How are you able to sell products and remain a nonprofit?
Selling items does not risk an organization's tax-exempt status if the revenue generated is used to promote the organization's exempt function and the applicable taxes are paid on any unrelated business income.
A major benefit to being a nonprofit is the exemption from federal and state income taxes. However, certain activities, considered unrelated to the organization's core mission, are subject to taxes. This tax is called Unrelated Business Income Tax (UBIT).
In order to be subject to UBIT, the profit-making activity must
* be regularly carried on;
* constitute a generally recognized trade or business; and
* not be an activity that is substantially related to the organization's tax-exempt status, meaning the activity does not further the mission of the organization.
We believe that selling clotheslines and products associated with line drying and cold-water washing are central to our exempt purpose, but we will be carefully monitoring our activity with the help of lawyers and accountants experienced in this area. The books, artwork, and merchandise are clearly not taxable items. If you have questions about this, we encourage you to be in touch with us at
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.
Source: http://www.boardsource.org/Knowledge.asp?ID=3.114
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