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State Tax Exempt Status

Most states impose an annual corporation income, franchise tax based upon net earnings on the corporation. In these states you must get an exemption from payment of these corporate taxes.

The general requirements for each state vary. Some states are based upon filing the articles of incorporation and obtaining the Federal 501(c) (3) tax exempt status.
Some states have one-time registration; others require annual renewal of registration; some will require submission of every common governance and financial document; others make do with just a copy of the 501(c)(3) determination letter.


State Sales Tax Exemption:


Your organization may be eligible for exemption from State Sales Tax. This may be granted by applying and meeting the criteria set forth in your State Sales Tax Section in your State Statutes.


State Registration for Soliciting Contributions


Which nonprofits must register (and when)?

Generally, any nonprofit that conducts a charitable solicitation within the borders of a state, by any means, is subject to its law and is therefore required to register. In fact, today most states regulate fundraising. They do so through statutes - usually called “solicitation laws” - that are primarily concerned with the solicitation of charitable contributions from the general public. The centerpiece of most of the regulatory schemes is comprehensive reporting, by nonprofits and by the outside fundraising firms and consultants they employ. Also generally, the operative terms “charitable” and “solicitation” are defined very broadly and could include, for example, a website posting by an environmental organization inviting contributions from the public. In other words, the soliciting organization need not be a “charity” in a strict sense nor have any physical presence of any kind in the state. So, a letter, phone call, or newspaper ad requesting financial support from a state's residents is enough, to trigger the coverage of that state's solicitation law.

 

Why must my organization “register?”

The simple answer is “it’s the law.” Typically, states exercise regulatory authority over nonprofits based on one (or both) of two premises: the nonprofit is physically “present” in the state (e.g., has an office, owns real estate, or conducts program activities) or the nonprofit raises funds in the state. In either case, a state might require the nonprofit to
“Register;” that is, to provide identifying information about the nonprofit and its operations. It is the latter premise for registration - raising funds


What is “registration?”

Compliance reporting under solicitation laws is divided into two pieces: (1) registration, which provides an initial base of data and information about an organization's finances and governance; and (2) annual financial reporting, which keeps the states apprised about the organization's operations with an emphasis on fundraising results and practices. Typically, states require both registration (at least an initial registration) and annual financial reporting. With approximately forty states regulating in this manner, there is inevitably little consistency of approach. Some states have one-time registration; others require annual renewal of registration; The Form 990, in addition to being the main IRS reporting form for nonprofits, is the basic component of the annual report that must be filed with a large number of state offices that regulate charitable solicitation. Many states require supplemental reports as well as the Form 990.