In Colorado, non-profit organizations are typically excluded from paying sales tax. As long as the organization is registered with the state and possesses a sales tax exemption certificate, this exemption applies to both state and municipal sales taxes. There are a few exceptions to this rule, therefore it’s critical for non-profits to be aware of them in order to abide by the law.
Non-profits must submit paperwork to the Colorado Secretary of State in order to register as charities in the state. Articles of incorporation and other paperwork must be submitted, together with a filing fee. The Internal Revenue Service (IRS) must grant non-profits tax-exempt status by receiving Forms 1023 or 1023-EZ. The Colorado Department of Revenue will issue a sales tax exemption certificate once the group has been registered and granted tax-exempt status.
The Colorado Secretary of State must receive annual financial statements from nonprofit organizations. The balance sheet, income statement, and cash flow statement are required to be included in these statements, which must also be produced in line with generally accepted accounting standards (GAAP). A statement of functional expenses, which breaks down costs by program, management, and fundraising, is also required from nonprofits.
Non-profits are not obligated to undertake audits, but they may choose to do so in order to provide donors and stakeholders more comfort. A formal audit is an examination of a company’s financial statements by a third party auditor. Internal controls, financial records, and adherence to accounting rules must all be carefully examined. If a non-profit receives federal funds or if a state law requires an audit, they may also be obligated to conduct one. Non-profits could also be the target of other audits or assessments. For instance, the IRS may investigate the tax-exempt status of a non-profit, or a grant-making agency may demand an audit as a prerequisite for financing. Nonprofits ought to be ready to offer financial records and other data when these kinds of assessments call for it.
In conclusion, non-profits in Colorado typically are exempt from paying sales tax provided they are registered with the state and have a sales tax exemption certificate. Additionally, non-profits are required to submit annual financial accounts to the Colorado Secretary of State and have an audit if they want additional assurance. Nonprofits need to be aware of any additional audits or reviews that may be necessary due to legal requirements or financing requirements.
If your organization is qualified to file a 990-N, you may file a 990-N following a 990-EZ. It’s crucial to remember that you cannot submit both forms for the same tax year.
You can submit Form 990-EZ electronically via the IRS website or a recognized e-file provider. Nevertheless, based on their annual gross earnings and other circumstances, different non-profit organizations may have varied filing requirements. It is advised to seek particular advice from a tax expert or the IRS regarding the documentation needs of your non-profit organization.