Not all customers are taxable
- You are required to charge sales tax on any transaction subject to tax unless a jurisdiction has ruled that the customer is tax-exempt or your customer qualifies for an exemption as a reseller of the services they are purchasing from you.
- An exemption certificate is a document provided by a customer when they make a tax-exempt purchase from your business.
- There are different types of exempt organizations, such as manufactures, government entities, and educational institutions, as well as organizations that are exempt due to their use of the services or product they are purchasing - all as determined under state’s statutes. Documentation is always required.
Classifying the transaction type is the first step but also managing the documentation for exemptions, particularly if you have a high volume, can be a headache.
The renewal term of exemption certificates varies by state and by type of exemption- some never expire and others have an expiration date.
It’s up to each state to determine if it will tax non-profit organizations and charitable organizations so if you sell your product/service to these type of organizations, you need to know state and local policy.
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