Module 5 E-commerce and Internet Reporting

1. Module 5 E-commerce and Internet Reporting Convery 2013

2. Learning Objectives • Identify the issues a NPO should be aware of when soliciting contributions over the Internet • What are the components of e-commerce? • Describe how and why an NPO should post their Form 990s on a Web site • Explain why and how IRS Form Form 990s are posted on the Internet • Describe the tax implications of selling products or services over the Internet Convery 2013

3. Internet Issues for NPOs • Internet Web sites may be used for commerce, advocacy, and fundraising • NPO may have to register under charitable solicitation laws in other states whose residents can access your website (e.g., check PA). • See the URS Uniform Reporting System (Multi-State Filer Project), a joint effort by the National Association of Attorneys General and National Association of State Charity Officials – see www.nonprofits.org/library/gov/urs/ Convery 2013

4. Internet Issues for NPOs, cont’d. • FASB’s EITF Emerging Issues Task Force has several pronouncements that may affect NPOs (see www.fasb.org/eitf). Examples from the past are: • Barter transactions, Web site development costs, complex equity instruments/transactions, gross vs. net presentation of revenue and expense, purchase rebates, shipping and handling Convery 2013

5. Components of e-commerce • Advertise and educate through a website • Sell products and services (Business to Customer), e.g., online registration for courses. Note: NPO serves as a tax collecting intermediary for sale of taxable merchandise • Purchase products for resale (Business to Business) • Compliance reporting, such as electronic filing • Solicit charitable contributions – online donations of cash and in-kind Convery 2013

6. Unrelated Business Income Tax (UBIT) issues? • UBIT = unrelated business income tax at the corporate tax rate • E-commerce revenues are subject to the same UBIT rules as other business-like activities (watch for payments for banner-ads and links and revenue between for-profit and nonprofit sites) Convery 2013

7. Sales Tax • An NPO may be exempt from paying sales tax on purchases for tangible personal property used or consumed primarily in carrying out the exempt purposes of the organization. • Purchases of property used in fund-raising activities, such as bingo and raffles (including items raffled off) are subject to sales tax. • Vehicles purchased primarily for the personal use of a director are subject to sales tax. • For the MI Sales and Use Tax Certificate of Exemption, see www.michigan.gov then Treasury, then Revenue Administrative Bulletins Convery 2013

8. Form 990 on a Web site • See www.guidestar.org • Public Disclosure rules (IRS Announcement 99-62, effective June 8, 1999 and IRC Sec. 6104, 6652, 6685) are satisfied if an NPO’s Form 990 is widely available on a Web site and if the format exactly replicates the form, e.g., PDF Convery 2013

9. Tax Implications of Selling Goods or Services on the Internet • State regulations require collection of sales tax for items sold, even across state lines • Note: there is a federal moratorium on the direct taxation of Internet activities while a blue-ribbon commission works on the issue Convery 2013