No 2-in-1 card for tax-exempt organizations
Your Business Credit
Dear Your Business Credit,
I buy supplies for church. Is there a credit or debit card the church could apply for that would not charge tax when making a purchase? I buy some supplies online and various places, as one place does not have all items. We do have a tax-exempt card for Wal-Mart and have to show that card with a credit card when we make a purchase. Thanks. -- Walt
Showing more than one card when you buy something is a bit cumbersome, but I have not been able to find a general-purpose credit card that automatically deducts the taxes at the cash register.
In case one eluded me, I checked with David Seiden, the partner in charge of the state and local tax practice at Citrin Cooperman, a full-service accounting, tax and consulting firm. Seiden, who is based in the firm's New York City office, has been practicing for more than 25 years.
"I don't know of any credit card that will exempt the buyer from sales tax, other than the ones issued to people who work for the federal government," he told me in an interview. He was referring to the GSA SmartPay card, a payment program for purchases by the federal government.
For tax-exempt organizations outside the federal government, sales tax is deducted by retailers either at the point of sale or afterward when a tax-exempt customer files for a refund. There's a reason for this, Seiden explained.
"The responsibility for the tax collection lies with the retailer, unless the purchaser provides the retailer with some sort of exemption certificate," Seiden says.
That's a big and complicated responsibility. States and localities have widely varying sales tax rules and some, like California, offer very narrow exemptions, Seiden says.
When you look at the rules for getting a sales tax deduction on the sites of several common sources of office supplies, you'll notice they all require proof of a purchaser's tax-exempt status at some point.
Wal-Mart's press office didn't respond to my questions about exactly how the purchasing process works for those who make tax-exempt purchases at the point of sale. For items purchased online, however, Wal-Mart's website says you must submit some paperwork.
"Items not normally resold in your business but purchased by special request may be taxed by our website," the site says. "For these items, you may contact your state's Department of Revenue to request a refund of tax paid. Items or supplies used to run your business are taxable."
Let's look at some other likely places you might shop. At Office Depot, customers have to file a sales tax exemption form with the store. Until customers' applications for a tax-exempt card are accepted and they can show it at the point of sale, they have to pay the sales tax and then file for a refund. Staples has similar rules. So does Home Depot.
At warehouse stores, the rules vary. Sam's Club requires an application in order for sales taxes to be deducted at the point of purchase. Meanwhile, Costco's site says it doesn't currently offer a sales tax exemption at the time of sale, but you can file for a refund by submitting information including your tax-exempt certificate and your receipt with a claim form.
The upshot is that there isn't yet an ultra-streamlined, one-size-fits-all way to make tax-exempt purchases on a credit card for a church. But once you get set up properly with your favorite stores, it should not be any more cumbersome than what you're dealing with now.
See related: Church should limit users of its credit card
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Published: March 2, 2015
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