Sales & Use Tax Foundations (Part 6) – Exclusions and Exemptions

Part VI:  Basic Questions and Answers about State Sales and Use Tax:  Exclusions and Exemptions

In our last blog, Part V: Basic Questions and Answers about State Sales and Use Tax: Subject of Tax, we focused on the fifth of our foundational sales and use tax topics — what are the subjects of tax, aimed primarily at the nontax specialist, who is often challenged by the complexities of sales and use taxation. In this blog, we ask and answer a few basic questions about the topic — what items are excluded or exempt for sales and use tax taxation?

Question 1: What are the general categories of exclusions and exemptions?

Exemptions to sales and use taxes are expressed in several ways: (1) explicitly, e.g., items considered a part of the manufacturing process; (2) as exceptions to the definition of a taxable sale or tangible personal property; or (3) as exclusions from a taxable category of transactions. Exemptions may be granted based on the nature of the product (such as food), the type of transaction (such as a resale), or the nature of the entity selling or buying the product (such as a charitable organization).

Question 2:  Sales for Resale

Sales for resale are generally exempt from sales or use tax. The sales tax applies only to retail sales generally defined as a sale for any purpose other than resale in the regular course of business, while the use tax is generally imposed on the storage, use, or other consumption in the state of tangible personal property purchased from a retailer.

Sales and Use: Exclusions and Exemptions — State-Specific Rules

Chart: Who is Liable for Sales and Use Taxes:  Subject of Taxation

Reseller Exemptions
Jurisdiction Tax Description Tax Cat Description Taxable/ Exempt Citation
Alabama ALABAMA STATE SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT Code of Ala. § 40-23-1
Arizona ARIZONA STATE TRANSACTION PRIVILEGE TAX (TPP) STATE SALES TAX – GENERAL MERCHANDISE EXEMPT A.R.S. § 42-5061
A.A.C. § R15-5-101
AZ DOR Publication 602 “Retail Classification”
Arizona Transaction Privilege Tax Procedure No. 17-1
Arizona ARIZONA STATE TRANSACTION PRIVILEGE TAX (Telecomm) STATE SALES TAX – TELECOMMUNICATIONS EXEMPT A.R.S. § 42-5061
Arizona Transaction Privilege Tax Procedure No. 17-1
Arkansas ARKANSAS SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT A.C.A. § 26-52-401
Arkansas ARKANSAS SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT A.C.A. § 26-52-401
California CALIFORNIA STATE SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT Cal Rev & Tax Code § 6007
CA BOE Publication 32: Sales to Purchasers From Mexico
Publication 61 “Sales and Use Taxes: Exemptions and Exclusions”
Colorado COLORADO SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT C.R.S. 39-26-102
New Colorado Affidavit of Exempt Sale Form Now Available
FYI – Sales 1: How to Document Sales to Retailers, Tax-Exempt Organizations and Direct Pay Permit Holders
Colorado COLORADO SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT C.R.S. 39-26-102
New Colorado Affidavit of Exempt Sale Form Now Available
FYI – Sales 1: How to Document Sales to Retailers, Tax-Exempt Organizations and Direct Pay Permit Holders
Connecticut CONNECTICUT SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT Conn. Gen. Stat. § 12-407
Connecticut CONNECTICUT SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT Conn. Gen. Stat. § 12-407
Connecticut CONNECTICUT GROSS EARNINGS TAX ON CABLE TV TAXABLE Conn. Gen. Stat. § 12-256
District of Columbia DISTRICT OF COLUMBIA SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT D.C. Code § 47-2001
District of Columbia DISTRICT OF COLUMBIA SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT D.C. Code § 47-2001
District of Columbia DISTRICT OF COLUMBIA TOLL TELECOMMUNICATION SERVICE TAX STATE GROSS RECEIPTS TAX – WIRELINE EXEMPT D.C. Code § 47-3904
District of Columbia DISTRICT OF COLUMBIA COMMERCIAL MOBILE SERVICE TAX STATE GROSS RECEIPTS TAX – WIRELESS EXEMPT D.C. Code § 47-3904
Florida FLORIDA STATE SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT 12A-1.039, F.A.C.
Florida DOR Publication GT-800013 [Revised March 2016]
Georgia GEORGIA SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT O.C.G.A. § 48-8-2
Georgia GEORGIA SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT O.C.G.A. § 48-8-2
 
Hawaii HAWAII GENERAL EXCISE TAX STATE SALES TAX – GENERAL MERCHANDISE TAXABLE HRS § 237-29.55
HRS § 237-13
HRS § 237-13.3
State of Hawaii, Department of Taxation, TAX FACTS 37-1 General Excise Tax (GET) March 2015
Hawaii HAWAII GENERAL EXCISE TAX STATE SALES TAX – TELECOMMUNICATIONS TAXABLE HRS § 237-13
HRS § 237-13.3
State of Hawaii, Department of Taxation, TAX FACTS 37-1 General Excise Tax (GET) March 2015
Idaho IDAHO STATE SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT IDAPA 35.01.02.011
Idaho Tax Commission Publication #3: WHOLESALERS
IDAPA 35.01.02.128
Illinois ILLINOIS RETAILERS’ OCCUPATION TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT 86 Ill. Adm. Code 130.120
IL DOR Publication 104: Common Sales Tax and E911 Surcharge Exemptions
Indiana INDIANA SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT Burns Ind. Code Ann. § 6-2.5-4-6
Indiana INDIANA SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT Burns Ind. Code Ann. § 6-2.5-4-6
Indiana INDIANA TELECOMMUNICATIONS GROSS RECEIPTS TAX EXEMPT Burns Ind. Code Ann. § 6-2.3-3-5
Iowa IOWA SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT Iowa Code § 423.3
Iowa IOWA SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT Iowa Code § 423.3
Kansas KANSAS SALES TAX STATE SALES TAX -GENERAL MERCHANDISE EXEMPT K.S.A. § 79-3602
K.S.A. § 79-3603
K.S.A. § 79-3651(d) as amended by 2007 Kansas HB 2171
Kansas DOR Publication KS-1520: Exemption Certificates
Kansas KANSAS SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT K.S.A. § 79-3602
K.S.A. § 79-3603
Kansas DOR Publication KS-1520: Exemption Certificates
Kentucky KENTUCKY SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT KRS § 139.270
Kentucky Sales Tax Facts June 2015
Kentucky KENTUCKY SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT KRS § 139.195(5)(b)
 
Kentucky KENTUCKY GROSS REVENUES TAX TAXABLE KRS 136.616
Louisiana LOUISIANA SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT La. R.S. 47:301
LA DOR Revenue Information Bulletin No. 09-015
Louisiana LOUISIANA SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT La. R.S. 47:301
Revenue Information Bulletin No. 12-027
Louisiana LOUISIANA INSPECTION AND SUPERVISION FEE TAXABLE La. R.S. 45:1177
Maine MAINE SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT 36 M.R.S. § 1811
36 M.R.S. § 1811-B
CMR 18-125-301
Maine Revenue Services Sales Tax Instructional Bulletin 54
MAINE REVENUE SERVICES SALES, FUEL & SPECIAL TAX DIVISION BUSINESS GUIDE TO SALES, USE, and SERVICE PROVIDER TAX
Maine MAINE SERVICE PROVIDER TAX EXEMPT 36 M.R.S. § 2557(30)
MAINE REVENUE SERVICES SALES, FUEL & SPECIAL TAX DIVISION BUSINESS GUIDE TO SALES, USE, and SERVICE PROVIDER TAX
Maryland MARYLAND SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT Md. TAX-GENERAL Code Ann. § 11-101
Md. TAX-GENERAL Code Ann. § 11-102
Maryland MARYLAND SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT Md. TAX-GENERAL Code Ann. § 11-101
Md. TAX-GENERAL Code Ann. § 11-102
Massachusetts MASSACHUSETTS SALES TAX EXEMPT ALM GL ch. 64H, § 2
Massachusetts MASSACHUSETTS SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT ALM GL ch. 64H, § 2
Michigan MICHIGAN STATE SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT MCLS § 205.51
REVENUE ADMINISTRATIVE BULLETIN 2016-14 – SALES AND USE TAX EXEMPTION CLAIM PROCEDURES AND FORMATS
Michigan MICHIGAN USE TAX EXEMPT MCLS § 205.94
Minnesota MINNESOTA SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT Minn. Stat. § 297A.61
Minn. Stat. § 297A.72
Minnesota DOR Revenue Notice # 98-11
Minnesota MINNESOTA SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT Minn. Stat. § 297A.61
Minn. Stat. § 297A.72
Minnesota DOR Revenue Notice # 98-11
Mississippi MISSISSIPPI SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT Miss. Code Ann. § 27-65-7
Mississippi MISSISSIPPI SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT Miss. Code Ann. § 27-65-7
Missouri MISSOURI SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT § 144.010 R.S.Mo.
Missouri MISSOURI SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT § 144.010 R.S.Mo.
Nebraska NEBRASKA STATE SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT Code of Nebraska Rules 316-1, Regulation 1-013
Nebraska Sales Tax Exemptions Chart [Updated October 14, 2016]
Nebraska NEBRASKA STATE SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT Code of Nebraska Rules 316-1, Regulation 1-013
Nebraska Sales Tax Exemptions Chart [Updated October 14, 2016]
Nevada NEVADA SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT NRS § 372.105
Nevada NEVADA COMMERCE TAX STATE GROSS RECEIPTS TAX – TELECOMMUNICATIONS TAXABLE NEVADA SENATE BILL 483 (2015)
New Hampshire NEW HAMPSHIRE COMMUNICATION SERVICES RETAILER TAX EXEMPT RSA 82-A:2.III(b)
RSA 82-A:3
New Jersey NEW JERSEY SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT N.J. Stat. § 54:32B-3
NEW JERSEY DIVISION OF TAXATION TECHNICAL BULLETIN TB – 66
New Jersey NEW JERSEY SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT N.J. Stat. § 54:32B-3
NEW JERSEY DIVISION OF TAXATION TECHNICAL BULLETIN TB – 66
New Mexico NEW MEXICO INTRASTATE GROSS RECEIPTS TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT N.M. Stat. Ann. § 7-9-47
FYI-204: Nontaxable Transaction Certificates (NTTCs)
New Mexico NEW MEXICO INTRASTATE GROSS RECEIPTS TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT N.M. Stat. Ann. § 7-9-48
New Mexico NEW MEXICO GROSS RECEIPTS TAX EXEMPT N.M. Stat. Ann. § 7-9C-7
New York NEW YORK SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT NY CLS Tax § 1105
New York NEW YORK SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT NY CLS Tax § 1105
North Carolina NORTH CAROLINA SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT 17 N.C.A.C. 7B.0106
North Carolina NORTH CAROLINA SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT 17 N.C.A.C. 7B.0106
North Dakota NORTH DAKOTA SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT N.D. Cent. Code, § 57-39.2-01
North Dakota NORTH DAKOTA SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT N.D. Cent. Code, § 57-39.2-01
Ohio OHIO SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT ORC Ann. 5739.01
Ohio OHIO SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT ORC Ann. 5739.01
 
Oklahoma OKLAHOMA SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT 68 Okl. St. § 1352
68 Okl. St. § 1357
O.A.C. § 710:65-13-200
Oklahoma Tax Commission LR- 16- 008
Oklahoma OKLAHOMA SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT 68 Okl. St. § 1352
68 Okl. St. § 1357
O.A.C. § 710:65-13-200
Oklahoma Tax Commission LR- 16- 008
Pennsylvania PENNSYLVANIA SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT 61 Pa. Code § 32.3
Pennsylvania PENNSYLVANIA SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT 61 Pa. Code § 32.3
Pennsylvania PENNSYLVANIA GROSS RECEIPTS TAX EXEMPT 72 P.S. § 8101
Puerto Rico PUERTO RICO STATE SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT Puerto Rico Act Number 117 Section 2502
Puerto Rico PUERTO RICO STATE SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT Puerto Rico Act Number 117 Section 2502
Rhode Island RHODE ISLAND SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT R.I. Gen. Laws § 44-18-8
Rhode Island RHODE ISLAND SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT R.I. Gen. Laws § 44-18-8
 
Rhode Island RHODE ISLAND PUBLIC SERVICE CORPORATION GROSS EARNINGS TAX TAXABLE R.I. Gen. Laws § 44-13-4
South Carolina SOUTH CAROLINA SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT S.C. Code Ann. § 12-36-910
S.C. Code Ann. § 12-36-120
South Carolina Department of Revenue Procedure 08-2, [May 5, 2008]
South Carolina SOUTH CAROLINA SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT S.C. Code Ann. § 12-36-910
S.C. Code Ann. § 12-36-120
South Carolina Department of Revenue Procedure 08-2, [May 5, 2008]
South Carolina SOUTH CAROLINA PUBLIC UTILITY TAX TAXABLE S.C. Code Ann. § 12-20-100
South Dakota SOUTH DAKOTA SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT S.D. Codified Laws § 10-45-10
South Dakota DOR Tax Facts: Exemption Certificate [Issued June 2016]
South Dakota SOUTH DAKOTA SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT S.D. Codified Laws § 10-45-10
South Dakota DOR Tax Facts: Exemption Certificate [Issued June 2016]
South Dakota DOR Tax Facts: Telecommunication Services (Issued June 2016)
South Dakota SOUTH DAKOTA STATE GROSS RECEIPTS TAX STATE GROSS RECEIPTS TAX – WIRELESS EXEMPT S.D. Codified Laws § 10-33A-3
South Dakota SOUTH DAKOTA STATE GROSS RECEIPTS TAX STATE GROSS RECEIPTS TAX – WIRELINE TAXABLE S.D. Codified Laws § 10-33-21
Tennessee TENNESSEE SALES TAX STATE SALES TAX -GENERAL MERCHANDISE EXEMPT Tenn. Code Ann. § 67-6-102
Tennessee TENNESSEE SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT Tenn. Code Ann. § 67-6-102
Tennessee TENNESSEE PUBLIC UTILITY GROSS RECEIPTS TAX TAXABLE Tenn. Code Ann. § 67-4-406
Texas TEXAS SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT Tex. Tax Code § 151.302
Tex. Tax Code § 151.006
Texas TEXAS SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT Tex. Tax Code § 151.302
Tex. Tax Code § 151.006
Utah UTAH SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT Utah Code Ann. § 59-12-104
Utah State Tax Commission Publication 25: “Sales & Use Tax General Information”
Utah UTAH SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT Utah Code Ann. § 59-12-104
Utah State Tax Commission Publication 25: “Sales & Use Tax General Information”
Vermont VERMONT SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT 32 V.S.A. § 9701
Vermont VERMONT SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT 32 V.S.A. § 9701
 
Virginia VIRGINIA SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT 23 VAC 10-210-280
Va. Code Ann. § 58.1-602
Virginia VIRGINIA COMMUNICATION SALES TAX STATE SALES TAX – COMMUNICATION SERVICES EXEMPT Va. Code Ann. § 58.1-648 (B)
Washington WASHINGTON SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT Rev. Code Wash. (ARCW) § 82.04.050
WA DOR Special Notice Dated Oct. 22, 2009
WA DOR Leaflet “Reseller Permit” [Dated 8/09]
WAC § 458-20-102
Washington WASHINGTON SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT Rev. Code Wash. (ARCW) § 82.04.050
WA DOR Special Notice Dated Oct. 22, 2009
WA DOR Leaflet “Reseller Permit” [Dated 8/09]
WAC § 458-20-102
West Virginia WEST VIRGINIA SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT W. Va. Code § 11-15-9
W. Va. CSR § 110-15-9
West Virginia State Tax : Sales & Use Tax Exemptions. TSD- 300
West Virginia WEST VIRGINIA SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT W. Va. Code § 11-15-9
W. Va. CSR § 110-15-9
West Virginia State Tax: Sales & Use Tax Exemptions. TSD- 300
Wisconsin WISCONSIN SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT Wis. Stat. § 77.51
Wisconsin WISCONSIN SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT Wis. Stat. § 77.51
Wyoming WYOMING SALES TAX STATE SALES TAX – GENERAL MERCHANDISE EXEMPT WCWR 011-000-002 section 9
Sales & Use Tax Bulletins: Exemption Certificate
Wyoming WYOMING SALES TAX STATE SALES TAX – TELECOMMUNICATIONS EXEMPT WCWR 011-000-002 section 9
Sales & Use Tax Bulletins: Exemption Certificate
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AUTHOR

Jerome Nestor

Jerome Nestor, Esq., CPA, MBA-Accounting Information Systems Manager Tax & Accounting North America Wolters Kluwer Mobile: +1 847.312.5671 Email: jerry.nestor@wolterskluwer.com

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