Transcript The Tax and Business Side of Fund

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Carol Oman
CFISD Director of Internal Audit
05/07/2013
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Mission / Purpose of PTOs & Booster Clubs
Fund-Raisers
o Tips on Fund-Raisers to Hold
• Fund-Raisers that can be Held
• Fund-Raisers that have been held
o Sales Tax Implications
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“One-Day Tax Free” Sales Days
Catalog Sales
Sales Tax Included In Price
Sales Tax Holiday
o Fund-Raiser Vendors
o IRS Prohibitions
o Fund-Raising Activity Report
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Contributions / Donations
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Revenues
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Expenditures
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Financial Deadlines
o District
o Texas Comptroller’s Office
o IRS
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Record Retention
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Assist in supporting students or student organizations
o Financial Support
• Fund-Raisers
• Contributions / Donations
o Support through volunteering of your time
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Review the Guidelines
PTOs
o http://www.cfisd.net/campuses/pto/pto.htm
Booster
Clubs
o http://www.cfisd.net/campuses/booster/booster.htm
Fund-Raiser Guidelines are included on these webpages.
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What types of fund-raisers can your organization hold?
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What types of fund-raisers have you held & why?
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What are the sales tax implications?
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What vendor should be used?
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Have you received permission to hold the fund-raiser?
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The type of fund-raisers that your organization can hold
depends on whether you have the following from the Texas
Comptroller’s Office:
o Sales & Use Tax Exemption – allows an organization to hold two
“one-day tax-free” sales days per calendar year.
o Sales Tax Permit – allows an organization to sell taxable items in
Texas. Apply on-line for a sales tax permit at
http://www.cpa.state.tx.us/taxpermit/.
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Look up the status of your organization to determine if you
have a sales & use tax exemption or permit at
http://www.cpa.state.tx.us/taxinfo/sales/tp_db_search.html.
o Exempt Organization Search & Verification
– Sales & Use Tax Exemption
o Sales Taxpayer Search
– Sales Tax Permit
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You may look up by name, EIN, or sales tax number.
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If your organization does not have a sales & use tax
exemption and does not have a sales tax permit, then only
the following types of fund-raisers can be held:
o Sale of items that are tax-exempt by law – such as cookie dough,
coupon books, etc.
o Sale of Catalog Items – such as gift wrap, candles, etc.
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If your organization only has a sales & use tax exemption,
you may sell:
o Items that are tax-exempt by law – such as cookie dough, coupon
books, etc.
o Catalog Items – such as gift wrap, candles, etc.
o Taxable items on two “one-day tax-free” sales days per calendar
year.
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If your organization only has a sales tax permit, you may
sell:
o Items that are tax-exempt by law – such as cookie dough, coupon
books, etc.
o Catalog Items – such as gift wrap, candles, etc.
o Taxable items.
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Most PTOs need a sales tax permit since they sell spirit
items throughout the year. Some Booster Clubs do not
need a sales tax permit since no taxable items are sold.
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If your organization has a sales & use tax exemption and
permit, you may sell:
o Items that are tax-exempt by law – such as cookie dough, coupon
books, etc.
o Catalog Items – such as gift wrap, candles, etc.
o Taxable items on two “one-day tax-free” sales days per calendar
year.
o Taxable items.
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By law, these items are tax-exempt.
 Ads – Athletic Programs, School Newspapers, Posters, Yearbooks
 Admission – Athletic Events, Carnivals, Dances, Dance / Drama / Musical
Performances, Summer Camps / Clinics, Workshops, Project Graduation
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Catalog Sales of Tax-Exempt Items – Cookie Dough
Discount / Entertainment Cards & Books
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Food – Meals, Food, Candy or Soft Drinks and Concession-Stand Food is tax-
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exempt if the sales are part of the organization’s fund-raising drive and all net
proceeds go to the group for its exclusive use. Does not include the sales of
alcoholic beverages.
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Magazine Subscriptions for more than 6 Months
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Services – Car Wash, Cleaning
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Auctions and Silent Auctions (exception is tax-exempt items,
such as gift card or coupons)
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Calendars and Day Planners
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Candles
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Catalog Sales of Taxable Items – Gift Wrap
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Clothing including T-Shirts
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Flowers – Roses, Carnations, Arrangements
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Gift Wrap, Balloons, etc.
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Magazines – When Sold Individually
Magazine Subscriptions – Sold for Less than 6 Months
Plants – Holiday Greenery, Poinsettias, Floral Arrangements
Rummage, Yard & Garage Sales
School Store & Spirit Items
School Supplies
Yard Signs
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What types of fund-raisers have you held & why?
o For Service Purposes (emphasis is not on profit)
– School Supplies or a special event, such as a Carnival
o For Profit
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Consider profit made from previous fund-raisers as
compared to the work involved.
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Consider sales tax implications.
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Did you know . . .
Even though you have a Texas sales and use tax-exemption:
o You may need to collect sales tax and
o You may need to pay sales tax.
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 Organizations
exempt from sales tax are entitled to
two (2) “one-day tax-free” sales days per calendar
year not school year. Suggest holding one fundraiser in the Spring and one in the Fall.
 Sales
of taxable items are taxable unless you use a
“one-day tax-free” sales day. “One-day” is 24
consecutive hours.
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Select the taxable fund-raisers (exclude catalog sales and
book fairs) that involve the most money received (highest
gross) not the largest profit.
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Document which fund-raisers are your “one-day tax-free”
sales days.
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You may take orders and receive the items on one day or
deliver the items to the customers on one day. This would
be considered your “one-day tax-free” sales day.
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For catalog sales of taxable items and book fairs, you are
considered an agent of the vendor. These fund-raisers are
ALWAYS taxable.
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As an agent of the vendor, you cannot use a “one-day tax-free”
sales day.
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Make sure that you and the vendor are in agreement on the
handling of the sales tax before the fund-raiser is held.
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Collect the sales tax and remit it to the vendor. The vendor will
pay the sales tax to the Texas Comptroller’s Office.
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 If
you have a taxable sale, will sales tax be included
in the sales price or will it be added to sales price?
 For
catalog sales and book fairs, easiest to have
sales tax included in the price.
 If
sales tax is included in the sales price, must
state on brochures or signs.
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Usually in August, the State has a sales tax holiday.
o Sales Tax Holiday – August 16, 17, and 18, 2013
o School Starts – Monday, August 26, 2013
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If you sell items that meet the criteria of the sales tax
holiday and sell them during that holiday, the items are taxfree. Is not considered as one of your “one-day tax-free”
sales days.
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If you are not sure if your fund-raiser is taxable, contact the
Texas Comptroller’s Office at 1-800-252-5555.
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Document the date, time, who you spoke with, your
questions, and the answers received.
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Is vendor an Approved Fund-Raiser Vendor?
The Approved Fund-Raiser Vendor list is on the PTO and
Booster Club Guidelines webpages.
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If they are not on the list, request the vendor to submit
applicable information to Marty Edwards to become an
approved fund-raiser vendor.
See http://www.cfisd.net/dept2/general/fund_guide.htm.
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Cannot require anyone to participate in a fund-raiser.
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Cannot require that a certain amount be sold or that a
certain amount be donated in lieu of fund-raising.
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Cannot penalize anyone for not participating in a fundraiser.
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Individual Accounts for Revenues Raised - PROHIBITED
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Cannot credit an individual based on revenues raised to
offset that individual’s expenses.
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Amount raised must benefit a campus / organization as a
whole.
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For fees and expenses that students must pay, these can
be tracked individually. You just cannot reduce the fees or
expenses based on funds raised.
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Permission Request – Due by September 30 or at least 30
days before fund-raiser is to be held. Submit to Principal
(PTOs) or Sponsor / Principal (Booster Clubs).
For fund-raisers to be held at the beginning of the school
year, submit your permission request as soon as possible.
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Operating Report – Complete within one week of projected
end date of fund-raiser. Complete applicable attachment.
Submit to Treasurer for PTOs and Booster Clubs.
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Examples
o Catalog / Product Sales (Attachment A)
o Ticket Events with Entry or Participation Fees (Attachment B)
o Concessions (Attachment C)
Before the first concession sale, the products should be counted and documented.
The ending inventory may be performed after each concession or less frequently. At
a minimum, inventory the products at the end of each semester. The internal
controls over products normally improve when inventories are performed more
frequently. Also document any purchases of products that are added to the
inventory during this time period.
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Permission?
Permit?
Activity Report?
Sales Tax?
Exemption?
All I want to do is help raise money for the students!!
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Contributions / Donations to a PTO / Booster Club
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May be monetary, equipment or other tangible item.
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Must be a 501(c)(3) entity as approved by the IRS to
receive a charitable contribution.
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Provide contributor with your organization’s employer’s
identification number (EIN).
If requested, provide a copy of your IRS Determination
Letter.
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For fund-raisers involving orders, require money to be
collected at the time orders are placed. You can determine
if any checks are returned prior to delivering products.
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Have checks made payable to the PTO or the Booster Club.
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Endorse checks and deposit money as soon as possible to
prevent the loss of funds.
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 As
money for a fund-raiser is received, have two
people count the money before giving it to the
Treasurer for deposit.
 Do
not use cash received to pay expenses. Deposit
money first and then write checks for expenses
incurred. This method provides a good audit trail.
 Suggest
making a copy of all checks received prior
to deposit for backup purposes.
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 For
funds raised, use the money as originally
budgeted or designated. If a change is needed,
inform your membership and request approval as
required by your bylaws.
 Use
funds raised in the year the fund-raisers are
held, when possible, so that the parents / students
that raised the funds will see the benefit.
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If an organization is working towards a project that will take
several years to fund, inform your membership.
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Do not purchase gifts for officers, sponsors, or principals
with PTO or Booster Club funds unless the gift is a token of
service recognition or special award with a value of $25 or
less according to the IRS.
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District
o File Financial Report and Review Report with Principal
(PTOs) or Sponsor, Principal, and Marty Edwards
(Booster Clubs) by 9/15 each year.
Due Date for 2012-13 Reports – 9/16/2013
o For fund-raisers to be held, submit Permission Request
of the Fund-Raising Activity Report to the Principal (PTOs)
or Sponsor / Principal (Booster Clubs) by 9/30 or at
least 30 days prior to a fund-raiser being held.
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Contributions to the District
o At the end of the Fall and Spring semesters, compile a list of expenditures
that were used to benefit students, a student group, or a school.
Examples of benefits provided may include money given directly to a
student group or school, items purchased for a student group or school,
and assistance provided to pay for all or a portion of a student trip /
competition. Most money expended by a PTO or Booster Club would be
used to benefit students, a student group, or a school.
o This list should be provided to your Principal, Sponsor, or PIE Liaison.
o The school should provide a contribution acknowledgment form to the PTO
/ Booster Club for the above contributions or benefits provided.
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 Texas
Comptroller’s Office – If your organization
has a sales tax permit, then you must:
o Submit a Texas Sales and Use Tax Return
o Due either monthly, quarterly, semi-annually, or annually
on the 20th day of the month following the end of each
reporting period.
If quarterly, due by 1/20, 4/20, 7/20, and 10/20.
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Each time a return is submitted late, a $50 penalty
plus interest is owed.
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Example: Sales Price included Sales Tax
Total Sales - $1,000, Tax Rate – 7 ¼%
$1,000 / 1.0725 = $932.40 (taxable sales)
$932.40 x .0725 = $67.60 (sales tax)
$932.40 + 67.60 = $1,000
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IRS
o Must file Form 990-N, 990-EZ, or 990 annually.
• 990-N – (online) Gross Receipts are $50,000 or less
• 990-EZ – Gross Receipts are greater than $50,000 and less than
$200,000
• 990 – Gross Receipts are $200,000 or more
o Due 4.5 months after fiscal year end.
• Fiscal Year End – May 31 – 990 Form due October 15
• Fiscal Year End – June 30 – 990 Form due November 15
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If form is not filed for 3 consecutive years, the IRS
automatically revokes the organization’s 501(c)(3).
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Internal Records
o Registration & Approval Form (Booster Club)
o Articles of Incorporation or Association
o Bylaws / Charter / Constitution
o Minutes from Meetings
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State of Texas
o Sales Tax Permit Application
o Sales Tax Permit
o State Sales & Use Tax Exemption Notification
o Certificate of Incorporation (if applicable)
o State Franchise Tax Exemption Notification
(if applicable)
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IRS
o Form SS-4 – Application for Employer Identification Number (EIN)
o Form 1023 – Application for Recognition of Exemption (include all
attachments)
o Form 8718 – User Fee for Exempt Organization Determination Letter
Request
o Acknowledgment of Your Request
o Determination Letter
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Keep the temporary records for a minimum of the current
year and the four (4) previous years.
Before discarding any records, confirm with the Texas
Comptroller’s Office and the IRS that your organization is in
good standing and that no open items or issues exist
related to the time period involving the records that you
would like to discard.
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Financial records and backup including checkbook and
bank records
Financial Reports and Review Reports
Contributions received by the organization
Financial Aid Guidelines (if applicable)
Sales Tax Reports
IRS 990-N, 990-EZ or 990 forms filed
Correspondence with the Texas Comptroller’s Office and the
IRS
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Financial Questions
Carol Oman – Director of Internal Audit – 281-897-4111
[email protected]
Pat Stefan – Internal Auditor III – 281-517-6537
[email protected]
Janett Tapia-Gonzalez – Internal Auditor II – 281-517-2941
[email protected]
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Fund-Raisers
Marty Edwards – Director of General Administration
281-517-6367 – [email protected]
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Contributions to Schools, Student Groups & District
Pam Scott – Partners in Education Director
281-894-3950 – [email protected]
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 Texas
Comptroller’s Office – Sales Tax
General Information – 1-800-252-5555
http://www.cpa.state.tx.us/taxinfo/sales/
Exempt Organizations Department
1-800-531-5441 ext. 34142
http://www.cpa.state.tx.us/taxinfo/exempt/index.html
 Internal
Revenue Service (IRS)
Tax-Exempt Organizations
1-877-829-5500 (toll-free)
www.irs.gov (Select Information for Charities & Non-Profits in the upper right-hand
corner of this webpage.)
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The following websites have copies of IRS tax returns. Some
reports are free while other reports may be purchased.
 Economic
Research Institute (ERI)
http://www.eri-nonprofitsalaries.com/index.cfm?FuseAction=NPO.Search&SearchType=Advanced&CobrandI
D=0
 GuideStar
http://www.guidestar.org/Home.aspx
 National
Center for Charitable Statistics (NCCS)
http://nccsdataweb.urban.org/PubApps/search.php
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