A booster club treasurer in her second year gets a letter from the state revenue department. The club has been selling spirit wear at every home game for a decade (hoodies, tees, stadium blankets) and someone, somewhere, flagged that the club has no sales tax permit. Her first thought is the one every volunteer has in this moment: we're a nonprofit, we don't pay taxes... right?
That assumption is one of the most common, and most expensive, misunderstandings in volunteer-run organizations. Being exempt from income tax (your 501(c)(3) status) and being exempt from collecting sales tax on things you sell are two completely different questions, decided by two different governments. The IRS handles the first. Your state handles the second, and the fifty states answer it fifty different ways.
This post can't tell you your state's answer. What it can do is arm you with the right questions, so a fifteen-minute conversation with your state's revenue department (or your accountant) settles it for good. And the standing caveat applies doubly here: this is general information, not legal or tax advice; sales tax rules are state-specific and change, so confirm with your state or a professional.
Why "we're a nonprofit" isn't the answer
Sales tax is a tax on transactions, generally collected from the buyer by the seller and remitted to the state. When your club sells a hoodie, many states see a retail sale, and the seller's nonprofit status doesn't automatically change that, because the tax isn't on your income; it's on the customer's purchase.
States then carve out exemptions, and this is where the variety explodes. Some states broadly exempt sales by qualifying nonprofits. Some exempt only a limited number of fundraising days or events per year. Some exempt certain organization types (schools, PTAs) but not others. Some exempt food but not apparel, or occasional sales but not ongoing ones. A few have essentially no nonprofit seller exemption at all.
The point isn't to memorize the map. It's to stop assuming your square of it is green.
The five questions to ask your state
When you contact your state revenue department (most have a nonprofit or exempt-organizations line, and many publish a nonprofit sales tax guide), work through these:
1. Are sales by our type of organization exempt, and what counts as proof? Many states require you to apply for a state-level exemption certificate; your federal determination letter alone may not be enough. Ask what document you need and whether it covers sales by you, purchases made by you, or both; they're often separate.
2. Is there an "occasional sales" or fundraiser-day exemption, and what are its limits? A common pattern: a set number of fundraising days or events per year are exempt, beyond which you're a retailer. If your spirit wear table is at every home game, count honestly: ten Fridays may already blow past an occasional-sale limit.
3. Are concessions treated differently from merchandise? Food sold for immediate consumption often has its own rules, sometimes more favorable for school-affiliated sellers, sometimes less. Ask specifically about your concession stand, not just "sales."
4. Do we need a sales tax permit, and what does filing look like? If any of your sales are taxable, you'll typically need a permit before selling and a filing cadence after (often annual for small sellers). Ask what the small-seller filing schedule is; it's usually far less burdensome than treasurers fear.
5. What about online sales and buyers in other states? If your team store ships beyond a pickup table, ask how the state treats online sales, and know that selling into other states generally only creates obligations there past substantial economic thresholds that almost no club approaches. Ask rather than assume, but don't panic about it.
Write the answers down, with the date and who told you, and keep them in the club's shared records. Future treasurers will bless you.
If some of your sales are taxable
It's genuinely manageable:
- Register before you sell, not after the letter arrives. States are notably gentler with organizations that come to them.
- Price tax-inclusive at the table. Charging $25.00 even and backing the tax out of it beats making volunteers calculate $23.36 plus tax in a concession line. Check that your state permits tax-included pricing with proper signage; most do.
- Keep sales records by category. Taxable apparel versus exempt food (or vice versa) needs to be separable at filing time. This is where running your store and concessions through one system pays off: a platform like HometownLift gives you itemized records of every sale, exportable by date range, so the filing is a report, not an archaeology project.
- Calendar the filing alongside your 990-N and state annual report. A tax you collected but forgot to remit is a worse problem than one you never collected.
And if you discover you should have been collecting for years? Don't bury it. Many states offer voluntary disclosure programs with reduced lookback periods and waived penalties for organizations that step forward. An accountant's hour of advice here is the best money a worried board will ever spend.
A useful mental model
Think of sales tax like the rules of the road in another country. Driving is legal everywhere, but whether you can turn right on red depends entirely on where you are, and "I didn't know" doesn't impress the local traffic officer. Your club isn't doing anything wrong by selling hoodies; it just has to learn the local rules once, write them down, and follow them.
The bottom line
Nonprofit status doesn't automatically exempt your sales from sales tax: that's a state question with fifty different answers. Ask your state the five questions above, get the answer in writing, register if you need to, and keep itemized sales records so filing is painless. One afternoon of diligence beats one certified letter.
For sales records that are itemized, exportable, and reconciled without volunteer effort, see the compliance tooling in HometownLift.