SALT Report 1371 – Indiana has updated its sales tax bulletin regarding exemptions for Indiana state colleges and universities that are nonprofit organizations or governmental agencies. Indiana provides certain exemptions from sales and use tax for purchases and sales that support the exempt government function or educational mission of the institutions. Consequently, transactions that do not support the government function or educational mission are subject to tax.
Purchases by Nonprofit Colleges and Universities
Transactions involving tangible personal property or services are exempt from sales tax pursuant to IC 6-2.5-5-25 if purchased by a nonprofit organization and the purchaser uses the property or service to raise money or further the purpose of the nonprofit. All purchases must be invoiced directly to the nonprofit organization and paid for via the organization’s funds. Also, the organization may not be operated predominantly for social purposes.
Purchases by State Colleges and Universities
Transactions involving tangible personal property or services are exempt from sales tax pursuant to IC 6-2.5-5-16 if the purchaser is an Indiana state college or university recognized as an Indiana governmental agency. The purchases must be invoiced directly to the state educational institution and paid for by government funds. All purchases must be for an official government function.
Sales by Nonprofit Colleges and Universities
Transactions involving sales of tangible personal property or services by a nonprofit organization are exempt from sales tax pursuant to IC 6-2.5-5-26 if they are used to raise funds to further its nonprofit purpose and are not conducted more than 30 days in a calendar year.
However, if a nonprofit organization sells items that further the educational, cultural, or religious purposes of the organization the 30-day restriction does not apply. An exception to the 30-day restriction is also made for sales of food and food ingredients by nonprofit colleges or universities. These sales are exempt from sales and use tax pursuant to IC 6-2.5-5-22 if the purchaser is a student attending the college or university.
Sales by State Colleges and Universities
Sales of educational materials, excluding books, stationery, or supplies, by a state college or university recognized as a governmental agency are exempt if sold to its students because these sales serve the governmental function of the institution.
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