Business Magazine

Social Media Federal Tax Implications

Posted on the 27 March 2013 by Maria Snyder @MariaConsulting

Social media and taxes, wait are you kidding?

No. I’m not kidding I saw it coming.

The use of social media, has significantly increased communication capabilities of tax-exempt organizations. Tax-exempt organizations cover a wide range of businesses: not-for-profit enterprises, political campaigns, booster clubs and civic organizations to name a few.  YouTube, Facebook and Twitter are some of the most popular social media platforms that are being utilized by business to reach the public in pursuit of their exempt mission and fundraising efforts. Use of social media provides organizations an opportunity to reach out to a vast audience through an efficient and inexpensive, form of communication.

Along with these opportunities, social media may potentially carry unintended federal and state tax implications. Taxation is enforced across many levels such as compliance, informative disclosure including leveling penalties and interest with enforcement of the rules. State taxation should not be ignored especially when it comes to sales and other taxes levied across and within state lines. Remember Amazon?

Internal Revenue Service logo

The Internal Revenue Service logo, doesn’t it resemble a maze?

Wait, the IRS knows about social media?

The IRS is very active on social media and could use it as an investigatory tool. Divorce attorneys have found it useful just as private detectives to uncover once unknown information. The IRS social media portfolio includes multiple Twitter accounts and YouTube accounts, Facebook pages and more.

The IRS has provided minimal guidance on the tax implications of online communication including Internet/Social media activities for tax-exempt organizations. The IRS deems online communication to be similar to other forms of communication, therefore a Web site is considered to be a form of communication. The IRS generally applies the Tax Code and judicial authority to an organization’s online activities as if those were the same as its conventional day-to-day activities.  Scared?

A nexus is created that may generate unrelated business income (UBI). UBI is generally taxable by federal and many state authorities.


Consult your tax adviser before, not after you go social.

Unrelated business income is revenue generated by activities unrelated to the tax-exempt organizations purpose and mission. Use caution when promoting your tax-exempt organization using social media. Federal taxation of unrelated business income may apply to you in certain circumstances. It’s better to play it safe and consult with your tax adviser as the rules apply to your situation.


IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, as a Certified Public Accountant I inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.


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