Expert: Harvey Mechanic - 9/13/2006

Question
We are a 501c with Federal but not NJsales tax exempt
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Followup To

Question -
In New Jersey are membership fees and ititiation fees taxalbe for the Benevolent and Protective Order of Elks, a Fraternal organization?

Answer -
You would first need to inform me whether the organization has received exemption determination and, if so, under what isbsection of the Internal Revenue code section 501.  Then I will get back to you on that.

Thank you.

Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com

Answer
New Jersey grants sales tax exemption letters to:

   *
     If your organization is a "501(c)(3)"organization (i.e. exclusively religious, charitable or educational) or a veterans', volunteer fire, emergency or PTA/PTO organization, complete the REG-1E application for exemption and attach:
        1. Certificate of Incorporation, or Constitution, and Bylaws, and
        2. IRS determination letter of exemption under IRC section 501(c)(3) (not required from a veterans' or emergency organization, PTO or volunteer fire company, which should attach any IRS exemption letter they have.)
   *
     If the IRS 501(c)(3) letter is a group exemption letter, also attach a letter or listing from your central organization indicating that your sub-unit is included under the group 501(c)(3) exemption.

http://www.state.nj.us/treasury/taxation/
click on the left "tax topics" and then on next screen click
"information About Nonprofit and Exempt Organizations" then click
"ST-5 exemption from sales tax"
and you will see that your organization would need to be exempt under section 501(c)(3) which is why I asked you for the subsection of section 501 (c) that you were organized under.  In any case,
if you click
"View Questions and Answers"
you will see at:
www.state.nj.us/treasury/taxation/pdf/pubs/reg1eQA.pdf
under question 5 that Fraternal organizations are not exempt from New Jersey sales taxes.

Your question then is narrowed dow to whether organizations like health and fitness clubs or your club are required to collects sales taxes on membership and initiation fees under the Sales tax law.  
Go back to that screen where you clicked "Tax Topics" and, instead, this time hit "Publications" and then "Sales & Use Tax" and then "S&U-4 New Jersey Sales Tax Guide" and on page 2 you will see, "The New Jersey Sales and Use Tax imposes a tax of 7% upon... the sale of certain services, except as provided in the Act."
On page 13 at the top right is listed "E"("E" stands for exempt as explained on page 4) for exemption of Membership Fees for professional/social clubs. So you would not need to collect sales or use taxes for your membership or initiation fees.

Thank you.

Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com