Reimburse for Sales tax on an expense

by ben
(ann arbor)

Our group has had a long standing policy of not reimbursing sales tax if a member made a purchase and paid sales tax. However, the reason given is that it is against IRS regulations. I find no such regulation and wonder how other people handle this.

Specifically my example is a member who provided meals during a mission trip. Saved her receipts some of which had sales tax on them. The reimbursement was made minus the sales tax.
Suggestions?

Comments for Reimburse for Sales tax on an expense

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Dec 09, 2014
Reimbursing sales tax
by: MarcusNTexas

There is no such regulation and it would seem to be unethical to have anyone, church member or non-member, make a purchase on behalf of the church and then refuse to reimburse that person the sales tax portion of the purchase price as long as the receipt is provided along with the request for reimbursement. Since I have been treasurer at our church, I have always reimbursed the full cost to any individual making a purchase on behalf of the church, including several I have made personally.

Dec 10, 2014
reimbursement
by: Anonymous

If your organization is tax exempt, the persons designated to purchase items should have that information and not be charged by the place of business.
However some Churches do not have the actual document from the IRS as it isn't required, and some States do not require Churches to obtain exempt status also.. so if there is no documentation for the place of business to view, they can (and most likely will) charge the tax...
Church boards have the right to review all cases if stated in the Church policies...

Most Churches that have documentation in place do not reimburse individuals for taxes paid because it can be a booking nightmare.. basically...just because the individual is not diligent the Church should not be penalized...

Each Church should have their own written and approved policies, follow them and review them yearly to make adjustments as needed.

hope this was helpful

Dec 13, 2014
sales tax reimbursement
by: D Fry

We have had a long-standing policy not to reimburse the sales tax portion of invoices submitted for reimbursement, primarily to encourage members to plan better and get a copy of our sales tax exempt certificate. We would not have paid the tax had the church purchased the items directly, so we did not want to encourage laziness and poor planning, although those words are a little harsh.
Some members submit for payment without including the tax amount, so withholding it doesn't necessarily accomplish the goal of encouraging better organization. It can add up to a considerable sum if too much is bought outside normal purchasing channels, but sometimes members are able to purchase at a discount, not available to the church, which is greater than the tax. In those cases paying it to them still saves the church money.
My best advice is to set up a policy and educate those who may be making purchases outside normal processes. Encourage everyone to plan, and use the tax exempt form. Get a list out of any vendors who have your info on file and get members to use them, especially if you have an account that will bill the church. Create a letter of authorization for those who need it. And stress that ordering through normal channels is preferred.
But there will always be emergencies, so use your best judgement. But be fair and consistent. A policy not enforced is worse than no policy at all.


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