SALT Report 1430 – The South Dakota Department of Revenue’s latest Tax Facts bulletin is designed to explain how sales and use tax applies to relief agencies. A relief agency is any nonprofit charitable organization which devotes its resources exclusively to the relief of the poor, distressed or underprivileged.
The Department will use the following criteria to determine if an agency qualifies for the sales tax exemption.
- The relief agency is organized and conducted solely for the benefit of the general public and for relief of the public burden,
- A person who needs the services of the relief agency is not turned away because the person is not able to pay for services,
- The relief agency does not provide for gain or profit of any private member of the agency except in the form of a salary,
- Upon dissolution the assets of the agency are used for charitable purposes,
- The relief agency does not present or appear to present any obstacles of any character, such as founders’ fees, mandatory assignment of income or property, or minimum fees, to those who need the benefits of the agency,
- The average cost of services of the relief agency exceeds the amount of fees actually collected,
- A major source of income of the relief agency results from gifts, bequests, or donations, not current charges,
- Allocation of facilities or services of the relief agency is not related in any way to ability to pay for such facilities or services, and
- The relief agency has an exemption under section 501(c) (3) of the Internal Revenue Code
When making purchases the Relief Agency must provide an exemption certificate complete with their exempt license number. The license number contains “RA” to identify it as a relief agency. All payments must come from the Relief Agency’s funds. Purchases paid by an individual, even if accompanied by an exemption certificate, are subject to sales tax because the purchase was not made by the relief agency.
Additionally, a church is not considered a relief agency and is not exempt from sales or use tax.
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