As a nonprofit organization, you have the option to take advantage of your state’s tax exemption status for sales taxes. This exemption will allow your organization to not have to pay sales taxes on purchases. This is a great way to save on the almost 10% sales tax here in Tennessee. However, are you or your staff guilty of tax evasion?
As an accountant, I am often making purchases for our nonprofit clients. I have copies of all the necessary documents in order to save our clients sales taxes. Your organization may have staff such as Program Managers or Executive Directors that has an exemption card with their name on it because of their frequent purchases for the organization. Over the years, we have encountered countless times where staff members have been using the agency’s tax exemption card to save money on personal purchases. However, this is illegal and unethical to use the agency’s tax exemption card for personal use. The consequences could be years in prison and large fines for the State of Tennessee in addition to possibly losing some of your civil rights, such as the right vote or carry a firearm. Contact your state’s sales tax division to determine your state’s consequences.
Here are some tips on how to minimize the risk of mishandling for personal use:
- Provide Training: Before issuing a tax exemption card or letter, provide training to the staff member. Training will allow the staff member to understand the purpose of the exemption and when to use it. It is also a good idea to have the staff member sign documentation stating the responsibilities and consequences of misusing it.
- Issue Letters instead of cards: Provide the employee with the tax exemption letters instead of a card. The letters are usually for one-time use because the store receives the letter as their documentation. By issuing a letter instead of a card, you are able to reduce the risk of a staff member using it for personal use. For larger stores like Walmart that require a card, prepay by placing your order online and have it delivered or use pick up at store option.
- Give incentives to employees: Research shows that happy employees are less likely to steal because they feel a sense of loyalty to the job. Ideas for incentives include flex time, employee of the month, social media recognition, or a work from home day.
We don’t want you or your staff to commit tax evasion “just to save a few dollars”. Recently, more stores are having you sign an “I certify” statement when making purchases to certify it is a purchase for a nonprofit organization and not for personal use.
Keep up the good work in your community! If you need help managing, organizing, and maximizing your finances, contact us.