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When you sell goods or services that are taxable and your customer intends to use the items or services in an exempt manner, you generally obtain an appropriate exemption certificate from your customer. This certificate may be for a specific purpose and describe one or more of the following reasons for claiming the exemption:

  • Purchase with the intent to resell (wholesaler or retailer)
  • Charity or religious consumption 
  • Manufacturing equipment or machinery
  • Local, state or federal government purchase
  • Schools (public and sometimes private)
  • Agricultural use
  • Research and development use
  • Pollution control equipment
  • Free enterprise zones

The certificate represents a claim of exemption. It is not an indemnification agreement. If the claim is found to be improper, the taxing authority may have rights against both the buyer and the seller for misuse of the certificate, including injunction, loss of right to make sales, revocation of right to issue exemption certificates, fines and imprisonment. Exercise caution when accepting exemption certificates from customers to avoid these potentially significant ramifications. Contact us to discuss procedures to follow when accepting and maintaining certificates.



Feel free to call or e-mail us to discuss any tax issues you may have.


Last modified on Sat Oct 18 2014 23:40:19 UTC.
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