NONBUSINESS EXEMPTIONS
§ 32.21. Charitable, volunteer firemen’s and religious organizations, and nonprofit educational institutions.
(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.
Authority 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).
Source The provisions of this § 32.21 amended February 15, 1985, effective February 16, 1985, 15 Pa.B. 576; amended January 9, 1987, effective January 10, 1987, 17 Pa.B. 186; amended December 23, 1994, effective December 24, 1994, 24 Pa.B. 6437; corrected March 17, 1995, effective December 1, 1990, 25 Pa.B. 954. Immediately preceding text appears at serial pages (179259) to (179260), (149577) to (149578), (184055) to (184056) and (190179).
Cross References 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).
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