RE: Sales/Use Tax on Pet Adoption Fees

Texas law requires that all humane organizations (Rescues, SPCA’s, Humane Societies, State nonprofit, and charitable 501c3 exempt orgs) collect and remit sales and use tax to the Texas Comptroller on their adoption fees. The only entities in Texas that are exempt from collecting sales tax from the adopters are municipal animal control agencies/shelters operated by a county or city.

For many humane organizations this will be a detrimental shock because the law is poorly written and it has been mistakenly assumed due to vague terminology that they are exempt from sales tax on adoption fees. For many, this means that there will need to be 7 years of prior sales/use tax reconciliations, back taxes, late fees, and penalties. ❗️BUT, we are here to give you a favorable resolution. For the past few weeks, a dedicated team of Lawyers have been working very hard on behalf of all humane organizations in Texas to bring resolution to the issue of Sales Tax on Adoption Fees. They have been contacting state representatives and other government officials about the detrimental impact this newly exposed information will have on the critical work all of us are doing for the animals of our communities. Here are the important facts that you need to know.

The law as of right now has not changed. All non-municipal humane organizations in Texas (regardless of having a 501c3 exemption or not) must collect, reconcile, report, and remit sales/use tax on all taxable sales (including animal adoption fees) to the Texas Comptroller.$ext.TacPage…

Thanks to the amazing work of the legal Team, the Texas Comptroller has agreed to waive all back sales/use taxes, late fees, and penalties for organizations in Texas… IF the humane organization reconciles the past 7 years (statute of limitations) of their adoption fees and they submit the reconciliation report along with a formal request for a waiver to the Texas Comptroller. For more information, please call 800-252-5555.

After your reconciliation is complete and the waiver is officially granted by the Texas Comptroller for all of your back taxes & penalties, you must collect, reconcile, report, and remit sales and use tax on your adoption fees moving forward, based on your local and state sales tax rates. EXAMPLE: Texas 6.25% & McKinney 2% = 8.25% Total Sales/Use Tax. ~ For an adoption fee of $200, you must also collect $16.50 in sales/use tax from the adopter that you will later reconcile, report, and remit to the Texas Comptroller. The tax is to be collected from the adopter… not paid for with the organization’s funds.

GDRNT was incorporated as a 501(c)(3) in 2001 and at that time the Founding Board and Lawyers did not file for a Texas Sales/Use Tax Permit. We are in the process of filling that application. GDRNT and our accountant(s) also misunderstood the terminology of this poorly written law and sales tax has not been collected on our adoptions since the beginning of our operations. (However I do believe the intent of the law was to apply to rescues.) Instead of invoicing our previous adopters for the applicable sales tax on their adoption fee, we will be formally submitting our tax reconciliation report to the Texas Comptroller and we are requesting a waiver of the back taxes and penalties.

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Please email us at [email protected] if you have any questions.

GDRNT and our legal Team plans to work hard to put in motion better operational, property ownership, and tax laws for all humane organizations in Texas. We plan to be be a part of the driving force for change and future compliance education.

SALES TAX: (Do not confuse a Federal Income Tax Exemption (501c3) with State Sales Tax on Taxable Sales and Purchases).
First and foremost, all humane organizations in Texas are required to APPLY for a sales Tax PERMIT from the start of their operations.
There are two elements to sales tax… sales and purchases.
~SALES: 501c3 charitable organizations holding a permit in Texas are allowed to have ONLY TWO 1-day sales tax exempt fundraisers per calendar year, where they may sell taxable items and NOT collect sales/use tax from the customer. All other sales outside of those two days, must have sales/use tax collected, reconciled, reported, and remitted to the Texas Comptroller. This includes the sale of t-shirts, stickers, collars, and all other taxable items you sell throughout the year. If you have been selling items outside of your two fundraising days each year for the past 7 years, you will need to re-reconcile all of your sales to include sales tax due and request a waiver from the Texas Comptroller.

~PURCHASES: IF your organization is a 501c3 charitable organization, you can APPLY for a sales tax exemption for your qualified program purchases (dog/cat food, crates, other program supplies, etc). 501c3 organizations are NOT automatically exempt from paying sales tax on purchases. This is completely separate from the organizations sales and does not exempt you from collecting sales tax on sales.
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