I thought fraternities and sororities were tax exempt. Why do we have to pay sales tax?
Fraternities and sororities are typically exempt from paying federal income tax if they maintain their tax exempt status and they file their IRS Form 990 each year. Fraternal organizations receive this federal tax exemption as a result of their 501(c)(7) status with the IRS.
Unfortunately, that 501(c)(7) status only applies to federal income tax exemptions. Each state sets their own tax laws. Some states (not all) expect 501(c)(7) organizations, like sororities and fraternities, to pay state sales tax on items they purchase.
What is the amount of sales tax we will have to pay?
The answer to this question depends on the city, county and state in which you reside. Rates will typically range from 0% to 9.0%. You can look up your particular sales tax rate by visiting: https://www.avalara.com/taxrates/en/calculator.html
How and when will we pay sales tax?
If you receive an invoice from OmegaFi, you will see the sales tax amount itemized on your invoice. If you pay OmegaFi via a portion of funds collected on your behalf, you will see the sales tax amount collected on appropriate payments in your accounting or fee registers in the Vault, LegFi or Compass apps, depending on which you use.
Do I have to pay sales tax on past activity?
No. You will only begin paying sales tax when OmegaFi notifies you of the start date.
Does OmegaFi keep sales tax collected?
No. OmegaFi pays the sales tax on your behalf directly to your state taxing authorities.
What locations will pay sales tax?
As of mid-2021, OmegaFi customers with a mailing address in Arizona, Massachusetts, New York, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Washington State and Washington DC will likely be charged sales tax to comply with the taxing authorities in those states. As laws change, additional states may be added or removed.
Why is OmegaFi just now beginning to charge sales tax?
The laws in various states have been changing since a landmark Supreme Court decision known as South Dakota vs. Wayfair, Inc. This case provided a new opportunity for states to generate additional sales tax revenue from out-of-state sellers. In addition, in many cases, states expanded their definitions to include software subscription purchases.
Do other software companies collect sales tax?
Yes, other software companies that are acting in accordance with state, city and county laws are collecting sales tax. If your home state requires it, a software company doing business in that state should be charging sales tax. Some examples of technology companies charging sales tax where required by law include Netflix, Amazon and Spotify.
We encourage you to ask all of your technology vendors what they are doing to comply with these new sales tax requirements and protect you from incurring any fees or penalties from your state taxing authority.
OmegaFi is not like a normal software company. You have account managers and staff members providing service and support beyond just software.
We agree. OmegaFi is much more than a typical software company. The level of support and hands-on service is a key distinguishing factor between OmegaFi and a typical software company. Unfortunately, the tax laws in various jurisdictions do not seem to care about this distinction. Our lawyers and tax advisors with PwC have analyzed this exact situation and determined we are required to collect sales tax on select product lines by select states and cities. If you have a legal opinion that can help your organization avoid having to pay sales tax on your use of OmegaFi products, we would be happy to review it.
Are you going to collect sales tax on the dues I collect from my members?
No. OmegaFi will only collect sales tax on the fees the OmegaFi customer (the chapter, house corporation or national headquarters) pays to OmegaFi for select services, as required by that customer’s home location.
My organization is exempt from paying sales tax. What do I do?
To avoid paying sales tax, please email a copy of your valid sales tax exemption to OmegaFi. For the fastest processing include the name of your organization (fraternity or sorority name and chapter name) and which OmegaFi products you use (Vault, LegFi, OmegaOne, OmegaRecruit, etc.).