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How do charities avoid paying the taxes that other firms must pay?
Wiki User
∙ 9y ago
Well interstingly, they don't get a much different result in many cases!
First of all the benefits your speaking about would be available, when available at all to an organization that qualifes and reports as a Section 501(c) of the IRS code. It is complicated and requires many things about how they operate, and most importantly, how they spend any money they raise 9from gifts or operations).
Generally, these organizations are all 'Not for Profit"...NFP. They don't have any net income, they spend it all on the charitable causes they support. If a normal company were to do that, it too wouldn't pay any income tax. (Cos that lose money, or make none, pay no income tax).
In some insrtances, generally on the state level, if the charity is doing something of service to socirty (say housing the sick), it may be allowed an additional break of not paying sales tax on things it would have to otherwise (like toilet paper), as a way for society to help it in its mission. Likewaise with real estate taxes. In a very real sense, it is a way to help the charity do what society would want to have done, and would very possibly, have to do and pay for itself otherwise.
Charities are exempt from paying taxes as long as they can fit into the IRS definition of a charitable organization.
Wiki User
∙ 9y ago
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How charities avoid paying the taxes that other firms must pay?
They don't 'avoid' paying taxes... their status gives them the right by law not to pay tax ! Registered charities are given exempt status by the government - meaning they do not have to pay tax.
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