I know a president of a nonprofit who is abusing the organization’s sales tax exemption for personal gain. He has purchased personal items that do not benefit the organization, only himself, e.g. buying a $1800 drone tax free. He also makes high end purchases for the organization on his personal credit card so that he gets the reward points, earning hundreds of dollars in rewards — again without providing any benefit to the organization. What should I do?
You don’t say what your own relationship is to the organization and whether you want to try to help the organization or whether you just want to “get” the president.
The sales tax issue is a matter of state sales tax law, but I don’t know of any state that allows individuals to use the organization’s exemption to purchase items tax-free for their personal use. The organization could potentially lose its sales tax exemption for violating this rule. At the least, it would have to pay tax on the improper purchases.
Getting reward points for purchasing on the credit card is less clearly improper. I am not sure whether he is getting rewards for purchases on a personal credit card for which he gets reimbursed (which wouldn’t avoid the sales tax and would probably be self-dealing if the organization is a private foundation), or if just gets to keep the rewards of an organizational card issued in his name. Either way, it may have been approved by the board. It could be considered a means to provide additional compensation, although it is a pretty clumsy way to do it. It may not be illegal if done with approval of the board, but it is clearly not a best practice.
If these activities bother you, you should talk with other officers or directors to alert them of the problem. If you are an officer, director or member yourself, you could initiate proceedings to publicize and seek to stop practice. If the others don’t do anything about it, you could report the sales tax violation to the state sales tax agency and encourage the agency to investigate. That’s probably the most likely way to get official action. Don’t forget to ask if there is a whistleblower reward for reporting. The president might have made you a little richer.