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Kentucky Governor signs HB 354, offering sales tax relief to not-for-profits

On Tuesday March 26, 2019, Governor Matt Bevin signed HB 354 into law. The bill included amendments to exempt the sales of admissions, along with the sale of some items related to fundraising events, by not-for-profit organizations exempt from tax by the IRS.

Who is affected?

All not-for-profit educational, charitable, or religious institutions exempt from tax under Internal Revenue Code Section 501(c)(3). It also exempts not-for-profit civic, governmental, or other nonprofit organizations from sales tax on admissions.

What are the major changes?

The first significant change relates to the imposition of sales tax (KRS 139.200). When the law was revised last year, it required charitable organization to collect and remit sales tax on admissions to events, including fundraising events. Under the new tax law, any admissions, as defined by KRS 139.010, charged by a not-for-profit educational, charitable, religious, civic, governmental or other not-for-profit organization would be exempt from sales tax.

The second significant change relates to sales of items related to fundraising events. Under the new law, fundraising event sales made by not-for-profits are exempt from the collection and remittance of sales tax. It should be noted that this does not include sales related to the operation of a retail business, such as bookstores, thrift stores, gift shops, surplus property auctions, recycle or reuse stores or any other type of ongoing activities in competition with for-profit retailers.

Does this apply to events we’re having soon?

Yes, the law became effective on March 26, 2019, so it applies to events held any time after that. However, if you have recently collected sales taxes from events prior to this date, be sure to remit them. No refunds will be issued for the period prior to the law becoming effective. More instructions are forthcoming from the Department of Revenue, so until then, we recommend keeping your sales tax accounts in order.

This new law will provide Kentucky not-for-profits with relief from the administrative burdens related to the collection and remittance of sales tax related to fundraising events and admissions to events and activities carried on by not-for-profit organizations.

For information on how this new law will affect your not-for-profit organization, please contact your MCM professional, or Senior Tax Manager Kim Marley, CPA via e-mail or phone (502.882.4596), or Senior Tax Manager Bob Moreland, CPA via e-mail or phone (502.882.4658).

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