North Carolina Association of CPAs 2015 Not-for-Profit Conference Sales and Use Taxes Eric K. Wayne, Sales & Use Tax Director May 19, 2015
Disclaimer Presentations are for general information only Presentation content should not be interpreted as specific tax advice for a specific tax situation Some questions may require additional facts before a response may be given Some questions may require responses from other Departmental employees or employees in other agencies Sales and Use Tax Division
Admission Charges - Legislation Effective January 1, 2014 Session Law 2013-316 (House Bill 998) Subject to Sales and Use Taxes To an entertainment activity. May 29, 2014, Session Law 2014-3 (House Bill 1050)
Entertainment Activities Live Performance, Purpose of Which is for Entertainment Live Event of Any Kind, Purpose of Which is for Entertainment Motion Picture or Film Museum Cultural Site Garden Exhibit Show Similar Attraction Guided Tour Museum, Culture Site, Garden, Exhibit, Show, or Similar Attraction.
Admission Charge Gross receipts derived for the right to attend an entertainment activity. The term Admission Charge includes: Single Ticket Multioccasion Ticket Seasonal Pass Annual Pass Membership Fee That Provides For Admission Cover Charge Convenience Fee Processing Fee Facility Charge Facilitation Fee Similar Charge Any Other Charges Included in Gross Receipts Derived From Admissions
Admission Charges Rate of Tax? State Sales Tax 4.75% Local Sales Tax Levies (2%, 2.25%) Transit Sales Taxes (0.50% if applicable or 0.25% upon adoption) Local rate based on: Location where admission can be gained If venue location is unknown, sourced per G.S. 105-164.4B
Admission Charges Rate of Tax?
Sales Tax On Admission Charges Question: Can the gross receipts derived from the admission charge include the sales tax or must the sales tax be separately charged and accounted for? Answer: Yes, the gross receipts derived from the admission charge may include the sales tax, provided the retailer displays a statement that the price includes tax.
Where Should Any Such Statement be Located? A sign at any ticket box office A statement for any online purchase portal A statement on the admission ticket, invoice, or other documentation provided at the time of the sale are acceptable Sales and Use Tax Division
Calculation Where Tax is Included
Exempt Amenity Examples Parking Privileges Special Entrances Access to Areas Other Than General Admission Don t confuse with charges for special exhibits Merchandise Discounts
What is an Amenity? A feature that increases the value or attractiveness of an entertainment activity. Allows a person access to items that are not subject to sales and use tax. Not available with the purchase of admission to the same event without the feature. Does not Include Food, Prepared Food, and Alcoholic Beverages
Admissions -Who Is the Retailer? Operator of the venue where the entertainment activity occurs, unless a retailer and facilitator have a contract between them allowing for dual remittance. The person that provides the entertainment activity and receives the admission charges directly from a purchaser. Ticket reseller
Who is a Facilitator? Person who accepts payment for admission charges to an entertainment activity and is not the operator of the venue (other than a ticket reseller)
Facilitator Responsibilities General Requirements: Facilitator must report gross receipts it receives from a consumer to the retailer. Facilitator must send the sales and use tax due on the gross receipts to the retailer by 10 th day following the end of each calendar month. Facilitator liable for the sales and use tax due that it fails to send to the retailer. Or Dual Remittance Option Sales and Use Tax Division
When is Tax on Admission Charges Required to be Reported For the reporting period the admission charge is received even when the entertainment activity is for a future date. For season tickets sold in advance, sales and use tax is due for the reporting period that payment is rendered by the purchaser.
Admission Tickets Given Away Question: Are tickets given away for no charge subject to sales and use tax? Answer: Free admission tickets that are not considered bartered transactions are not subject to sales and use tax, provided the tickets are given away by the retailer.
Not an Admission Charge Tuition, registration fees, or charges to attend: Instructional seminars, conferences, or workshops for educational purposes.
Lectures Question: Are charges to attend a lecture subject to sales and use tax? Answer: Generally, an admission charge to attend a public speaking event or lecture is subject to sales and use tax as an admission charge to a live event. Sales and Use Tax Division
Donations to Attend Concert? Question: If a nonprofit entity sponsors a concert where no stated admission fee is charged, but donations of a certain amount are suggested, are the donations subject to sales and use tax? Answer: If any person can attend the concert for free and no donation or amount of consideration is required to attend, then any amounts donated to the nonprofit entity for the concert are exempt from sales and use tax. Effective May 29, 2014, a donation that is deductible as a charitable contribution under IRC 170 is an admission charge exempt from tax. However, if a person can attend the concert for free and a donation or other consideration is not required to attend, such amounts are not deemed to be admission charges to an entertainment activity subject to sales and use tax.
Receipts From Raffles Taxable? Question: Are sales of raffle tickets subject to sales and use tax? Answer: No. A purchase of a raffle ticket does not represent a purchase of tangible personal property or an admission charge. Sales and Use Tax Division
Exemption -Admission Charges State Attractions Repealed Effective January 1, 2015 Physical Place Supported with State Funds (G.S. 143C-1-3) Offers Cultural, Educational, Historical, or Recreational Opportunities Report No. 2012-01 (February 2012) published by the Program Evaluation Division of the North Carolina General Assembly Sales and Use Tax Division
Admission Charge Exemption Changes January 1, 2015 Nonprofit Entities G.S. 105-164.13(60)c. - A festival or other recreational or entertainment activity that lasts no more than seven consecutive days and is sponsored by a nonprofit entity that is exempt from tax under Article 4 of this Chapter and uses the entire proceeds of the activity exclusively for the entity's nonprofit purposes. This exemption applies to the first two activities sponsored by the entity during a calendar year. G.S. 105-164.4G(f)(5) - An event sponsored solely by a nonprofit entity that is exempt from tax under Article 4 of Chapter 105 if all of the following conditions are met: a. The entire proceeds of the activity are used exclusively for the entity's nonprofit purposes. b. The entity does not declare dividends, receive profits, or pay salary or other compensation to any members or individuals. c. The entity does not compensate any person for participating in the event, performing in the event, placing in the event, or producing the event. For purposes of this subdivision, the term "compensate" means any remuneration included in a person's gross income as defined in section 61 of the Code.
Admission Charges Publications Directive SD-13-4 dated December 18, 2013. Important Notice dated June 25, 2014
Taxable Transactions Retail sales (other than certain annual fundraisers) Some exceptions apply for sales of items: G.S. 105-164.13(34) G.S. 105-164.13(35)
Sales and Use Tax Exemptions - Nonprofits G.S. 105-164.13 (34) Sales of items by a nonprofit civic, charitable, educational, scientific or literary organization when the net proceeds of the sales will be given or contributed to the State of North Carolina or to one or more of its agencies or instrumentalities, or to one or more nonprofit charitable organizations, one of whose purposes is to serve as a conduit through which such net proceeds will flow to the State or to one or more of its agencies or instrumentalities. This exemption does not apply to gross receipts derived from an admission charge to an entertainment activity G.S. 105-164.13 (35) Sales by a nonprofit civic, charitable, educational, scientific, literary, or fraternal organization when all of the following conditions are met. This exemption does not apply to gross receipts derived from an admission charge to an entertainment activity. a. The sales are conducted only upon an annual basis for the purpose of raising funds for the organization's activities. b. The proceeds of the sale are actually used for the organization's activities. c. The products sold are delivered to the purchaser within 60 days after the first solicitation of any sale made during the organization's annual sales period. Sales and Use Tax Division
Annual Fundraisers G.S. 105-164.13(35) provides for an exemption from tax on sales made on an annual basis by qualifying nonprofit entities May hold up to 6 fundraisers a year (a fundraiser every 60 days) provided: Each fundraiser ends within 60 days of the initial solicitation The proceeds of each fundraiser are used for a different specified purpose The proceeds of one fundraiser per year may go to the general operations of the nonprofit entity No two fundraisers can be ongoing concurrently for purposes of the exemption
Register to Remit Sales and Use Tax Online Registration (Quickest option) http://www.dor.state.nc.us/electronic/registration/index.html Complete and Submit Form NC-BR http://www.dor.state.nc.us/downloads/forms_fillin_ncbr.php?url=fillin/ NCBR_webfill.pdf
Online Business Registration
NC-BR Application
Once Registered. Department Issues Certificate of Registration - Account Identification Number Coupon Booklet/Blank Forms E-500, Sales and Use Tax Return Mailed Form E-505AC, Newly Registered Taxpayers Mailed Sales and Use Tax Division
Form E-500, Page 1
Form E-500, Page 2
Exempt Purchases Items Purchased for Resale are Exempt From Sales and Use Tax at the Time of Purchase Provide Vendor with Form E595E, Streamlined Sales and Use Tax Agreement Certificate of Exemption Sales and Use Tax Division
Form E-595E, Page 1 Sales and Use Tax Division
Form E-595E, Page 2 Sales and Use Tax Division
Purchases Subject to Sales and Use Tax Tangible Personal Property Purchased for Storage, Use, Consumption, or Distribution in NC Examples: Tables, Office Furniture Computers Office Supplies (Appointment Reminder Cards) Magazines, Newspapers, Pamphlets Certain Digital Property Transferred or Accessed Electronically Examples: Digital Songs Online Publications Online Newspapers Taxable Services Examples: Laundry Services Telecommunications Sales and Use Tax Division
Sales and Use Tax Refunds G.S. 105-164.14(b) authorizes semiannual refunds of sales and use taxes paid by qualifying nonprofit entities on: Direct purchases of tangible personal property and services for use in carrying on the work of the nonprofit entity Indirectly incurred by a nonprofit entity through reimbursement to an authorized person of the entity for the purchase of tangible personal property and services for use in carrying on the work of the nonprofit entity (excludes travel expenses) Indirectly incurred by a nonprofit entity on building materials, supplies, fixtures, and equipment that become a part of or annexed to a building or structure that is owned or leased by the nonprofit and is being erected, altered, or repaired for use by the nonprofit entity for carrying on its nonprofit activities is considered a direct purchase by the nonprofit entity.
Taxes Not Subject to Refund Provision Sales and use tax paid on: Electricity Telecommunications Service Ancillary Service Piped Natural Gas Video Programming A Prepaid Meal Plan Digital Property Alcoholic Beverages (As Defined In G.S. 18B-101)
Other Taxes Not Subject to Refund Highway Use Tax Paid on a Motor Vehicle Reimbursements of Travel Expenses Local Occupancy or Local Prepared Food Taxes Scrap Tire Disposal White Goods Disposal Taxes
Form E-585 & Form E-536 (as applicable)
How to Locate Help/Information Signup for ealerts www.dornc.com Headline Items Important Notices Annual Departmental Law Change Publication Annual Form E-505 Directives, Technical Bulletins, Administrative Rules Interactive Voice Response (IVR) FAQs (1-877-252-3052) Information for Businesses (www.dornc.com) Professional CPAs, Accountants, Attorneys, etc. Sales and Use Tax Division
Taxpayer Assistance Website : www.dornc.com Taxpayer Assistance and Collection Center: 1-877-252-3052 Service Centers across the state Asheville Charlotte Durham Elizabeth City Fayetteville Greensboro Greenville Hickory Raleigh Wilmington Winston-Salem
Questions?