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Grex > Coop11 > #11: Taxes and our new 501(c)3 status |  |
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aruba
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Taxes and our new 501(c)3 status
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Jul 20 20:32 UTC 1998 |
I made some calls today, and found out some good news.
- I called the Michigan Department of Treasury's Sales, Use, and Withholding
Taxes Division and told them that we had been approved as a 501(c)3
organization. They told me we can make the following changes:
- As long as we do not sell more than $5,000 worth of merchandise, we need
not collect sales tax on what we sell. (However, if we do sell more
than $5,000 worth of stuff, we will owe sales tax on everything we
sell, including the first $5,000. So we need to be careful. We have
never come close to selling $5,000 worth of stuff, but the auctions
count as sales for this purpose, so we are within an order of magnitude.
Last year, for example, we sold $485 worth of merchandise and made
$1414.01 in auction proceeds, so we were 38% of the way to the $5000
limit.)
- The lady I talked with will send us a Sales Tax Exemption form.
Whenever we buy something that would normally incur sales tax, we
can present the seller with a copy of the exemption and of our
letter from the IRS, stating that we are 501(c)3, and then we need
not pay the sales tax. However: the payment for items needs to come
directly from Cyberspace Communications for us to be able to avoid
taxes this way. We can't do what has been the norm in the past:
have some staff member make a purchase and then be reimbursed later
by the treasurer. Well, we *can*, but it will save us money not to.
- I called Ameritech, and they are sending us forms to fill out so that we
will no longer have to pay state and federal tax on our telephone
charges.
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| 49 responses total. |
dpc
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response 1 of 49:
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Jul 20 20:33 UTC 1998 |
Wow--an exemption from taxes on the phone bill is an unexpected benefit!
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mta
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response 2 of 49:
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Jul 20 22:37 UTC 1998 |
Thanks for looking into this Mark!! Wow, I do believe you folks have just
raised Grexes "real income" -- as in expendable cash -- significantly!
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rtgreen
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response 3 of 49:
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Jul 20 23:36 UTC 1998 |
What is the magnitude of the phone taxes, in terms of local dial-ins that
we could retain? has this just made the discussion of three fewer lines
moot?
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srw
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response 4 of 49:
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Jul 21 05:30 UTC 1998 |
STate and federal taxes on phone charges add up to 9%. That is 3 or 4
memberships per month worth of reduced expense. Mark will be able to compute
the exact amount. It's a lot, for us.
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rcurl
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response 5 of 49:
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Jul 21 05:32 UTC 1998 |
Same on the electric bill.
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aruba
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response 6 of 49:
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Jul 21 18:56 UTC 1998 |
Unfortunately we do not pay our electric bill directly, rather we
reimburse our landlord. So we cannot get a tax break there unless we
change that system. I called Detroit Edison to ask for our monthy
average, and found (not surprisingly) that the Pumpkin shares a meter with
someone else. (I concluded that based on the fact that the monthly
average was a lot higher than what we use.) I don't know what it would
take to get the Pumpkin on its own meter, but I suspect it's more trouble
than it's worth.
Our last phone bill contained $31.86 worth of taxes. That's 5 memberships
worth!
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davel
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response 7 of 49:
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Jul 21 21:33 UTC 1998 |
Hmm. This is one advantage that we (or at least *I*) never forsaw, but which
may well be the single biggest benefit of 501(c)3 for Grex. Second on
what Misti said, Mark. It's a big chunk of our budget.
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aruba
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response 8 of 49:
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Jul 22 06:43 UTC 1998 |
Credit should go to Ken Ascher for suggesting that we might get out of paying
taxes on our phone bill. I wouldn't have thought of it otherwise.
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janc
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response 9 of 49:
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Jul 22 12:40 UTC 1998 |
Cool.
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valerie
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response 10 of 49:
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Jul 22 15:09 UTC 1998 |
This response has been erased.
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mta
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response 11 of 49:
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Jul 22 17:37 UTC 1998 |
You guys are great!
Thanks, mark and Ken, and Jan!
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rcurl
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response 12 of 49:
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Jul 23 02:04 UTC 1998 |
Well, yes, thanks everyone...for pointing out the obvious. Just look at
what is not taxable in everything that Grex does - and get recognition
of tax exemption for all of it. This has been true from the day the 501(c)3
effort was first considered.
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aruba
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response 13 of 49:
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Aug 7 14:28 UTC 1998 |
I finally got the tax exemption applications from Ameritech - they took 2.5
weeks to get here, for some reason. There is one to get out of federal tax
and one to get out of state tax. My cursory reading of them makes it look
like we qualify for the state exemption but not the federal. The federal form
requires that we "locate the provision under which exemption is claimed", and
the options are:
A. Reseller of communication services
B. Governmental organization
C. Ambassadors, ministers or other diplomatic representatives
D. Consular offices whose foreign government have treaties with United States
E. Consulates, agencies and commissions of foreign governments
F. Schools operated as an activity of a church, parish or other religious body
G. Nonprofit educational organization
H. Nonprofit hospital
I. Common carrier, telephone and telegraph company, radio and television
broadcasting stations and networks
J. Other reasons
The only options that look like they might possibly apply to Grex are G and
J. But under G it says, among other things:
The exempt organization normally maintains a regular faculty and
curriculum, normally has a regularly enrolled body of students, in
attendance at the place where its educational activities are regularly
carried on, and has as its principal function the providing of formal
education.
So that's out. Under J (Other), it says
Acceptable only if accompanied by a determination letter from Internal
Revenue Service explaining the basisi of exemption from Federal Excise
Tax on Communication Service (income tax exemption is not applicable).
So that makes it pretty clear we can't choose J. Therefore I don't think we
qualify for an exemption from federal tax.
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aruba
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response 14 of 49:
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Aug 7 14:36 UTC 1998 |
Now that I look at the state form a little more carefully, I need to make
some calls before filling it out, too. I will post more when I know more.
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keesan
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response 15 of 49:
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Aug 7 15:20 UTC 1998 |
Reseller of communication services? Or does that make membership donations
nondeductible? Probably won't work. I use grex as my only way to do e-mail
and read the net.
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aruba
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response 16 of 49:
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Aug 8 01:43 UTC 1998 |
OK, looks like we are eligible to avoid state taxes. I sent the paperwork in
to Ameritech today.
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dpc
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response 17 of 49:
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Aug 17 18:39 UTC 1998 |
I think we're a "reseller of communication services." Our price is zero
for everyone but members.
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scg
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response 18 of 49:
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Aug 17 22:55 UTC 1998 |
Except that being a reseller of communications services has some very specific
meanings. That basically means that you are selling telephone lines to
people, and then buying the lines you are selling from Ameritech. With that
goes a ton of regulation, and the exemption for paying taxes to Ameritech is
because such resellers can instead pay their phone line taxes directly to the
government.
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rcurl
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response 19 of 49:
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Aug 18 04:08 UTC 1998 |
We cannot be a "reseller..." as we are incorporated as a non-profit charitable
organization giving away services, which is what we do. We do not sell members
anything, as members are just the donors that support grex by their charitable
donations. Members don't have to pay for any services. It makes a big
difference whether "payment" is voluntary or required.
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dpc
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response 20 of 49:
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Aug 19 20:24 UTC 1998 |
As long as members get some services that non-members don't (such as
outbound telnet), those services are being sold. OTOH, from what
scg says we aren't a "reseller of communication services." Oh, well...8-)
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rcurl
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response 21 of 49:
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Aug 19 20:41 UTC 1998 |
You have to restrict language use to that used in tax law. Grex is not
a reseller of the services it provides supported by donations, but would
be a reseller of T-shirts. most "member services", up to certain limits,
are also not defined as being sold.
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aruba
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response 22 of 49:
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Sep 15 23:01 UTC 1998 |
Got a phone bill today, but they're still charging us taxes. I'd better call
them tomorrow and make sure they got our application.
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lilmo
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response 23 of 49:
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Sep 15 23:52 UTC 1998 |
Can we get out of previously paid taxes? I.e., can the exempt status be made
retroactive?
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aruba
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response 24 of 49:
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Sep 16 18:33 UTC 1998 |
That's the big question. They said yes, but there is nothing on the
paperwork I sent them which says when our status begins, and I don't know if
they'll take my word for it that it's retroactive.
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