following:
(1)
Identity of purchaser or
user. The person claiming the exemption shall be an authorized agent
or representative of the exempt organization which is entitled to the
exemption, and shall make the purchase in the name of and from funds of the
exempt organization. The purchase of property by an individual upon his own
account shall be subject to tax, even though the purchaser intends to later
donate the property purchased to an exempt organization which would have been
entitled to exemption if it purchased the property directly. For example, the
purchase of flowers by and in the name of a church, to decorate the altar,
shall be exempt from tax. However, the purchase of flowers by a church member
on his own account shall be taxable, even though the purchaser intends to
donate the flowers to the church.
(2)
Exemption numbers. An
organization desiring to qualify as an exempt organization shall file with the
Department a completed Application for Sales Tax Exempt Status form, together
with related documentation and other information required by the Department.
The Department will not consider the application unless the organization is
actively performing the activities upon which it bases its claim for exemption.
The Department will review the application and documents, and if in its opinion
the activities of the organization qualify it as an exempt organization, will
issue an exemption number, prefixed by the number "75," to the organization.
The Department may issue an exemption number to the parent organization for use
by member organizations. Only organizations which are registered with the
Department and hold an exemption number are permitted to make tax free
purchases for use by the organization. Once issued, an exemption number
continues to be valid and remains in effect until it is revoked by the
Department. For the purpose of insuring that the organization is entitled to
its exemption and to update the Department's records, the Department may
require the organization to reapply for the exemption and submit another
application together with other required documentation every 3 years. The
Department may require an organization to reapply for this status at any time
if the Department has reasonable cause to believe that the organization's
activities do not meet the criteria established for exemption including those
in §
32.1 (relating to definitions).
The Department may revoke an exemption number issued to an organization which
does not qualify for exempt status or fails upon request to submit an
application, related documentation and other information requested by the
Department.
(3)
Appeals. If the Department denies an Application for Sales Tax
Exempt Status or revokes an exemption number, the organization may file an
appeal with the Board of Appeals within 90 days of the mailing date of the
notice of the action complained of under §
7.4 (relating to filing of special
petitions).
(4)
Exemption
certificates. A purchase by an exempt organization shall be supported
by a valid, properly executed Sales and Use Tax Exemption Certificate which is
to be retained by the vendor. The exemption number, prefixed by the digits 75,
together with the following language shall be inserted on the face side of the
exemption certificate: "Property and/or services are being purchased for use
and not for resale by purchaser holding exemption number 75-." An exempt
organization is not permitted to use its exemption number in connection with
the purchase of tangible personal property or services, which the organization
intends to resell, whether or not its sales are for fund raising
purposes.
(5)
Exempt
organizations.
(i)
Exemption
not transferable. The exemption to which an organization is entitled
is not transferable to another, such as a construction contractor. For example,
College "E" engages the services of Repairman "Z" to supply and replace a
broken window pane. While College "E" is entitled to claim an exemption upon
the purchase of the window pane, Repairman "Z" is required to pay tax upon his
cost of the window pane since he is a contractor.
(ii)
Declaration of sales tax
exemption. To claim an exemption on taxable purchases of $200 or more,
an exempt organization shall furnish to the vendor a Declaration of Sales Tax
Exemption. The "Declaration Form" shall contain the organization's exempt
status number and indicate a usage which is nontaxable. The obtaining of a
completed declaration form relieves the vendor of the "good faith" requirement
in accepting an exemption certificate and the burden of proving otherwise is on
the Department. The "Declaration Form" does not relieve the exempt organization
of its tax liability if the purchase from the vendor is later determined to be
taxable.
(c)
Sales by exempt organizations.
(1)
General. An exempt
organization making sales of tangible personal property or services has the
same responsibility as another vendor under the sales tax law, even though
sales are made to members, students, patients, employes or other persons
directly associated with the organization. If taxable property is sold, the
fact that the organization selling it made no profit from its sale, or if
payment is called a donation, will not excuse the selling organization from
collecting and remitting the tax, or from registering with the
Department.
(2)
Isolated
sale. An exempt organization need not collect and remit tax upon the
sale of property in an isolated sale as defined in §
32.1 (relating to
definitions).
(3)
Food and
beverages. An exempt organization which is either engaged in the
business of catering or the operation of a restaurant, cafe, lunch counter or
other eating place for the purpose of selling prepared food or beverages is
required to obtain a sales tax license number and collect and remit tax upon
its sales of food or beverages unless the sales of food or beverages:
(i) Qualifies as an isolated sale as defined
by §
32.1.
(ii) Are made on
the premises of a school or church in the ordinary course of its activities.
Example: F, a volunteer firemen's
organization sells fish dinners regularly on Friday evenings in order to raise
money to build a new firehouse. As F is operating an eating place and does not
qualify for the isolated sale exemption, F shall obtain a sales tax license and
collect and remit tax on its sale of food.
(4)
Purchases of property for
resale. An exempt organization purchasing property for resale in
connection with fundraising activities is required to hold a Pennsylvania sales
tax license number for the purpose of collecting tax, unless the sale qualifies
as an isolated sale as defined in §
32.1.
(i) The organization's sales tax license
number shall be inserted on a sales and use tax exemption certificate along
with the required wording that the property being purchased will be resold. The
75 exemption number which is only issued to exempt organizations, is not a
sales tax license number and may not be used by the organization in purchasing
tax free property for resale.
(ii)
If the sale of the property qualifies as an isolated sale, a sales tax license
number is not required. The organization shall tender to the vendor a unit
exemption certificate setting forth the dates of sale of the property being
purchased. A separate unit exemption certificate shall be tendered by the
exempt organization for each purchase which will be resold by the exempt
organization as an isolated sale and shall be retained by the vendor. Vendors
who sell property to an exempt organization claiming the isolated sale, on four
or more occasions or wherever the property will be sold in excess of 7 days in
a calendar year are required to collect the applicable Pennsylvania sales tax
from the exempt organization. An example of this type of transaction is as
follows:
Example: Exempt organization E makes
purchases of property for resale on three separate occasions during the
calendar year. E files a unit exemption certificate for each purchase. Set
forth on each certificate is an explanation that the property will be sold
during a period of 2 days. Thereafter, E makes a fourth purchase of property
and tenders an exemption certificate to the supplier. The attachment to the
certificate indicates that the property will be sold in an isolated sale during
a period of 2 days. The supplier is not permitted to accept the exemption
certificate in good faith. Unless E has a sales tax license number entitling it
to purchase the property for resale, the supplier is required to charge
Pennsylvania sales tax on this sale of the property to E since the fourth sale
does not qualify as an isolated sale.
(5)
Sales tax licenses. An
exempt organization which makes taxable sales shall obtain one of two types of
sales tax licenses.
(i)
Permanent
license. If the organization anticipates making taxable sales on a
continuing basis, it shall obtain a permanent sales tax license which shall be
obtained by filing an application with the Department, Attn: Registration
Division. See also §
34.3 (relating to tax
returns).
(ii)
Temporary
license. If the organization anticipates making taxable sales only
within a 90-day period, it shall obtain a temporary license which requires the
filing of one return for the total period of the sale. Temporary sales tax
licenses shall be obtained from a district office of the
Department.
(6)
Returns. Failure of the exempt organization to file the sales
tax return or to provide the required information requested therein may result
in the revocation of the organization's exempt status.
Notes
The
provisions of this § 32.21 amended February 15, 1985,
effective 2/16/1985, 15 Pa.B.
576; amended January 9, 1987, effective 1/10/1987, 17 Pa.B. 186; amended December 23,
1994, effective 12/24/1994, 24
Pa.B. 6437; corrected March 17, 1995, effective 12/1/1990, 25 Pa.B.
954.
The provisions of this § 32.21 issued under The Fiscal Code
(72 P. S. §
6); and the Tax Reform of
1971(72 P. S. §§
7270
and 8291); amended under The
Fiscal Code (72 P. S. §
6).
This section cited in 61 Pa. Code §
32.25 (relating to steam, gas,
electricity, fuel oil and kerosene); 61 Pa. Code §
42.5 (relating to nonprofit
educational stations); 61 Pa. Code §
47.17 (relating to lease or rental
of vehicles and rolling stock); 61 Pa. Code §
60.7 (relating to sale and
preparation of food and beverages); 61 Pa. Code §
60.17 (relating to sale of food
and beverages by nonprofit associations which support sports programs); and 61
Pa. Code §
60.20 (relating to
telecommunications service).
