Sales Tax Exemptions Explained!- What are sales tax exemptions?

Hi everyone!

This week’s tax tip is about exemptions. Let's start with the basics. What are sales tax exemptions? Exemption implies release or freedom from something. In this case, the "freedom" from paying sales tax.

Every jurisdiction has sales and use tax exemptions available to certain taxpayers. Some people understand exemptions in terms of exempt organizations. (i.e., who is purchasing the item). These include governmental agencies including the federal government, state governments, etc. Other exempt entities can include educational, religious, and charitable organizations.

When making sales to exempt organizations, it is important that you obtain all appropriate documentation required to substantiate the tax-free nature of the sale. On other words, if your jurisdiction requires you to obtain a certificate for the exempt organization or any other documentation, obtain the documents per their requirements.

Other exemptions are based on what is being sold and how it is being used. For example, in Texas, there are major exemptions available to manufacturers. Currently, there are exemptions on items like energy used in the manufacturing process, wrapping and packaging, etc. used by manufacturers. While, these exemptions are available to manufacturers, they may not be available to other types of businesses.

If there are applicable exemptions for your business, good for you. Use them and save a much money as you can. However, do not fall into the trap of being overly aggressive when determining what is tax exempt. Sales and use tax exemptions are narrowly construed. It is not a smart move to be overly aggressive. Research which sales and use tax exemptions are applicable. If you have questions, there are multiple resources available to help you navigate this area.

And that is your weekly tax tip. Enjoy the rest of your week!

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[Aphillywitdahoodie]

Question…. So if I live in Florida and own an auto repair shop.
And I have to report sales and use tax monthly.


Say I only diagnose a vehicle I don’t repair it. I only tell the customer what is wrong with their vehicle no parts incorporated into the repair.
When I do sales and use tax monthly.
Would I report that as an “exempt sale” since it was labor only and no materials were used??



As an auto repair shop in Florida this stuff is so confusing because I’m NOT just a regular “reseller” I’m fixing personal tangible property which is a service and selling the vehicle parts all in one transaction. I know when parts are included in the repair the entire job is taxable

But so confused on what an exempt sale would be for me. And can not find a thing online about it. Wish there was ONE video that explains dept of rev sales and use tax for an auto repair shop in Florida

[jordankay]

Im trying to learn about tax exemption for being enrolled in a federally recognized tribe. I am enrolled and never attempted to claim tax exemption but my kid has to write something for government class related on taxes in any manner and she chose. Fed rec tribes and sales tax. Because I feel like no one knows exactly how it works and now she's so curious. Contrary to popular belief we don't live freely and get free money and we pay tax.

[ogomarzie]

Hello, very good info but I just started my used car dealer last year and all the stores I buy parts from are asking for the tax exempt permit. So I applied and got it, but how does it work for us? Do I still have to collect sales tax from customer or is that for the dmv to get once they register their car. Thanks in advance