Tax Implications of Donating to Non-Profits in Maricopa County: An Expert's Guide

When it comes to donating to a non-profit organization in Maricopa County, it is essential to understand the tax implications. Generally, sales to a non-profit organization are subject to transaction privilege and use tax, unless the organization is a qualified hospital or health facility. 501 (c) and 3 non-profit organizations are usually exempt from paying transaction privilege tax and use tax for retail or food sales. However, they must obtain an annual exemption letter from the department in order to be eligible for this exemption.

The exemption letter will limit the use of the exemption to providing health, education and charitable services related to medicine and medicine only. Non-profit organizations are also required to pay the use tax and transaction privilege that applies to construction services, unless the organization is a healthcare organization or other eligible organization.

Qualifying for Exempt Transactions

In order to qualify for exempt transactions, the eligible organization must provide the seller with an annual exemption letter along with a properly completed Arizona Form 5000HC for each facility. This form certifies that the tangible personal property purchased or leased by that establishment will be used only to provide educational or charitable services related to health and medicine. An organization that provides rehabilitation programs for people with mental or physical disabilities may also qualify for an exemption letter if it meets certain requirements under section 501 (c) () of the United States Internal Revenue Code.

The assets must be dedicated and used exclusively in programs for people with mental or physical disabilities if the programs are exclusively for training, work placement, rehabilitation, or testing.

Paying Transaction Privilege and Use Tax

In general, nonprofit organizations are required to pay the Transitional Privilege and Use Tax that vendors transfer for office supplies and other purchases, unless the organization is a qualified health care organization or serves another purpose that qualifies for a state-issued exemption letter. Yes, your organization is likely to pay the use and privilege tax on transactions transferred to you by the tenant, unless your organization is a qualified health care organization or you are leasing property for religious worship.

Conclusion

Donating to non-profits in Maricopa County can have significant tax implications. It is important to understand these implications before making any donations. Organizations must obtain an annual exemption letter from the department in order to be eligible for certain exemptions. Additionally, organizations must pay transaction privilege and use tax on most purchases unless they are qualified healthcare organizations or serve another purpose that qualifies for a state-issued exemption letter.