Selling an item to a tax exempt institution...?

Question

If I sell an item (in this case several copies of a book) to a non-profit, tax-exempt entity, I assume I cannot charge them tax. Is this true? Secondly, do I still have to pay the state what the tax would be, dispite not collecting it?

Example: Book cost = $11.95
(Pennsylvania) Tax = $0.84

Buyer pays $12.79
I pass on the $0.84

Tax emept buy pays 11.95
I pay out of pocket $0.84 or not?

Answer 1

They should either give you a copy of their tax exempt form, or their tax exempt number. Keep this on file.

Correct, you do not charge them tax. But you don't remit the amount to the state, either.

Answer 2

In most states, the status of an entity doesn't dictate whether the entity is exempt for sales tax purposes. Unless the entity is going to resell the book, they would be subject to the tax (normally known as a use tax). Therefore, you would collect and remit the sales tax.

Answer 3

Being exempt from income tax is not the same as being exempt from sales tax. If you sell anything without collecting sales tax, you have to prove to the state that no sales tax is due or pay the tax yourself. The link below is a PA Department of Revenue FAQ about sales tax exemption. It may help.