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It's the Law - Sales Tax Exemptions

THE SALES TAX EXEMPTION: It is Available to Home Educators.

     Do my home education purchases of educational textbooks and materials qualify for exemption from the sales tax?

     This question came up in our recent Support Group Leaders Retreat. Having been involved with nonprofit organizations, I was aware of the general concept that nonprofit "educational organizations" qualified for exemption of purchases they make to fulfill their educational mission. In other words, schools buying school materials don't have to pay sales tax. I was curious as to what extent home educators could use this sales tax exemption under state law. So, I dusted off the old law books and then I had a pleasant meeting with officials at the Department of Revenue. What I discovered was both interesting and positive. Proceed with caution. As in many areas of the law, home education is not a perfect fit with the statutes and rules as they were drafted. Home educators are still a relatively new phenomenon that drafters of the statutes and agencies have difficulty managing. That being said, here's what I discovered:

     Are Homeschool Purchases Exempt from the Sales Tax? The Legislature provides for nonprofit "educational organizations" to be exempt from the sales tax for purchases of items necessary to fulfill their educational purposes. If you read the Department of Revenue's rules strictly, it is hard to fit home education under the definition of an "educational organization".

     Nonetheless, the Corporate and Sales Tax Division of the Department of Revenue struggled with this question a number of years ago and issued an opinion they titled, "Sales Tax Information on Home Schools". The Department determined that home schools are entitled to an exemption from the state sales tax for educational purchases. I met with Anne Gravelle of the Department, the contact person listed on the opinion. She stated they recognized that home educators are providing the same benefit as any other school and, therefore, should receive the sales tax exemption for educational purchases. Three cheers for the Department of Revenue, someone in government really does understand home education.

     Because homeschoolers do not nicely fit into the rules, the Department established a procedure by which homeschool families could obtain a sales tax exemption number (ES#). The procedure has been that a homeschool would simply fill out Form ST16, "Application for Certificate of Exempt Status" available from the State Department of Revenue. The families were instructed by the Department to provide a "Constitution" of the homeschool in order to establish that they were in fact an "educational organization". My discussion with the Department included the supervisor and attorney for this division. We all agreed that a "Constitution" did not really reflect what was actually necessary. They have agreed in the future that an affidavit from the parents stating they are homeschooling their children would be sufficient in order to obtain an ES#.

     When the contents of an appropriate affidavit are finally developed, we will place it on our web site. Instructions, cautions and links to the necessary forms are on the MACHE web site, www.mache.org, at the "It's the Law Columns" link on the Legal/Legislative page.

     What Items Can a Homeschool Buy Exempt from the Sales Tax? The Department of Revenue opinion specifically states:

     "The items must be used to perform the educational functions of the homeschool. This includes items such as books, pens, pencils, paper, school supplies and furniture or fixtures used for educational purposes. The exemption does not apply to purchases of meals, lodging or to purchase or lease motor vehicles. Also taxable are general home furnishings such as kitchen tables and chairs, beds, sofas, and fixtures. Utilities and telephone services are also taxable since these items are needed for the home regardless of whether or not the family has a homeschool. Purchases of items such as computers, software, VCR's and TV's, by a homeschool for use in its educational functions are exempt. However, if these items are purchased for personal or recreational use by the family, these items are taxable."

     The tricky items are computers, VCRs, DVD players and TV's. Because we don't fit cleanly under the rules there is no clear test on when an item is for educational use (exempt from sales tax) vs. personal (taxable). This is where we would strongly encourage that you avoid abusing this privilege and use a strict interpretation. We want to preserve this privilege for the future.

     For example, if you are a family that watches TV for recreational purposes and also happens to watch an occasional educational video, don't claim your television purchases has exempt. If you are a family that doesn't have a television in your home for recreation or you have a specific set in you use in the instructional area to provide video curriculum, then use your tax-exempt status. The fact that your children occasionally watch a Veggie Tales video on the "school TV" while you're fixing supper is no concern to the tax collector. They stated to me that they will not get into that level of detail.

     Simply put, there is no hard and fast rule as to when it's considered personal vs. educational in the homeschool setting. I would suggest a rule of thumb that if the purchase would not have been made "but for" your homeschool needs and the item is used only occasionally for non-educational reasons, it would qualify for an exemption. By comparison, traditional schools that qualify for this exemption lawfully allow their students and teachers to occasionally send e-mails over their computers or to write a note on school paper for personal reasons. Just don't abuse the privilege.

     How Do I Buy Exempt from Sales Tax? If you're buying a tax-exempt item, you fill out the sales tax exemption Form ST3, Certificate of Exemption and present it to a merchant. Form ST3 is a simple one page form that contains your name, address, and exempt status. Neither you nor the merchant has to file this form with the state. The merchant only holds the form for a period of time in case the merchant is ever audited. Upon presentation of Form ST3, the merchant is obligated to provide you with exemption from the sales tax.

     Visit our web site at www.mache.org for details on how to purchase an item using the sales tax exemption. The necessary forms and instructions are available there for your use. We will also place them in your MACHE handbook that will come out in August of 2004. You may also obtain the necessary forms from the State Department of Revenue website in Adobe Acrobat reader format at www.taxes.state.mn.us/forms/st3_03.pdf, or you can order the form by phone at (651) 296-6181. Ask for Forms ST3, Certificate of Exemption and ST16, "Application for Certificate of Exempt Status".

     Conclusion. The fact that homeschool purchases are entitled to a sales tax exemption comes from a generous interpretation of the law by the present staff of the Minnesota Department of Revenue. This could change with a new administration or staff at the Department. Therefore, if you experience any problems in future, please let MACHE know immediately. Don't assume that this privilege is set in stone.

     MACHE is very grateful to the prompt and courteous assistance from the Department of Revenue staff, in particular Paul Blaisdell, Supervisor of the Corporate and Sales Tax Division, Anne Gravelle and Gregory Heck. We also want to thank Education Commissioner Cheri Pierson Yecke, Ph.D and her Director of School Choice and Innovation Morgan Brown for their assistance in clarifying this issue positively on behalf of home education. As taxpayers you can be proud of their dedicated service.

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