PTAs to Begin Collecting Food Sales Tax

The state comptroller told PTA officials they had been violating tax law by not collecting sales tax.

Local chapters of the Parent Teacher Association (PTA) in Maryland will now have to start collecting sales tax on all items during fundraisers after the state comptroller's office told officials that PTAs had been violating tax law.

Whenever a local school’s PTA hosted a bake sale or magazine fundraiser in the past, the organization usually charged a flat fee for certain items since the hosts usually already paid retail tax on the items. However, that is now going to change due to the comptroller’s interpretation of Maryland tax law, said Maryland PTA president-elect Ray Leone.

"PTAs have always paid retail tax. We have never not paid taxes. We did, however, think that certain items were exempt as they were foods not consumed on site, or met other commonly misunderstood criteria," Leone said. "[The Maryland PTA] is now advising local PTA units to collect and remit retail tax on snack foods such as cookie dough and popcorn in bulk. This should be a very small change for most PTAs." 

Following the comptroller’s announcement, the more than 900 PTAs in Maryland will need to start collecting sales tax when selling goods—such as cookie dough or hot dogs—for fundraisers determined by the rate of increase between an item’s original retail price and the price then charged by PTAs.

“The PTA's interpretation of the law was a little more lax apparently than the state comptroller’s interpretation of the law," Leone said. “This is going to make life a little worse for a lot of Maryland PTAs."

Leone said he didn’t expect the state to ask for back taxes from PTAs—partially because of the massive task it would be.

“Going back and trying to fix [back tax issues] is a judiciary nightmare,” he said.

On average, about 80 percent of all PTA treasurers are not specifically educated or trained in advanced accounting, Leone said. But based on the complexity of many PTA financial books, he said the training is greatly needed.

Leone said he audited the records of one PTA that raised about $50,000 for the year.

“I’m auditing some books right now. We’ve paid the taxes on what they thought was right, and we’re telling them to go forward with what they know now,” Leone said.

After receiving the comptroller’s interpretation, Leone sent out a form letter to all PTA treasurers—many of whom he personally trained—informing them about the adjustment and explaining how to determine the appropriate tax amounts.

Moving forward, PTAs will need to collect taxes for on-site food sales (like hot dogs) and cookie-dough fundraisers. Pizza dough, however, is not included in the interpretation because it was not determined to be a tax item and so it will remain a non-taxed item for PTAs, Leone said.

He was quick to point out that the tax collection adjustment is not a state-enforced move, but mainly the interpretation of one man—an interpretation the PTA wants to abide by. But that doesn’t mean Leone won’t be pushing back a little to help alleviate stress and taxation requirements for his PTAs.

“I believe personally this may be one guy’s interpretation that’s benefiting the state. We’ll probably have to engage tax lawyers to give us an exact interpretation,” Leone said. “How can you say pizza dough isn’t a snack item [non-taxable] but cookie dough is? That’s the kind of thing that’s throwing me off.” 

JustABill December 01, 2012 at 07:30 PM
Mark G while your reasoning sounds more bitter than logical my guess is you missed the part where the Joe Corbie's pizza and other "partner" companies products are technically a mail order item from an out of state business and therefore non taxable. Even if they are companies from within the state pizza making kits and ready to bake cookie dough are grocery items and also non taxable here in Maryland. As for the lack of many "old fashioned" bake sales, you can thank your local ambulance chasing attorney for the threat of a ridiculously frivolous law suit from someone with a nut allergy not being told the loaf of banana nut bread they bought has nuts in it or something idiotic like that. This has forced groups to resort to prepackages processed foods and other safe items like Christmas wrapping paper that of course needs to be called holiday wrapping paper so as not to offend anyone.
Richard December 01, 2012 at 10:38 PM
Purchases outside of Maryland are taxable, they just don't get paid. Check the following link. This will probably be the next thing from our state government. I heard this on WTOP just last week. http://individuals.marylandtaxes.com/usetax/usetax.asp
Michael B. Cron December 02, 2012 at 04:49 AM
It's a rotten idea that only a greedy money hungry state government would have the guts to enforce. Consider the fact that PTA's are not for profit tax exempt organizations whose sole purpose is to help raise extra needed funds to help subsidize another not for profit tax exempt organization namely our state public schools. This is just unbelievable! What's next, charging sales tax for our children's lunches that are purchased in the school cafeteria? Why would anyone pay sales tax on a donation? Just stop buying cakes, candy, bagels and any other so called taxable items from the PTA and just write a check instead. This way 100% of your donation will go directly to where it is needed most and is tax deductable. I wonder where the sales tax money that will be collected by the PTA will go......our public schools purhaps? No,that would be too easy!
Bailey Henneberg December 03, 2012 at 03:28 PM
Mark, is your point that if they are selling junk it should be taxed, but if they were selling baked goods it would be crazy? (A "sin tax" of sorts.) Michael, interesting point you raise -- should the state tax a fundraiser whose funds go to subsidize its schools?
Michael B. Cron December 04, 2012 at 05:37 AM
Bailey, I think it is pure bureaucratic "B.S." This state will not be satisfied until it can find a way to tax every activity we as citizens do. I take that back...the state would not be happy. They would find a way to tax our taxes. All this state knows how to do is tax and spend and not necessarily in that order . Until we vote out our inept legislators, this is what will continue to happen.


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