Working on several church accounts and running into confusion about tax exemptions on utility bills. Some utilities automatically apply religious exemptions, others require annual filings, and a few seem to ignore them entirely. Has anyone developed a systematic approach to ensuring churches get their proper tax exemptions? Also seeing some interesting rate classification issues where churches with schools or daycare get split billing.
Church accounts and tax exemption issues
Rodney, tax exemptions are a mess because every state handles them differently. In Texas, churches file with the comptroller and utilities are supposed to honor it automatically, but half the time the utility never gets the memo. I make it standard practice to verify exemption status with both the state and the utility for every religious client. Found a Methodist church paying 8.25% sales tax for three years when they should have been exempt.
The commercial activity issue is huge too. Churches that rent space for events or run schools sometimes lose their exemption for those activities. Had a Baptist church where the utility was charging tax on the entire account because they rented their fellowship hall for weddings. We got it split so only the rental portion is taxable.