How Do you Get Sales Tax Exemption?
I am in NC. I think that NC specifically exempts camps from collecting sales tax, but there would be other issues which could exempt camps even if there were not a special exemption.
(Note: We do collect sales tax on sales in our camp store. We actually include it in the price and pass it on.)
Hotels generally charge a price per day. Our camps are one week long and the parents pay for the whole week even if the camper goes home ill or homesick. (If a camper is injured at camp and needs to go home, we might offer to scholarship them the following summer or later in the existing summer, but we don't offer refunds.)
We follow health department regulations that are specifically for camps, so even the state recognizes camps under a different category. The regulations include spaces between beds, bunk bed heights, etc.
Hotels don't usually put you in a room with people whom you don't know. (Sometimes groups booking at the hotel do, but not usually the hotel.) Camps do.
We also follow regulations for camps, daycares, etc. on the number of campers per counselor. Daycares & after-school programs in NC don't charge sales tax. I think that we could easily argue that our camps are more comparable to daycares & after-school programs than to hotels.
Our campers are never away from their counselors. Even free-time activities & swimming include their counselors. Again, this is more like a daycare.
It is tougher to argue that we shouldn't charge sales tax to groups, but I would argue based upon the types of facilities & programs that you offer. We are a United Methodist conference camp and, as such, are under the jurisdiction of the bishop for our region. The IRS recognizes us as a 501c3 not-for-profit organization and as an extension of The United Methodist Church. That would not exempt us from charging & collecting sales tax (just paying it), but I think that it would help in arguing that your programs & facilities are different than a hotel.
We also don't let individuals just show up & rent a cabin or lodge. In fact, we only rent to individuals if they are booking a group (e.g. a wedding reception). They have to book ahead, sign a contract stating that they will abide by our rules (no alcohol, tobacco, drugs, weapons), provide us with proof of insurance, etc.
We serve non-church groups like family reunions, scout campouts, etc. However, we also host other religiously affiliated groups (e.g. local Unitarian church picnic). We have our mission statement posted, a stained glass cross window in our dining hall, a metal sculpture of Christ on the cross on one of our walking trails, Bibles sitting around, and other obvious symbols of Christianity. However, at this time we do not purposefully evangelize to every group who visits us. I have talked to other camps who do evangelize during a 10-15 minute meeting with each group. During the meeting they describe the camp rules, hours of service, and state their mission, which is evangelical in sharing your Christian purpose. Perhaps if you adopted a similar plan, it would help argue your point.
Well, I hope that some of these rather random thoughts will be helpful to you. If you have any questions, feel free to e-mail back.
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In TX we are tax exempt coming and going. We do not have a tax permit or anything. As long as you are not selling retail goods to the public, I am not sure where the bind is. Some states have value-added taxes and tax services, but I have never seen it extend to churches and their activities.
Organizations like James Dobson, Promise Keepers, etc. avoid tax conflicts by requesting a donation of XX for their materials, rather than selling them.
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Our camp paid sales taxes for many years here in Kansas. I questioned this, and last year we received a sales tax refund for 3 years equaling $50,000. A lot depends upon your particular state laws, but we argued on the basis that we were a ministry of the Kansas East Conference of the UMC. I wrote a long explanation indicating what our mission was (including the mission statement), whom we served (other not-for-profits in the non-summer season), etc. We do pay sales tax (and collect it) from individuals and groups that are not not-for-profit, and even those groups can often be excluded if you spend time with them sharing what your ministry and mission are along with sharing with them the history of your site.
You do want to be sure that you are not marketing your rooms as motel, but as overnight lodging for guests. Kathy Trotter would also be a good resource for information on this.
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At our site in Arkansas we do a brief environmental stewardship educational presentation with every guest group that comes (even families) and expect everyone to do a service project for the retreat center — it can be 15 minutes or a couple of hours, depending on the group and their schedule. The family groups love it and we try to tailor it to the ages of the younger members of the group. Also, our mission statement includes "personal and family renewal" so we feel we have covered the bases to be able to say that groups choose to come here because of our emphasis on earth stewardship. That makes us quite different from a motel.
We also offer devotional materials and encourage individual quiet time on any of our 30 meditation benches with every group or person who comes here. This enables us to provide faith formation opportunities for all groups.
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We went through a similar thing a few years back here in Ohio. Our township trustees actually had us in court trying to force us to charge a bed tax. Once the judge heard that we are a religious affiliated not-for-profit organization that meets all criteria as a 501(c)(3) tax exempt organization, the case was literally thrown out. We were co-defendants with another camp that is not religious affiliated but does meet all 501(c)(3) criteria, they also did not have to charge a bed tax. I'm not sure if this helps, to be honest a tax code expert. I'm far far far from that! I hope this works out, this could start a scary precedent for other camps.
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I operate a United Church of Christ site in Wisconsin.
We do not charge sales tax to non-profit groups, providing the group is paying the bill from their budget and not simply collecting money from participants and then paying the bill directly with those collected funds.
We charge sales tax on the food portion of the summer camper fees. However, if local churches pay scholarships toward any participant we do not pay sales tax on the amounts collected from the church.
We do collect and pay sales tax on sales in our camp store.
I may be reading this wrong, but I suspect you will end up collecting and paying sales tax. Just because the organization is non-profit does not mean that the customers of that organization are non-taxable. That's how our accountants have read this.
I do hope this goes well for you — and perhaps you will learn something that will benefit all of us. Maybe I will be able to stop collecting and paying sales tax!
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A never ending, never fun issue for retreat centers/camps.
My understanding is that non-profit status was created because of our government's perception that some activities, especially of religious organizations, add value to our society without primary concern for profit, and more beneficial to not apply income tax. Activities integral to our ministry do not usually include gift shops, golf courses, etc. of course.
A State Tax Commission interview sounds intimidating, but I believe we all have sound precedent for exemption. Good Luck!
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Ted: We are of the opinion that the fees we charge are for services rendered in program — missions in our case. In the State of Tennessee, services provided (i.e. accountants, lawyers, engineers, consultants etc.) are not charged sales tax. I do not know your state. It is also worthy to mention we have never asked for an opinion. I would think that you are also providing services for a group much different than a hotel. If your facility is competing with the local hotels for
conferences/training/family reunions then the hotel owners probably have an issue. In Tennessee this has never been an issue — adding sales tax to services did come up in the Legislature last year and was defeated. The religious lobby is fairly strong here. If your state taxes services then I think the probability of being exempt is remote. Hope it works out for you.
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We have been charging sales tax on all items sold through the camp stores for 20+ years now. It applies to all persons who use the facilities — UMC groups and others. We are in the state of Indiana.
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Great question for all of us on the network. When I was in Colorado, we were audited by the tax assessors. This was related to property taxes, but there may be some overlap in issues. Their main investigation centered on whether or not the groups we served actually were outlined in our tax exempt paperwork with the state, the official category we were exempted for, and whether the groups we served were reflected in our mission statement.
Fortunately, our mission statement had been updated to reflect that our ministry of Christian hospitality was not only with our own United Methodist church members, but also with other religiously affiliated and non-profit groups whose purpose bettered the community. We had also included family groups in our mission, which had an impact on whether family reunions were viewed as exempt in the eyes of state tax law. In our case, the tax department representatives were reasonable and sought to understand the dynamics. We did have to pay some minimal back taxes on a handful of groups that had no actual connection with our stated purpose for which we received the tax exemption. We later eliminated such groups to avoid any confusion about tax liabilities. Some other camps in our area continued to host those groups and pay the proportional taxes. We thought it was cleaner and more in tune with our mission to avoid any conflicts of purpose.
This raises a crucially important issue about how we describe our retreat and hospitality ministries for groups. I have been passionately advocating for nearly a decade that language like "rental groups" and "other-use groups" be completely eliminated from our vocabulary as Christian camp and retreat centers. Those terms undermine our focus on mission and give the distinct impression that these groups are being served not out of the core of our purpose and values, but simply to generate income to meet budget. Even if such language is not intended at all to send this message, words have power in shaping the perspectives of our own staff and volunteers over time, the perspectives of groups we serve, and of persons like government officials and community leaders charged with the responsibility to determine if what we are doing coincides with tax exempt status. Instead of titling our paperwork "rental agreement," for example, why don't we use wording that reveals our service and ministry, such "hospitality services agreement" or "Retreat agreement" — these words have deep theological grounding and Christian traditions linked solidly with our unique identity as faith-based Camp and Retreat Centers.
Here were some of the other items the tax assessors took into account:
- Are you serving United Methodists for religious purpose and faith formation experiences? Those groups were exempt from taxation. (Weddings are religious ceremonies, for example.)
- Are you serving other religiously affiliated groups who also are hosted in order to fulfill faith-based purposes while on retreat or at camp? Those groups were exempt.
- Are other groups you provide hospitality for actually not-for-profit groups whose purpose helps better the community? Those groups were deemed exempt from taxation, if they can provide their tax exempt paperwork or are obvious nonprofits like schools, governmental agencies, etc.
- In the case of family reunions, are they arranged for by persons from a faith community or nonprofit group, and do the activities include spiritual growth activities or other forms of service and ministry that are not available at nearby hotels or lodges?
Each of our tax-exempt organizations are given that exemption for specific purposes. These purposes enhance the community at large in some significant way that the general public values; therefore, we are exempted from taxation for providing that benefit to the community at large. Most of us have a religious ministry type exemption.
If the groups we serve have little to do with our mission or purpose, then we essentially are duplicating services provided by for-profit entities like hotels, RV parks, lodges, resorts, etc. These groups are not exempt from taxation, so a legitimate issue of fairness becomes pertinent. Why should we be tax exempt, if all we provide is meals and lodging and little more? That isn't fair. One key, then, is to have a clearly articulated mission that encompasses those we serve, and then make sure that our religious purpose is somehow offered and available for each and every group we serve. The officials are looking to tax those groups that fail to fall under the umbrella of our stated purpose and the purpose for which we were given the exemption in the first place.
Tax auditors might also question things sold to the public at camp like trinkets, snacks, t-shirts, etc. unless one can demonstrate in a common-sense way how this activity helps fulfill the ministry and the funds generated go back into serving the campers and guests in some way and not to personal profit or benefit.
I suggest you read your official tax exempt category and the definitions there and also update your mission statement officially to reflect the full scope of your ministry both in terms of faith formation and Christian hospitality and service. It will be important to articulate how Christian hospitality differs from a hotel's lodging, meal, and recreational offerings. Simply offering room and board and recreational activities for a cheaper price in a pretty setting is not enough to distinguish what we are exempted to do. We cannot simply duplicate what others are doing who do not have the privilege of exemptions. We must know our purpose and be very deliberate about being able to articulate it and show how what we do is a true fulfillment of those goals.
Some camp, conference, retreat centers share briefly about their mission in hosting groups and give suggestions about how individuals or groups might voluntarily participate in spiritual growth and service while on their stay, if it is not already a designed part of their program.
Camps who cannot articulate this well are being required to pay taxes, and unfortunately in the budget shortfalls across the country some who can state their case are still being required to pay taxes as governmental bodies seek new sources of revenues. It is wise for camp/retreat ministry staff and boards to review their practices before the tax people come knocking. Being able to express and live out your unique identity as a religiously affiliated camp/retreat ministry is very important at more than one level.
Finally, one more factor has saved some centers from taxation. If you are not really competing with local for-profit business, then some tax officials consider it a service to the community that would not otherwise be available. For example, if all the hotels, lodges, etc. are full to capacity and there is nowhere else for groups to go, then you are providing a service that no other business can at that time. This is a little bit shaky, however, if some other facilities are not full. These business owners may even be the ones who ask the tax officials to audit you if it seems that you are not fulfilling your stated purpose, but instead are competing with them for "business."
I hope these thoughts and insights from our own experience helps your leadership team, as you respond to the meeting with the tax commission. I found that treating the auditors with love, while being persuasive in making your points, is a lot better than creating a win/lose battleground.
Christian Camping International may have some insights based on their work with many Christian conference, camp and retreat centers around all kinds of issues. You can reach them at email@example.com or www.cciusa.org.
We did not go the route of simply agreeing to pay and collect taxes but stated our case; but some centers have simply chosen to pay the taxes and pass it on to the groups that come. They figure they can take any group then without a problem. For us, staying focused on our core mission and purpose made that a less desirable approach.
I look forward to the other responses you receive and learning from the perspectives and experience of others. Thanks for collating all the replies you receive for the benefit and consideration of everyone.