Section 258.4(d) of the 2008 Book of Discipline makes it mandatory that every local
church finance committee “shall make provision for an annual audit of the financial
statements of the local church and all its organizations and accounts.”
But there are more reasons than that for annual audits. Here are a few:
to protect the persons the local church elects to offices of financial responsibility
from unwarranted charges of careless or improper handling of funds;
to build the trust and confidence of the financial supporters of the church in the
way their money is being accounted for (trust and confidence lead to improved patters
of financial support);
to set habits of fiscal responsibility to assure that when there is turnover in personnel
there will be continuity in accountability and nothing will fall through the cracks;
to assure that gifts made to the church with special conditions attached are consistently
administered in accordance with the donor’s instructions, and thus let donors know
their gifts are used as intended;
to provide checks and balances for sums received and expended.
Conducting an audit is not a symbol of distrust
It is a mark of responsibility.
It is a message to local church donors that you care about their gifts.
It is good stewardship demonstrated for all to see.
Protect your people and your finances: perform an annual audit
You can get the help you need from the UMC General Council on Finance and Administration
in the form of the latest version of the Local Church Audit Guide. The guide is available
online at gcfa.org/audit.html, or if you are unable to access the guide, contact
the district office. It includes an audit check list and a “Report of the Annual
Audit” with instructions. The guide answers such questions as:
Who can perform a local church audit?
How do restricted assets differ from designated assets?
How is an audit conducted?
Qualified nonprofit organizations (e.g. churches) do not need to collect or pay sales
tax on goods they sellif annual gross sales are less than $5,000. Public Act 156
of 1994 exempts from sales tax sales at retail made by certain organizations from
tax if aggregate sales at retail for the calendar year are less than $5,000. Sales
at retail are defined as transfers of ownership of tangible personal property such
as food, shoes, toys, clothes or appliances. “Sales at retail” indicates transfer
of goods from one entity to another regardless of profit.
For example, when a church holds a Christmas bazaar for the sale of craft items,
and aggregate sales for the year exceed $5000, the Sales Tax Act applies to all sales.
Every subdivision of a single church (UMW, youth group, men's group, choir, etc.)
is considered part of the same church for purposes of calculating the $5000 limit.
All churches that make sales at retail (defined as the sale of tangible personal
property for any purpose to the ultimate consumer (MCL 205.51(1)(b)) must apply for
and receive a sales tax license. (MCL 205.53.) If the annual retail sales of the
church are less than $5000, then the church is exempt from paying any sales tax.
(MCL 205.54o.) However, they must still receive a sales tax license. It is not an
exemption of the first $5000.
Nonprofit organizations making sales at retail are still required to register and
obtain a sales tax license even if their total sales for the calendar year are less
than $5,000 and they have no tax liability.
Items intended for resale can only be purchased without payment of tax by making
a claim of exemption on the Certificate of Exemption by reason of “for resale at
retail.” A sales tax license is required before such a “resale”claim can be legally
Exemption is only available to those noted organizations who have total aggregate
sales in a calendar year from all sales activity of less than $5,000. If sales in
the year are $5,000 or more, all sales are subject to tax. This is not an exemption
for the first $5,000 in sales.
Any tax you do collect must be paid to Treasury regardless of the amount of gross
sales. For example, if you expect your gross sales to be $6,500 and collect sales
tax, but later find your gross sales were only $4,000, you must pay the sales tax
collected to Treasury. You must register even if the items you sell are not taxable.
If you don’t collect sales tax on your sales, but your sales exceed $5,000, you are
liable for the tax on the sales. For more information contact the Customer Contact
Division, Technical Services Division, at 517-636-4730 or go to the Michigan Department
of Treasury website.
Churches and other nonprofits qualify as businesses and individuals under the sales
tax act. When they sell something to the final consumer, the sales tax applies. In
other words, when they sell something to the person who is going to use it (or eat
it), they must collect sales tax. If the church sold something to someone else (another
store for instance) and that other person intended to sell the items to the people
who would use it or eat it, then sales tax would not apply on the sale from the church
to the other store (the sales tax would apply when the other store sells it to the
ultimate consumer). However, it seems unlikely that a church would have, as part
of its operations, a business where they act as a middleman buying or creating goods
that they sell to others who intend to sell them to the final consumer.
Churches can apply for a sales tax license online through the Michigan Department
of Treasury website. They need to complete Form 518.