An organization that has applied for, but not received, an IRS letter determination establishing its status as a IRC, section 501(c)(3) organization may apply for a Temporary Certificate of Exemption by submitting to the Commissioner a completed Department Form TA-1, a copy of IRS Form 1023 as submitted to the IRS, and a copy of its articles of organization and by-laws. The organization must also execute an agreement to extend the statute of limitations on assessments for a period equal to the period that the Temporary Certificate is in force, plus one year.
The Commissioner may issue a Temporary Certificate of Exemption upon receipt, review and verification of the forms and corporate documents. The Temporary Certificate will be effective for two years from the date of issuance or until thirty days after the IRS issues a letter of determination granting or denying section 501(c)(3) status, whichever occurs sooner. The Temporary Certificate may be renewed at the sole discretion of the Commissioner.
2. Scope of Certificate
A Temporary Certificate of Exemption will entitle an organization to a conditional exemption from the sales/use tax in accordance with G.L. c. 64H, § 6(e) and G.L. c. 64I, § 7(b). During the effective period of the Certificate, the organization may present the Certificate to vendors, and will not be required to pay the tax at the time of sale.
The vendor will be relieved of its obligation to collect and remit sales and use taxes only if the vendor maintains a copy of the Temporary Certificate presented for each purchase made by a § 501(c)(3) organization awaiting certification. In addition, organizations are required to maintain adequate records of all purchases for which the Temporary Certificate of Exemption was presented, including a list of each item purchased, the price, and the vendor's name and address.
3. Notice to DOR/Tax Obligations
An organization must notify the Commissioner within thirty days of the organization's receipt of a letter determination either granting § 501(c)(3) tax-exempt status or denying such status. An organization that receives a letter determination granting tax-exempt status may file an application, including the IRS letter determination and the Temporary Certificate of Exemption, requesting a permanent Certificate of Exemption. An organization whose request for tax-exempt status is denied by the IRS must return a copy of the IRS letter determination and the Temporary Certificate of Exemption to the Department . The organization must file sales/use tax returns within thirty days of receipt of an IRS determination denying tax exempt status. The returns must be accompanied with payment of the sales/use tax due for all periods for which the Temporary Certificate was used. The Department will assess the organization for taxes due in accordance with M.G.L. c. 62C, § 26, as necessary. The organization will be liable for interest and penalties established under G.L. c. 62C, § 32.
The Department will entertain waivers of penalties under G.L. c. 62C, § 33 in instances where the organization satisfies the Commissioner that its application for federal tax-exempt status was made in good faith.
Commissioner of Revenue
October 16, 1996