Question: I would like to have information on sales tax, such as how to set up and how it works.

Response: In general, student organizations (and educational agencies) must pay sales and use tax for all items purchased, consumed and sold by the organization. There are, however, some exceptions, such as when sales are irregular or intermittent (such as some sales at football games or annual rummage sales). The rules on sales tax are complex and outside of what the FCMAT Help Desk can assist you with, other than some pointers we can share. Comprehensive information about both sales and use taxes can be found on the State Board of Equalization web site at www.boe.ca.gov.  We've found that site to be very helpful and the Board of Equalization does have customer service lines that may be of assistance to you.

Also, each accounting system is very specific as to how to set up sales and use tax fields, and we suggest you work with your software vendor on how to deal with the technical aspects.

Remember that California sales tax must be paid on gross sales. Because student store sales are neither irregular nor intermittent, they are taxable, so there will not be an exemption for the payment of sales tax.

Since sales tax is normally paid when goods are purchased at retail, that is one obligation taken care of. But it must be remembered that when the goods are resold, sales tax is due on the difference between the purchase price and the price at resale. The district's business office files a sales tax return periodically for the sales tax it has collected. It is most efficient for the district to include on the same return any sales tax due on student store sales.

The district's business office staff should obtain the necessary information from the student store sales and report the sales tax when it is due. This also ensures greater accuracy when preparing the sales tax form. Thus, you should work with the district's business office on how to handle sales tax reporting correctly.

Use tax must be paid on items purchased from a retailer but for which sales tax was not paid at the time of purchase. This usually occurs when goods are purchased from out-of-state vendors. Just as the district's business office files a periodic sales tax return, it also files a use tax return. It is most efficient to include the student store's information on the use tax return. Again, working with the district's business office is critical.

 10/4/09