The purpose of this section is to provide general tax information to Booster Clubs. It is each Booster Club’s responsibility to seek competent professional tax advice for its own tax reporting and filing requirements. The information provided in this document is not intended to be all‐inclusive.
How to obtain tax exempt status 501(c)(3)
If your group has revenue of $5,000 or more, you will need to take the steps necessary to become a nonprofit education organization recognized by the Internal Revenue Service as exempt from taxation. This is known as a 501(c)(3) entity. Effective with 2019-20 booster club activity, all groups with revenue of $5,000 or more will be required to be a 501(c)(3) entity.
Please know that booster clubs who are classified as 501 (c)(3) are exempt from paying franchise tax. Here is the link from the comptroller’s office with additional information.
Formation of a non‐profit corporation does not necessarily entitle the organization to exemption from federal taxes. In order to be exempt from federal taxes, The Booster Club must apply for this status on Form 1023‐ Application for Recognition of Exemption under Section 501(c)(3). These documents are available on the Internal Revenue Service website.
The application must be accompanied by Form 8718, User Fee for Exempt Organization Determination Letter Request, which provides a user fee to be paid to the Internal Revenue Service. Depending on the anticipated annual gross receipts, the fee is either $150.00 or $500.00. Upon acceptance of the organizations exempt status by the Internal Revenue Service, a determination letter will be received as evidence of approval. The letter should be kept in a safe, permanent place as it will be used time and again to prove the organization's exempt status.
Please provide a copy of your determination letter to the district Finance office – attention Elaine Cogburn.
Note: Instructions for completing these forms and copies of the forms can be found on the Internal Revenue Service website under forms and publications. The IRS main number is 1‐ 800‐829‐1040, and the Tax‐Exempt section is 1‐877‐829‐5500.
How to obtain an Employer Identification Number (EIN)
The IRS requires all organizations (entities) that conduct business to have their own Employer Identification Number. The EIN is obtained with the SS‐4 Form from the IRS. A member's social security number should not be used as the organization's Employer Identification Number for banking or other business purposes. Booster Clubs are not allowed to use the District's EIN.
To obtain an Employer Identification Number:
- Obtain and complete IRS Form SS‐4.
- Make a copy for the club's permanent records.
- When a number is assigned to the Booster Club by the IRS, ensure that the paperwork is maintained in a permanent file from year to year.
- The recommended fiscal year end for the Booster Club is June 30.
- There is no application fee required when filing Form SS‐4.
- This EIN will be the number used to establish a bank account for the Booster Club.
Note: You can apply for an EIN number on the Internal Revenue Service website. Insert "employer identification number" under forms and publications. You will be able to complete the application process online.
All Booster Clubs must apply for their own sales tax exempt status. They may not use the sales tax exempt status of another Booster Club or the District sales tax exempt status. Sales by a Booster Club are generally taxable. Booster Clubs are not tax‐exempt unless they have filled out the proper application forms from the Texas Comptroller of Public Accounts and have been given tax‐exempt status. Each Booster Club can have two tax free sale days per calendar year according to Texas State Sales Tax Law. Items can be sold during the tax‐free weekend in August without collecting sales tax.
More information, including forms and FAQ's are available at the Texas Comptroller's site here.
Organizations that have applied for and received a letter of exemption from sales tax do not have to pay sales and use tax when they buy, lease or rent taxable items that are necessary to the organization's exempt function. No item purchased tax‐free by an exempt organization can be used for the personal benefit of a private party or other individual. For any questions regarding sales tax, you can call the Texas Comptroller of Public Accounts at 1‐800‐531‐5441 or email firstname.lastname@example.org.
Taxable Status of Purchases
- A booster organization must provide the vendor with a valid signed exemption certificate when claiming state sales tax exempt status. Exemption certificates do not require tax identification numbers to be valid nor is the vendor required by law to honor the exemption.
- The District's exemption status may not be utilized by parent, booster, patron, or alumni organizations to secure exemption from sales and excise taxes. Parent/teacher organizations and Booster Clubs must apply for their own exemption.
- Items which become the personal property of the student (t‐shirts identifying participation in band, choir, orchestra, Student Council, etc), even though connected with a school or organization, are not exempt from tax. Items which are purchased by the organization through booster funds as an award to a student are not taxable.
- Meals purchased by the organization for teams, groups, bands, etc. on authorized school trips are exempt from sales tax if the organization contracts for the meals. The booster organization must pay for the meals with a Booster Club check and provide an exempt certificate.
- Individual members of the team, group, band, etc. may not claim exemption from sales tax on the meals they purchase while on a school authorized trip.
Collection and Remittance of Sales Taxes
The Booster Club shall collect sales tax on all taxable sales. When imposing sales tax, the organization has the option of:
- Adding the tax to the item's selling price‐ thus, if the selling price of an item were $2.00, the tax rate was 8.25%, the boosters would collect $2.17 ($2.00 x 1.0825) from the buyer for each item sold.
- Absorbing the tax in the item's selling price‐ thus, if the item sold for $2.00 including the tax, the boosters would retain $1.83 and remit $0.17 for sales tax. If this method is used, divide the total sales by 1.0825 (assuming the tax rate is 8.25%) to find the taxable sales. To determine the sales tax amount, subtract the taxable sales from the gross sales.
Taxable Status of Sales
School and school related organizations need not collect sales tax on the following:
- Admission tickets
- Club memberships
- Food and drinks sold at school functions
Therefore, state and local sales tax shall be imposed and collected on all sales for:
- Items sold by the school store
- Any type of Booster Club materials
- Any other item sold as personal property (i.e. school pictures, uniforms, etc.)
- All sales of items such as handicrafts, T‐shirts, candles, cups, books, and school supplies sold by a school associated organization during a fundraising drive
- All other personal property except for those items specifically excluded above
Sales tax should be filed in accordance with the State Comptroller’s guidelines. Further information can be found on the Comptroller’s website.
Internal Revenue Service guidelines require that all payments for services in excess of $600.00 made to an individual by a booster organization be reported on a form 1099 on an annual basis. The Booster Club should secure an IRS form W‐9 from the provider at the time of service to ensure the organization has an accurate record of the tax payer identification number. The organization must then issue a form 1099 to all qualifying vendors performed in a calendar year by January 31st and report to IRS by this same date.
The Internal Revenue Service website should be accessed for appropriate 1099 reporting requirements and forms.
Annual Federal Filing Requirements
Every booster organization exempt from federal income tax under section 501(a) is required to either file an annual Form 990 Return of Organization Exempt from Income Tax, Form 990‐N Electronic Notice (e‐ Postcard) for Tax‐Exempt Organizations Not Required To File Form 990 or 990‐EZ or Form 990‐EZ, Short Form Return of Organization Exempt From Income Tax. The return is due by the 15th day of the 5th month after the close of the organization’s tax year or fiscal year. According to the IRS, small tax‐exempt organizations, such as small booster clubs, are required to file an annual electronic notice Form 990‐N (e‐ Postcard). The e‐Postcard is required to be filed on‐line. The e‐Postcard is due every year by the 15th day of the 5th month after the close of the organization’s tax year. A booster club cannot file the e‐Postcard until after its tax year ends. Whether or not a booster club has filed for exemption status with the IRS, it should still file the appropriate 990 form as required by exempt organizations. IRS regulations affect not‐ for‐profit organizations and their requirements for financial reporting.
For the fiscal year ending in 2011 and later:
Booster Clubs must use Form 990‐N, normally known as the e‐Postcard if:
- Gross receipts are $50,000 or less.
Booster Clubs must use Form 990‐EZ if:
- Gross receipts are more than $50,000 but less than $200,000 AND
- Total assets are less than $500,000 at year‐end.
Booster Clubs must use Form 990 if:
- Gross receipts are $200,000 or more OR
- Total assets are $500,000 or more at year‐end.
These provisions may change so consult with a tax professional or the IRS for additional assistance. Even though booster organizations are recognized as tax exempt, they may be liable for Federal tax on the portion of income deemed to be unrelated business income (“UBI”). UBI is income from a trade or business activity, regularly carried on that is not substantially related to the charitable, education or other purposes that are the basis for the organization’s exemption. An organization that has $1,000 or
more gross income from UBI must file Form 990‐T, Exempt Organization Business Income Tax Return. This form is filed in addition to Form 990, 990‐EZ, or 990‐N and is required regardless of the level of the income received.
If the booster club’s address has changed a notification must be sent to the IRS to ensure that any IRS refund or correspondence is received. To change an address with the IRS, complete Form 8822, Address Change Request, and send it to the address shown on the form.