Tax Exempt Customers Explained!- Who are Sales Tax Exempt Customers?

Hi everyone!

This week’s tax tip is about exemptions. We spoke about this topic in another video, Sales Tax Exemptions Explained. The link is:    • Sales Tax Exemptions Explained!- What...  

Just a quick recap, 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. In 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.

Currently in Texas, the 151.310 exempt entities (religious, charitable and educational organizations) must apply to the Texas Comptroller of Public Accounts to receive the designation as a tax-exempt entity. Once they have received the designation, they must issue a properly completed Texas Sales & Use Tax Exemption certificate to make tax free purchases.

Link to the Texas Sales & Use Tax Exemption certificate: https://comptroller.texas.gov/taxes/s...

Governmental entities (as defined in Texas Tax Code 151.309) do not apply for exempt status. They also are not required to issue exempt certificates to make tax exempt purchases. A purchase order, contract, invoice, etc. is sufficient proof of their tax-exempt status.

Those are the highlights as it relates to Texas tax exempt entities. Each jurisdiction is different. It is important that you understand the requirements in the jurisdiction where you conduct business.

If you have questions, there are multiple resources available to help you navigate this area. And that is your weekly tax tip.

DISCLAIMER: Please note that this video references tax laws, etc. that were applicable at the time the video was created. Laws, policy, etc are subject to change and should be researched. This video is general in nature and is not meant to be a substitute for researching the miscellaneous issues discussed. We are not issuing any advice about your specific business, business concerns or situation.

Enjoy the rest of your week!

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