In an effort to reduce the amount of fraud and abuse of the sales tax-exempt privilege, a new requirement has been implemented for statutorily exempt, non-governmental, non-profit entities.   The statutorily exempt entities are listed inAlabama Rule 810-6-3-.07.05.

Beginning January 1, 2016, statutorily exempt non-profit organizations will be required to have an Annual Certificate of Exemption (COE) from the Alabama Department of Revenue on file in order to maintain exemption from state and local sales and use or lodging taxes.  See Sales and Use Tax Rules.

This requirement will affect organizations such as foundations, private schools, humane societies, church organizations and more.  The COEs will need to be renewed each year before the end of the month in which the certificate expires.   (Note:  This is not a “post-marked deemed timely filed” date, but an actual issuance date.)

The new COE will need to be presented to vendors starting January 1, 2016 in order for purchases to be sales-tax exempt.   A return will also need to be filed annually beginning in 2017 detailing all of the tax-exempt purchases made with the COE.  However, the specifics of this reporting requirement have not yet been determined.

Failure to have a COE on file will bar Alabama non-profits from making tax-exempt purchases until the COE is obtained.  In order to maintain current tax-exempt status, we strongly encourage all non-profit entities to apply for their COE promptly in order to avoid any confusion before January 1, 2016.

If you have any questions or would like more information, please contact your BMSS CPA or one of our BMSS State & Local Tax Services professionals.

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