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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.

Allison Pickard, PTA president for Oakwood Elementary School in Glen Burnie, said more taxation and enforcement will make things difficult even for those PTAs paying proper taxes.

"Imposing complicated sales [tax] laws on PTAs will only discourage parents further from volunteering with their school's PTA," Pickard said. "It is increasingly difficult to recruit parents to volunteer in school let alone take on a Board positions like Treasurer."

Pickard said the Oakwood PTA treasurer has professional accounting experience, but she doubts many PTAs have this luxury.

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.”

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