You are here:

Nonprofit Law/Operating Non Profit without applying for 501c3


Hi Harvey,
Thanks in advance for your wisdom. My question is this. Is there a tax advantage in any way if you operate a non  profit and choose not to file for the 501c3? In other words, if you are denied or do not apply, are you then responsible for paying all taxes such as sales tax. For example, a sports organization would organize teams and the league they play in. If player's buy uniforms from a local manufacturer, they would pay sales tax. if they buy balls and cones to play the sport, they would pay sales tax. Finally, if they hold a car wash, they need to pay income tax? Karlene

You are welcome.  I have in my profile that this free forum is only for general
questions relating to IRS federal exemption issues of 501(c)(3)
organizations. Your issue is controlled by state law and states may
differ somewhat with how they would treat such issues.

You will be able to obtain the information from your state sales
tax office or your state law (as to exemptions from sales tax).

For example, see which  is the exemption
application from sales tax in the State of Pennsylvania and on page
2 there is a listing of the organizations that may be exempt from
paying the Pennsylvania Sales Tax. "School District" is listed
under the heading "EXEMPTION REASONS" at line 4.

Below that is "Exemption limited to purchase of tangible personal
property or services for use and not for sale."

As for the federal exemption -- If you want donors to be able to deduct donations and not
to have your sales income (like car wash income)  if any, taxed you would need to establish a charitable trust, incorporate under a state's nonprofit corporation law, or set up an unincorporated nonprofit association. Your organizing document would need to state that it is
organizing under Internal Revenue Code Section 501(c)(3). You would have at least 3 directors, with control of the board not in related persons.  See the IRS Publication 557 "Tax Exempt Status for Your
Organization" at:
in the right column on page 25 under "Organizations Not
Required to File Form 1023" discusses who does not need
to file and among those is "Any organization (other than
a private foundation) normally having annual gross
receipts of not more than $5,000.  These organizations
are exempt automatically if they meet the requirements of
section 501(c)(3)."  Otherwise, you would need to file or be taxable.

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

Nonprofit Law

All Answers

Answers by Expert:

Ask Experts


Harvey Mechanic


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

©2017 All rights reserved.

[an error occurred while processing this directive]