Module 5

E-commerce and

Internet Reporting

Convery 2013 1

Identify the issues a NPO should be aware of when soliciting contributions over the Internet

What are the components of e-commerce? Describe how and why an NPO should post

their Form 990s on a Web site Explain why and how IRS Form Form 990s

are posted on the Internet Describe the tax implications of selling

products or services over the Internet

Convery 2013 2

Internet Web sites may be used for commerce, advocacy, and fundraising

NPO may have to register under charitable solicitation laws in other states whose residents can access your website (e.g., check PA). ◦ See the URS Uniform Reporting System (Multi-

State Filer Project), a joint effort by the National Association of Attorneys General and National Association of State Charity Officials – see www.nonprofits.org/library/gov/urs/

Convery 2013 3

FASB’s EITF Emerging Issues Task Force has several pronouncements that may affect NPOs (see www.fasb.org/eitf). Examples from the past are: ◦ Barter transactions, Web site development costs,

complex equity instruments/transactions, gross vs. net presentation of revenue and expense, purchase rebates, shipping and handling

Convery 2013 4

Advertise and educate through a website Sell products and services (Business to

Customer), e.g., online registration for courses. Note: NPO serves as a tax collecting intermediary for sale of taxable merchandise

Purchase products for resale (Business to Business)

Compliance reporting, such as electronic filing

Solicit charitable contributions – online donations of cash and in-kind

Convery 2013 5

UBIT = unrelated business income tax at the corporate tax rate

E-commerce revenues are subject to the same UBIT rules as other business-like activities (watch for payments for banner-ads and links and revenue between for-profit and nonprofit sites)

Convery 2013 6

An NPO may be exempt from paying sales tax on purchases for tangible personal property used or consumed primarily in carrying out the exempt purposes of the organization.

Purchases of property used in fund-raising activities, such as bingo and raffles (including items raffled off) are subject to sales tax.

Vehicles purchased primarily for the personal use of a director are subject to sales tax.

For the MI Sales and Use Tax Certificate of Exemption, see www.michigan.gov then Treasury, then Revenue Administrative Bulletins

Convery 2013 7

See www.guidestar.org

Public Disclosure rules (IRS Announcement 99-62, effective June 8, 1999 and IRC Sec. 6104, 6652, 6685) are satisfied if an NPO’s Form 990 is widely available on a Web site and if the format exactly replicates the form, e.g., PDF

Convery 2013 8

State regulations require collection of sales tax for items sold, even across state lines

Note: there is a federal moratorium on the direct taxation of Internet activities while a blue-ribbon commission works on the issue

Convery 2013 9