A local business license, usually issued by your city and often referred to as a tax registration certificate, allows you to operate in your city. If your city or other local jurisdiction has its own sales tax system, this certificate will also be your authorization to collect those taxes on behalf of the local government and forward that money on an established schedule, much as you do for the state.

There is an annual cost associated with this license. As with all these assorted fees, permits, and licenses, plan to work it into your yearly budget as an operational expense.

The most difficult time for getting these licenses in place is during your start-up phase, when much of the work will fall to your treasurer. Once everything is established, these tasks will become a routine matter of maintaining and staying current with your yearly obligations.

The Combined Local Taxes

When you open your first tax bill, you may be amazed to find things you never dreamed existed. Your nonprofit will have to pay for common city or county services such as public safety, emergency services, and many others. Once you have been in business for a year, these numbers will no longer shock you and you will be able to factor them into your budget.

The Local Improvement Districts

Local improvement districts (LIDs) are generally small parts of a city that share a common purpose and agree to tax themselves as a way of paying for services unique to their area. This becomes relevant to nonprofits because many theaters and other cultural organizations are located in LIDs. This actually works to your advantage because you will have direct input into the level of taxation and how expenditures are determined.