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PTAs To Begin Collecting Food Sales Tax

The state comptroller told PTA officials they had been violating tax law by not collecting sales tax.

UPDATE (Tuesday 11:32 a.m.)—Local chapters of the Parent Teacher Association (PTA) in Maryland will now have to start collecting sales tax on all items during fundraisers after the state comptroller's office told officials that PTAs had been violating tax law.

Whenever a local school’s PTA hosted a bake sale or magazine fundraiser in the past, the organization usually charged a flat fee for certain items since the hosts usually already paid retail tax on the items. However, that is now going to change due to the comptroller’s interpretation of Maryland tax law, said Maryland PTA president-elect Ray Leone.

"PTAs have always paid retail tax. We have never not paid taxes. We did, however, think that certain items were exempt as they were foods not consumed on site, or met other commonly misunderstood criteria," Leone said. "[The Maryland PTA] is now advising local PTA units to collect and remit retail tax on snack foods such as cookie dough and popcorn in bulk. This should be a very small change for most PTAs." 

Following the comptroller’s announcement, the more than 900 PTAs in Maryland will need to start collecting sales tax when selling goods—such as cookie dough or hot dogs—for fundraisers determined by the rate of increase between an item’s original retail price and the price then charged by PTAs.

“The PTA's interpretation of the law was a little more lax apparently than the state comptroller’s interpretation of the law," Leone said. “This is going to make life a little worse for a lot of Maryland PTAs."

Leone said he didn’t expect the state to ask for back taxes from PTAs—partially because of the massive task it would be.

“Going back and trying to fix [back tax issues] is a judiciary nightmare,” he said.

On average, about 80 percent of all PTA treasurers are not specifically educated or trained in advanced accounting, Leone said. But based on the complexity of many PTA financial books, he said the training is greatly needed.

Leone said he audited the records of one PTA that raised about $50,000 for the year.

“I’m auditing some books right now. We’ve paid the taxes on what they thought was right, and we’re telling them to go forward with what they know now,” Leone said.

After receiving the comptroller’s interpretation, Leone sent out a form letter to all PTA treasurers—many of whom he personally trained—informing them about the adjustment and explaining how to determine the appropriate tax amounts.

Moving forward, PTAs will need to collect taxes for on-site food sales (like hot dogs) and cookie-dough fundraisers. Pizza dough, however, is not included in the interpretation because it was not determined to be a tax item and so it will remain a non-taxed item for PTAs, Leone said.

He was quick to point out that the tax collection adjustment is not a state-enforced move, but mainly the interpretation of one man—an interpretation the PTA wants to abide by. But that doesn’t mean Leone won’t be pushing back a little to help alleviate stress and taxation requirements for his PTAs.

“I believe personally this may be one guy’s interpretation that’s benefiting the state. We’ll probably have to engage tax lawyers to give us an exact interpretation,” Leone said. “How can you say pizza dough isn’t a snack item [non-taxable] but cookie dough is? That’s the kind of thing that’s throwing me off.” 

KAREN SMITH November 27, 2012 at 05:13 PM
Maryland leigslators, when able, should look at other resources for tax dollars.....PTA volunteers look at fundraising as exciting, teaching our kids to work with the community, keeping maryland businesses alive from donations with recognition...Famalies that spend hours baking, etc....is inspiring to our kids that parents work together.....Good hearts give time, ideas for fundraising, etc.....Who will actually take the responsibility if a cake is bought then sold by the slice for higher retail??? MARYLAND, THE PTA HELPS YOU!!!!!!!!!!!! FOR FREEEEE!!! How about those new Casinos? Raise tax profit? A hotdog and bag of popcorn to support our children vs. Buildings being built by gamblers?.....As we all know, they didn't build these buildings from winners......!!!
Bob November 27, 2012 at 08:51 PM
hmmmm, what isn't taxed in Maryland? Owe malley will soon go after the air that we breathe.
John Smith November 28, 2012 at 12:43 AM
My son has gone to three schools in Anne Arundel County - two public and one private. All of the schools have always included sales tax on top of the purchase price, collected the tax, and remitted it to the State. It isn't a big deal to them. The State isn't taxing the PTA's. It's requiring the PTA's to collect sales tax from the purchasers when they buy their wrapping paper, candles, etc., just like every other seller has to. Should all nonprofits be exempt from collecting sales tax or only PTA's? Where would you draw the line?
KAREN SMITH November 28, 2012 at 11:56 AM
The fine line? wrapping paper, candles, etc. are distributed from companies that require sales tax to be paid......A bake sale is normally donated by volunteers. A bake sale and magazine sale have much distance between the two.....The fine line needs to be more specific.....Congrats! to the school who raised $50,000.00 for this shows much parent participation and helps Maryland Schools budget. A bake sale and magazine sale two totally different types of fundraising.....Cookie dough and Pizza dough are both a snack!!!!..........With such monies being raised by the PTA, the supplies bought at the begining of the year bought by parents, and other items required by the parents, has legislation taken the time to see how much money PTA's are saving you.....???? That is my opinion of a where the fine line is drawn!
Greg November 28, 2012 at 03:58 PM
Why not just have a "Bake Donation....???"

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