by Stephen Bevins
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“Do not forget to take our nonprofit exemption certificate to the store with you!”
Anyone who has gone shopping as part of a nonprofit organization has heard this all-important phrase. Nonprofit organizations are exempt from paying taxes on tangible personal property and taxable services. A Tennessee nonprofit exemption certificate must be presented by an in-state Tennessee 501(c)(3) organization when making purchases. Nonprofit organizations must keep their tax exemption certificate indefinitely. Every four years, nonprofit certificates of exemption are reissued to all current exemption holders by the Tennessee Department of Revenue. Renewed certificates are mailed to the current address on file with the Tennessee Department of Revenue in the weeks prior to the expiration of the current exemption certificates. If at any point your business changes address, update it with the Tennessee Department of Revenue to ensure you receive your most current exemption certificate.
Any dealer or supplier to a nonprofit organization must obtain and keep on file a current exemption certificate from the nonprofit organization. Every four years, a dealer or supplier will receive a letter from the Tennessee Department of Revenue saying that new exemption certificates have been issued to nonprofit organizations. New exemption certificates issued have an effective date of July 1, 2023.
As a dealer or supplier, it is best practice to keep all certificates received from a nonprofit organization, to show the nonprofit’s exemption certificate was current at the time of their purchase. In case of an audit of the dealer or supplier, keeping record of all nonprofit exemption certificates gives adequate proof of why sales tax was not collected on the nonprofit organization. It is recommended that a dealer or supplier annually review the nonprofit exemption certificates in their records. Nonprofit organizations must provide a new exemption certificate to the dealer or supplier if informational aspects of their business have changed.
If a dealer or supplier has not done business with a nonprofit organization in over a year, the dealer or supplier may request a current nonprofit exemption certificate. Or, they may verify the nonprofit exemption certificate in their records is still valid by using TNTAP. In TNTAP, verification can be accomplished under “Sales and Use Tax Certificate Lookup,” and then “Verify a Sales and Use Tax Certificate.” Even though a dealer or supplier can verify the nonprofit organization’s exemption through TNTAP, a dealer or supplier must still have a nonprofit organization’s exemption certificate on file in their records.
As a dealer or supplier, the law in Tennessee does not require out-of-state organizations that have been granted tax-exempt status to apply for a Tennessee tax-exempt certificate. Out-of-state organizations are allowed to present a copy of their 501(c)(3) exemption designation to purchase goods and services tax-free. When an out-of-Tennessee organization is purchasing, it is best practice for a dealer or supplier to obtain record of that organization’s exemption certificate.
Happy shopping, and do not forget your nonprofit exemption certificate!