It's a common misconception that non-profit organizations are automatically exempt from Transaction Privilege Tax (TPT) and use tax in Arizona. The truth is, certain specifically defined organizations may be exempt from transaction privilege tax under certain business classifications. Generally, sales to a non-profit organization are subject to transaction privilege and use tax, unless the organization is a hospital or qualified healthcare organization. Eligible organizations may request exemption for items they purchase based on the criteria listed in the Transaction Privilege Tax Procedure (TPP) 00-4.Non-profit organizations that sell tangible personal goods to the end user are exempt from the classification of retail companies.
Organizations listed in TPP 15-1 do not need to apply annually for a certification letter. To qualify for exempt transactions, the qualified organization must provide the provider with an annual exemption letter along with a properly completed Arizona Form 5000HC for each location. Eligible health care organizations, eligible community health care centers, and non-profit charity organizations with I, R, C status are all eligible for this application procedure. If an organization fails to submit the required documentation, the department will request more information within thirty (30) business days of receiving the request for an annual exemption letter.
Eligible hospitals can refer to A, R, S for applicable deductions. Eligible health care organizations that provide training to blind and visually impaired children and children with multiple disabilities from birth to twenty-one years of age can also refer to TPP 15-1 for applicable deductions. Organizations that qualify to provide educational or charitable services related to health and medicine can refer to TPP 15-1 for applicable deductions. This includes clinics that are being built as eligible community health centers and the only primary care provider in the community.
A clinic not affiliated with a hospital that is located in an area designated by the federal government as underserved in this state is also eligible. An organization that provides rehabilitation programs for people with mental or physical disabilities is one that meets the requirements of section 501 (c) (of the United States Internal Revenue Code) and that dedicates and uses such assets exclusively in programs for people with mental or physical disabilities if the programs are exclusively for training, job placement, rehabilitation, or testing. To be eligible for exempt transactions, the qualified organization must provide the seller with an annual exemption letter along with a properly completed Arizona Form 5000HC for each location, certifying that the organization uses tangible personal property directly and exclusively in training, job placement, rehabilitation, or testing programs for people with mental or physical disabilities. The deduction only applies to the amount of gross sales revenue or gross income attributable to the purchase price by the main contractor of machinery, equipment, or other qualified tangible personal property purchased by the contractor. Before making any business transaction, it's important to understand all potential tax implications. Reorganizations can have tax implications for selling shareholders if those shareholders receive consideration from an acquirer that does not qualify as exempt.
