Monday, February 6, 2012
Fundraisers; Staying Compliant with California’s Rules and Regulations
Posted by Armanino Nonprofit Team
Raffles, auctions and various types of sales are a popular way for many nonprofits to raise funds for charitable purposes. And while everybody wins when that incredible vacation is raffled off, it isn’t all fun and fundraising. There are some often overlooked items nonprofit organizations must keep in mind when planning their fundraisers to stay compliant with California’s various rules and regulations.
In California, nonprofit organizations may be required to register with the Office of the Attorney General and file a separate disclosure with the Registry of Charitable Trusts for each raffle they hold. Some nonprofits, such as religious organizations, schools, colleges, and hospitals are exempt from raffle registration; however, they still must follow certain restrictions and conditions. There are a number restrictions that apply to conductng charibable raffles, some of the most important being:
- 90% of the gross receipts from ticket sales for each draw must be used for charitable purposes or given to another eligible organization for its charitable purposes.
- None of the 90% restricted for charitable purposes can be paid to those operating the raffle
- Proceeds must be used in California
- Cannot use gaming or slot machines to conduct the raffle
Find informaiton, (including a Guide to Penal Cose Section 320.5 Raffles for Charitable Purposes) on on the California Attorney General’s website
Auctions and Sales Tax:
Fundraisers that include donated merchandise, such as auctions, silent auctions and rummage sales also carry certain guidelines that must be followed. While some exemptions do occur in certain conditions, organizations conducting these types of fundraisers typically must pay sales tax on the items they sell. There is no blanket exemption for religious organizations and churches.
Since these sold items (tangible personal property) are taxable, nonprofit organizations must register as a seller and hold a seller’s permit. If your nonprofit organization holds no more than three fundraising events with taxable sales each year, you may apply for a temporary seller’s permit for each event. However, if your organization routinely holds more than one event a year, you may want to apply for a permanent permit so you do not forget your obligations in this area.
Other requirements include:
- Filing a sales tax return and paying the sales tax by the due date determined by the Board of Equalization (BOE)
- Keeping records of sales, deductions and purchase of tangible property purchased for sale
The Board of Equalization’s website is a great place to gain more information on sales and use tax. (See BOE Publication 18, for Nonprofit Organizations.)
Education and making sure your organization is compliant with the various state regulations are the first steps to planning a successful event. So go out, have fun and raise those dollars.
Nonprofit organizations have specialized audit, tax and operational needs that require specialized service. Armanino has been committed to the nonprofit sector since 1953, and we now work with more than 500 nonprofit clients. This hands-on experience gives our staff of CPAs and former CFOs a deeper understanding of the issues nonprofits face, so we’re able to meet their needs and help them fulfill their missions in the most efficient, cost-effective way possible.