Do Nonprofits Pay Sales Tax in Washington State?

Yes, nonprofits in Washington State generally pay sales tax on their purchases and collect sales tax on their sales, the same as any other business. Federal 501(c)(3) status does not exempt an organization from Washington’s retail sales tax, which combines a 6.5% state rate with local rates that push the total above 9% in many areas.¹ State law does carve out narrow relief for a few organization types, for goods bought to resell, and for qualifying fundraising events — but everything outside those boxes is taxable.

Why 501(c)(3) Status Doesn’t Cover Washington Sales Tax

Washington treats federal tax-exempt status and state sales tax as separate matters. An IRS 501(c)(3) designation exempts your organization from federal income tax; it says nothing about your obligation to pay Washington retail sales and use tax.²

When your nonprofit buys office supplies, furniture, cleaning products, computers, or anything else for its own use, it is acting as a consumer. Consumers pay sales tax at the register, and the Department of Revenue expects nonprofits to do the same.² Not paying can lead to assessments for back taxes, interest, and penalties.³

Which Nonprofits Get a Sales Tax Break

State law provides sales tax relief to a small number of organization types. These exemptions target specific policy goals, not nonprofits as a category.

Artistic and Cultural Organizations

Sales tax does not apply when an artistic or cultural organization buys objects for exhibition or presentation to the general public. Qualifying purchases include objects of art, objects of cultural value, materials used to create a work of art (other than tools), and items used to display art or present exhibitions and performances.⁴ The exemption covers acquisitions tied to the public-facing mission. It does not extend to general operating supplies like office furniture or cleaning materials.

Free Hospitals

A hospital that provides care without charging patients — a “free hospital” under state law — is exempt from sales tax on items reasonably necessary for its operation and the provision of health care.⁵ The definition is strict. The hospital must not charge patients at all, not merely offer reduced-cost or charity care alongside paid services.

Foster Housing for Youth in Crisis

Construction materials purchased by a health or social welfare organization to build alternative housing licensed as a family foster home for youth in crisis are exempt from sales tax. This includes materials used to renovate an existing structure into new housing for that purpose.²

Buying Inventory for Resale

Any nonprofit that buys goods specifically to resell them — through a thrift store, bookstore, or event — can purchase that inventory without paying sales tax. The items must go directly to resale without being used by the organization first. Instead of paying tax at checkout, the nonprofit gives the vendor a reseller permit. To obtain a reseller permit, the organization needs the appropriate Washington business licenses and endorsements.⁶

Buying wholesale shifts the tax collection obligation. When you sell those items to customers, you must collect retail sales tax from them unless a separate exemption applies to the sale itself.⁷

Fundraising Events Get Special Treatment

Fundraising is where most nonprofits find real sales tax relief. The exemption applies on both sides of the transaction.

What You Buy for the Event

When a nonprofit purchases goods that will be resold at a qualifying fundraising event — meals for a benefit dinner, items for a silent auction, merchandise for sale — it can buy those items without paying sales tax by providing a reseller permit to the vendor.⁷ This includes meals purchased from caterers, restaurants, or hotels.

What You Sell at the Event

Qualifying nonprofits are also exempt from collecting sales tax on the sales they make during a qualifying fundraising event.⁸ Wine sold directly by the nonprofit at auction and spirits sold by the glass during a qualifying event are both exempt.⁷

What Counts as “Qualifying”

Not every nonprofit sale qualifies. Under state law, a fundraising activity solicits contributions or exchanges goods and services for money to further the nonprofit’s goals. The activity cannot involve operating a regular place of business during regular hours. A thrift shop, bookstore, restaurant, or similar operation with set hours and a fixed location does not qualify, even if all the profits go to charitable purposes.⁹ The exemption is built for distinct events like galas, auctions, and benefit dinners.

To use it, your organization must be exempt under Section 501(c)(3), (4), or (10) of the Internal Revenue Code, or meet similar structural criteria. The proceeds must further the organization’s goals, and the event cannot be held at a regular business location.⁷

Use Tax on Out-of-State Purchases

Buying from an out-of-state seller does not sidestep the tax. When your nonprofit buys goods from a seller that does not collect Washington sales tax — online, by phone, or through mail order — the organization owes use tax on those purchases. The rate matches what you would have paid in state: 6.5% plus the local rate for your location.¹⁰¹¹

Use tax is owed the first time the item is put to use in Washington. The same exemptions available for sales tax generally apply to use tax, so if a purchase would have been exempt from sales tax, it is also exempt from use tax. Nonprofits report and pay use tax on their excise tax returns.

Collecting Sales Tax on Your Own Sales

Nonprofits that sell goods or services must collect retail sales tax from their customers and remit it to the Department of Revenue, just like a for-profit business.² This includes thrift stores, bookshops, cafés, and any other regular retail operation. The exceptions are sales that fall under a specific statutory exemption — most notably qualifying fundraising events and certain food products.⁷

The seller collects the rate that applies where the customer receives the goods or services.¹ Sales tax collected is trust money held on behalf of the state and must be submitted when the organization files its excise tax return.

One note on a separate tax: Washington’s business and occupation (B&O) tax also applies to most nonprofit revenue, though cash donations and qualifying fundraising income are exempt, and a small business credit may zero out the bill for lower-revenue organizations.²

Paperwork You Need to Claim an Exemption

The document you use depends on why the purchase is exempt.

Reseller Permit

For any item your organization buys to resell — through a storefront or at a qualifying fundraiser — present the vendor with your reseller permit. This lets you buy at wholesale without paying sales tax. Items purchased this way must go directly to resale without being used by the organization first.⁶

Buyers’ Retail Sales Tax Exemption Certificate

For purchases exempt under a specific statute, such as items bought by a free hospital or art acquired by a cultural organization, complete a Buyers’ Retail Sales Tax Exemption Certificate (Form REV 27 0032). Select the specific legal reason for the exemption, provide your organization’s nine-digit Unified Business Identifier (UBI) number, and have an authorized representative sign it. The seller keeps the original as proof.¹²

Keep pre-filled copies on hand so staff can present them quickly. The certificate stays valid as long as the organization’s tax status and the nature of its purchases stay the same.

Penalties for Claiming an Exemption You Don’t Qualify For

Using a reseller permit or exemption certificate to avoid sales tax on a purchase that does not actually qualify carries a penalty of 50% of the tax that should have been paid, on top of the unpaid tax itself plus any applicable interest and other penalties.¹³

The Department may waive the penalty if the misuse was beyond the organization’s control or if items were purchased for dual purposes. When a buyer provides exemption documentation to avoid tax, the burden falls on the buyer to prove the purchase was legitimate.¹³ Confirm every exempt purchase genuinely fits a statutory exemption before presenting documentation.

Getting a Refund If You Paid Tax You Didn’t Owe

If a vendor refuses to accept your exemption documentation, or you are unsure of the rules at the time of purchase, pay the tax and keep the receipt. You can then file a refund application with the Department of Revenue to recover the amount.¹⁴ The application must be submitted within the required time limits, and you will need a seller’s or buyer’s declaration under penalty of perjury for each seller involved. Claiming the exemption at the register is simpler, but the refund path is there when it isn’t available.

1
Washington Department of Revenue. Retail Sales Tax
2
Washington State Legislature. WAC 458-20-169 – Nonprofit Organizations
3
Cornell Law School. Washington Administrative Code 458-20-228 – Returns, Payments, Penalties, Extensions, Interest, Stays of Collection
4
Washington State Legislature. RCW 82.08.031 – Exemptions Sales to Artistic or Cultural Organizations
5
Washington State Legislature. RCW 82.08.02795 – Exemptions Sales to Free Hospitals
6
Washington Department of Revenue. Reseller Permits
7
Washington Department of Revenue. Nonprofit Organizations
8
Washington State Legislature. RCW 82.08.02573 – Exemptions Sales by a Nonprofit Organization
9
Washington State Legislature. RCW 82.04.3651 – Exemptions Amounts Received by Nonprofit Organizations for Fund-Raising Activities
10
Cornell Law School. Washington Administrative Code 458-20-178 – Use Tax and the Use of Tangible Personal Property
11
Washington Department of Revenue. Local Sales and Use Tax Rate Table
12
Washington Department of Revenue. Buyers Retail Sales Tax Exemption Certificate
13
Washington State Legislature. Washington Code Title 82 Chapter 82.32 Section 82.32.291 – Reseller Permit Unlawful Use Penalty Rules
14
Cornell Law School. Washington Administrative Code 458-20-229 – Refunds