Q & A Compliance for Virtual Events and Auctions

Virtual events are a fun way to raise money for an important cause. Hosting an online event or auction will allow you to reach a broader audience. It’s also a great way to engage people with your cause when gathering together in person is not possible. Virtual events do require a great deal of planning and you need information. We’ve compiled some of the most frequently asked questions about compliance for virtual events and auctions to provide you with the answers you need to make your event compliant and successful.

Which type of event will we hold?

Your fundraising registration and reporting compliance obligations depend on your choice of event. Decide what type of online event you’ll be hosting and if gaming or an auction will be part of it. The next question you’ll need to ask yourself is will you use your nonprofit’s own website as your event platform, or use a third-party platform like Salsa for your auction or event.

How do we comply with applicable laws?

Nonprofits that wish to raise funds from the public are required to comply with charitable solicitation registration requirements. Regulated at the state level, charitable solicitation registration requirements vary by jurisdiction. There are forty-one states that currently require nonprofits to register to solicit their residents, and twenty-five states require certain information be disclosed by nonprofits on solicitation materials.

Where and when should we register to fundraise? 

Make sure to register where required in advance of your event so you’re compliant with all applicable state charitable solicitation laws. Generally, states require most nonprofits to register before they begin fundraising activities. California requires registration within 30 days of receipt of a donation. Where should you register?

Solicitations happen where the donor receives them, so when fundraising online that could be anywhere. Promoting donations for the event on social media? Allowing remote bidding? These are ways to receive donations from supporters across the country, which could mean that nationwide registration may be required. Our Online Fundraising Compliance Guide is a great resource that provides more details.

Which laws govern charitable gaming?

If there will be gaming at your event there may be additional state and local rules to meet. A common regulation is that only adults may assist with gaming activities. Special permits may be required. 

The process for obtaining a charitable gaming license typically includes submitting an application and fee with the appropriate regulatory body. This process may need to be completed at both the state and local levels of government. States often require submission of additional documents and information, including:

• Articles of Incorporation
• Bylaws
• A list of individuals assisting with gaming activities
• Location of gaming event(s)
• A list of the organization’s officers

Must we collect and remit sales tax?

The IRS grants nonprofits exemption from federal taxes. Many states apply the IRS’s 501(c)(3) exemption to state income tax exemptions. Other states require nonprofits to apply for a state sales tax exemption. It’s important to know that securing a state income tax exemption does not automatically mean you will receive an exemption for state sales and use tax. 

In most states, nonprofits must pay sales tax on their purchases and charge sales tax on the items they sell. Some states allow certain types of nonprofit organizations a special exemption from sales tax but the exemption is generally limited to the purchase of items used for their exempt purpose. 

Every auction sale is a purchase of goods or services, which can trigger state sales tax laws. Generally speaking, like retailers, nonprofits must collect and remit sales tax on their taxable sales. Some states do allow for exceptions to this general rule for fundraising. Check your state’s rules to be certain. Check with your third party auction platform also. They may take care of this obligation for you.

Which charitable disclosures should we include?

No matter if you’re thanking those who donated an item or those who purchased one you may need to include state-mandated charitable disclosure language in the acknowledgment. There are specific states that require nonprofits to disclose where information about the nonprofit can be obtained on solicitation materials and acknowledgments to donors. 

Charitable disclosure statements are typically required to be listed on solicitations, donor confirmations, donor receipts and donor reminders of contributions. In addition to providing details on a nonprofit’s charitable solicitation registration status, disclosures may be required to include directions on where to find more information on the entity’s mission and financials. There are currently 25 jurisdictions that require the disclosure statement on written materials to donors, each state with their own expectations for content.

Let the games and the events begin!

Hosting a virtual event or auction is a great way to raise funds and engage supporters, especially in uncertain times. Remember to take compliance seriously when planning your event. Not only is it required, but it will help increase the trust between your organization and your donors. Remember this - public trust is the most important currency for any nonprofit. Donors will not give to an organization they cannot trust. Take these requirements seriously, build that foundation of trust, and set your fundraising event up for success!

Harbor Compliance does not provide tax, financial, or legal advice. Use of our services does not create an attorney-client relationship. Harbor Compliance is not acting as your attorney and does not review information you provide to us for legal accuracy or sufficiency.

Sharon Cody, JD is the partnership manager at Harbor Compliance, a leading provider of compliance solutions. Since 2012, Harbor Compliance has helped more than 25,000 organizations apply for, secure, and maintain licensing. Sharon’s passion for educating nonprofits on the value of compliance stems from three decades spent as an attorney, foundation executive, charitable fundraiser, and nonprofit board member.