Sales tax exemptions generally fall into three distinct categories, each with specific qualifications and applications across various jurisdictions.
Entity-Based Exemptions
This applies based on “WHO” is making the purchase, focusing on the organization’s inherent status rather than specific purchases. Nonprofits and government agencies typically fall into this category, receiving broad exemption privileges. When an organization qualifies for entity-based exemption, the entire organization typically enjoys tax-free purchasing regardless of what they’re buying, though reasonable limits usually apply.
This approach recognizes that certain organizations serve public interests and should retain resources for their mission rather than paying them in taxes. Schools, hospitals with nonprofit status, religious institutions, and federal agencies commonly receive these comprehensive exemptions. However, even with entity-based exemptions, organizations must typically maintain adequate documentation proving their exempt status and may face restrictions on purchases that don’t support their primary mission.
Product-Based Exemptions
It depends on “WHAT” you’re purchasing, applying to specific categories of goods regardless of who buys them. Many states exempt groceries and unprepared food to reduce the tax burden on essential nutrition, though prepared food items like restaurant meals typically remain taxable.
Prescription medications receive exemption in most jurisdictions as essential healthcare items, while over-the-counter medications may or may not qualify depending on state policy. Medical devices such as wheelchairs, prosthetics, and other essential health equipment frequently receive exemptions to prevent additional financial burden on those with health challenges.
Manufacturing equipment used in production processes often qualifies for exemption to encourage industrial development and prevent tax pyramiding. Agricultural supplies, including feed, seed, and certain equipment categories, receive special consideration in recognition of farming’s essential role in food production.
Use-Based Exemptions
This focuses on “HOW” you’ll use the purchased items, applying to specific utilization patterns rather than the item itself or who’s buying it. Common examples include items purchased explicitly for resale to customers, preventing multiple taxation as products move through distribution channels. Raw materials for manufacturing that become physical components of finished products typically qualify when they’re transformed during production processes.
Equipment designated for research and development activities often receives an exemption to encourage innovation and technological advancement within a state’s economy. Products specifically designed and purchased for pollution control or environmental compliance may qualify for exemption as a matter of public policy to encourage the adoption of cleaner technologies. Unlike entity-based exemptions, use-based exemptions require careful documentation of how the purchased items will be employed in qualifying activities.
Special Sales Tax Exemption Categories
These are unique tax relief provisions that don’t fit neatly into standard exemption frameworks. These include:
1. Temporary Exemptions
Temporary exemptions represent a unique category in the sales tax, operating on limited timeframes to address specific social or economic objectives. Back-to-school shopping periods, typically scheduled in late July or early August, provide tax relief on qualifying educational items, including clothing, supplies, and sometimes computers, below certain price thresholds. These periods help families manage the financial burden of preparing children for the academic year while stimulating retail activity during otherwise slower seasons.
Emergency preparedness weeks, often scheduled before hurricane or tornado seasons, exempt items such as generators, batteries, flashlights, and water storage containers to encourage households to prepare for potential disasters. By incentivizing preparedness, these periods aim to reduce the strain on emergency services during actual crises.
Disaster recovery efforts following declared emergencies frequently receive temporary exemptions on building materials, replacement appliances, and other necessities to accelerate rebuilding and reduce financial strain on affected communities. These exemptions typically require documentation connecting purchases to specific recovery projects.
2. Partial Exemptions
Partial exemptions offer a middle ground between full taxation and complete exemption, providing reduced tax rates for certain categories or uses. Manufacturing utilities in many states receive partial exemption status, with electricity, natural gas, and water used directly in production processes taxed at lower rates than standard commercial utility consumption. This approach balances revenue needs with economic development objectives.
Food for immediate consumption, including restaurant meals and prepared items from grocery stores, often falls into reduced-rate categories in jurisdictions that fully exempt unprepared groceries. This distinction recognizes the difference between necessity and convenience while maintaining some revenue from discretionary food spending.
Certain medical supplies that don’t qualify for full exemption may receive partial relief, particularly items that serve both medical and non-medical purposes. These partial exemptions acknowledge the items’ health benefits while recognizing their potential for non-exempt uses.
3. Blanket Certificates
Many states allow “blanket certificates” that streamline tax compliance by covering all qualifying purchases from a specific vendor for a set period, typically one to five years, depending on jurisdiction. These certificates save considerable time and paperwork for frequent purchases between established business relationships, eliminating the need to present exemption documentation for each transaction. Instead of processing individual exemption claims, vendors can maintain a single certificate on file for qualifying customers.
However, blanket certificates require careful tracking of expiration dates and changing business circumstances to maintain compliance. The purchaser remains responsible for ensuring each transaction qualifies under their exemption type, as misuse can result in significant penalties and tax assessments.
Organizations utilizing blanket certificates should implement internal controls to prevent their application to non-qualifying purchases, as regular audits often scrutinize these arrangements for potential abuse. Despite these challenges, blanket certificates represent a valuable efficiency tool for businesses with recurring exempt purchases.
State-by-State Sales Tax Exemption Forms
The patchwork of state sales tax systems makes managing exemption certificates particularly challenging. Each state has its own forms, terminology, and requirements. What works in Oregon won’t work in Georgia, and keeping track of these differences is essential if you operate in multiple states.
Let’s expand this information with a complete table covering all 50 states plus the District of Columbia:
| State | General Exemption Form | Resale Certificate Form | Nonprofit Form | Manufacturing Form | Notes |
| Alabama | Form STE-1 | Form ST-EX A1 | Form STE-3 | Form STE-2 | Certificates are valid for up to one year |
| Alaska | N/A | N/A | N/A | N/A | No state sales tax |
| Arizona | Form 5000 | Form 5000A | Form 5000 | Form 5000 | TPT License serves as a resale certificate |
| Arkansas | Form ST391 | Form ST391 | Form ST391 | Form ST391 | Same multi-purpose form for different uses |
| California | Form BOE-230 | Form BOE-230 | Form BOE-231 | Form BOE-226 | A seller’s permit can serve as a resale certificate |
| Colorado | Form DR 0563 | Form DR 0595 | Form DR 0715 | Form DR 1191 | Special certificates for energy used in manufacturing |
| Connecticut | Form CERT-119 | Form CERT-120 | Form CERT-119 | Form CERT-101 | Requires a separate certificate for each vendor |
| Delaware | N/A | N/A | N/A | N/A | No state sales tax |
| Florida | Form DR-13 | Form DR-13 | Form DR-5 | Form DR-3A | Annual resale certificates expire each year on Dec 31 |
| Georgia | Form ST-5 | Form ST-5 | Form ST-5 | Form ST-5M | Manufacturing exemptions require a specific form |
| Hawaii | Form G-17 | Form G-17 | Form G-6 | Form G-45/G-49 | Uses the general excise tax system instead of sales tax |
| Idaho | Form ST-101 | Form ST-101 | Form ST-101 | Form ST-101 | Multi-purpose exemption certificate |
| Illinois | Form CRT-61 | Form CRT-61 | Form E-1 | Form CRT-61 | Manufacturing machinery has specific exemptions |
| Indiana | Form ST-105 | Form ST-105 | Form ST-105 | Form ST-105 | General exemption certificate for multiple purposes |
| Iowa | Form 31-014 | Form 31-014 | Form 31-014 | Form 31-014 | Multi-purpose exemption certificate |
| Kansas | Form ST-28 | Form ST-28A | Form ST-28A | Form ST-201 | Multiple specialized exemption certificates |
| Kentucky | Form 51A126 | Form 51A105 | Form 51A126 | Form 51A126 | Direct pay permits are available for manufacturers |
| Louisiana | Form R-1064 | Form R-1064 | Form R-1064 | Form R-1064 | A certificate of registry serves multiple purposes |
| Maine | Form ST-4 | Form ST-4 | Form ST-2 | Form ST-4 | Nonprofit organizations use a separate form |
| Maryland | Form 61A | Form 61 | Form COT/EX 1 | Form 61A | Specialized forms for different exemption types |
| Massachusetts | Form ST-12 | Form ST-4 | Form ST-5 | Form ST-12 | Different forms based on the exemption reason |
| Michigan | Form 3372 | Form 3372 | Form 3372 | Form 3372 | Multi-purpose certificate with different sections |
| Minnesota | Form ST3 | Form ST3 | Form ST3 | Form ST3 | Multi-purpose exemption certificate |
| Mississippi | Form 27-110 | Form 15-3 | Form 72-001 | Form 27-110 | Direct pay permits are available for large taxpayers |
| Missouri | Form 149 | Form 149 | Form 1746 | Form 149 | Religious/charitable organizations use a special form |
| Montana | N/A | N/A | N/A | N/A | No state sales tax |
| Nebraska | Form 13 | Form 13 | Form 13EX | Form 13 | Exemption certificate valid for 3 years |
| Nevada | Form TXT-01 | Form TXT-01 | Form TXT-01 | Form TXT-01 | Multi-purpose exemption certificate |
| New Hampshire | N/A | N/A | N/A | N/A | No state sales tax |
| New Jersey | Form ST-3 | Form ST-3 | Form ST-5 | Form ST-4 | Different forms based on the exemption type |
| New Mexico | Form ACD-31050 | Form ACD-31050 | Form ACD-31050 | Form ACD-31050 | Non-taxable transaction certificates system |
| New York | Form ST-119.1 | Form ST-120 | Form ST-119.1 | Form ST-121 | Multiple specialized certificates available |
| North Carolina | Form E-595E | Form E-595E | Form E-595E | Form E-595E | Multi-purpose certificate with checkboxes |
| North Dakota | Form SFN 21759 | Form SFN 21759 | Form SFN 21759 | Form SFN 21759 | Multi-purpose certificate |
| Ohio | Form STEC-B | Form STEC-U | Form STEC-B | Form STEC-M | Manufacturing has dedicated exemption form |
| Oklahoma | Form 13-6 | Form 13-6 | Form 13-6 | Form 13-6 | Multi-purpose exemption certificate |
| Oregon | N/A | N/A | N/A | N/A | No state sales tax |
| Pennsylvania | Form REV-1220 | Form REV-1220 | Form REV-1715 | Form REV-1220 | Blanket certificates are valid for 5 years |
| Rhode Island | Form RI-CERT | Form RI-CERT | Form RI-CERT | Form RI-CERT | Multi-purpose exemption certificate |
| South Carolina | Form ST-8A | Form ST-8A | Form ST-387 | Form ST-385 | Different forms for different exemption types |
| South Dakota | Form ST-1CE | Form ST-1CE | Form ST-1CE | Form ST-1CE | Multi-purpose exemption certificate |
| Tennessee | Form RV-F1300701 | Form RV-F1300701 | Form RV-F1300701 | Form RV-F1300701 | A certificate of registration serves multiple purposes |
| Texas | Form 01-339 | Form 01-339 | Form 01-339 | Form 01-339 | Multi-purpose exemption certificate |
| Utah | Form TC-721 | Form TC-721 | Form TC-721 | Form TC-721 | Multi-purpose certificate with checkboxes |
| Vermont | Form S-3 | Form S-3 | Form S-3E | Form S-3M | Manufacturing has a dedicated exemption form |
| Virginia | Form ST-10 | Form ST-10 | Form ST-13 | Form ST-11 | Multiple specialized certificates |
| Washington | Form 27 0032 | Reseller Permit | Form 27 0032 | Form 27 0032 | Reseller permits are issued automatically to qualifying businesses |
| West Virginia | Form WV/CST-280 | Form WV/CST-280 | Form WV/CST-280 | Form WV/CST-280 | Multi-purpose exemption certificate |
| Wisconsin | Form S-211 | Form S-211 | Form S-211-SST | Form S-211 | Part of Streamlined Sales Tax Agreement |
| Wyoming | Form ETS 101 | Form ETS 101 | Form ETS 101 | Form ETS 101 | Multi-purpose exemption certificate |
| District of Columbia | Form OTR-368 | Form OTR-368 | Form FR-164 | Form OTR-368 | Nonprofit organizations use a specialized form |
Looking for a guide on how to apply for a sales tax exemption certificate? Or want to understand what each certificate means and its purpose? Check out the complete guide about the certificate of sales tax exemption. Find your state website link here.
Who Can Skip the Sales Tax?
Not everyone qualifies for sales tax exemption. Here’s who typically makes the cut:
Nonprofit Organizations
Nonprofit organizations encompass a diverse range of entities that serve public rather than commercial interests. The 501(c)(3) designation includes charitable and religious groups. These organizations focus on helping with poverty, education, scientific research, or religious activities. Educational institutions, including private schools, colleges, and universities that operate without profit motives, also qualify for this status.
Nonprofit healthcare providers, like community hospitals and clinics for underserved populations, can get tax exemptions. This helps them use more resources for patient care. Veterans’ organizations providing support services to former military personnel and their families receive special consideration in many jurisdictions. Volunteer fire departments protecting communities without compensation typically qualify due to their essential public safety role.
Government Entities
Government entities at all levels receive broad tax exemption recognition. Federal agencies operate with automatic exemption in all states as a matter of law, reflecting constitutional principles against taxing between government levels. State government departments conducting official business within their jurisdictions enjoy similar protections.
County and city governments, including municipal authorities and special districts, qualify to ensure tax dollars aren’t recycled through taxation systems. Public schools and universities funded through government appropriations receive an exemption to maximize educational resource allocation rather than redirecting funds back through tax systems.
Businesses Making Specific Purchases
Businesses can qualify for targeted exemptions based on the nature of their purchases and operations. Retailers buying inventory specifically intended for resale to customers receive an exemption on these transactions, preventing tax pyramiding through the supply chain. Manufacturers purchasing raw materials and components that become physical parts of their finished products typically qualify for manufacturing exemptions designed to prevent multiple taxation of the same goods.
Agricultural producers buying farm equipment, seeds, fertilizers, and other production inputs often receive special consideration due to the essential nature of food production. Industrial companies buying production machinery and equipment used directly in manufacturing processes can claim exemption in many states through specialized industrial exemption programs aimed at fostering economic development and production efficiency.
Remember: Managing sales tax exemptions might seem overwhelming, but the financial benefits make it worthwhile. Start small, focus on compliance, and build your knowledge over time.
Looking for more sales tax resources?
- Learning more about sales tax registration for your business
- Understand the different types of exemption certificates
- Learn the key elements of a resale certificate
Have specific questions about tax exemptions or sales tax in general? Our sales tax consulting team is always ready to assist you and your business to stay compliant. Drop in your questions to get you started.
