Tax Exempt Certificates 2026: Sales Tax Exemption Rules for Sellers

Short answer: if a customer tells you their purchase is tax-exempt, don’t take their word for it. Get a completed exemption certificate before or at the time of the sale, check it makes sense for that customer, and keep it for at least four years. If you skip any of these and the state audits you, you owe the tax, not your customer.

This guide is for sellers who receive exemption certificates: wholesalers, B2B suppliers, SaaS companies selling to schools and nonprofits, and online stores with business customers. If you’re the buyer trying to stop paying tax on inventory, read Resale Certificate: How to Get One in Your State instead.

Should you accept this certificate? Find your customer

Customer	Is the sale usually exempt?	What to get from them
A retailer or wholesaler buying to resell	Yes	A resale certificate for the delivery state, or the MTC or SST multistate form
A 501(c)(3) charity, school or church	Only if the state grants it	The state-issued exemption number or certificate. Federal 501(c)(3) status alone isn’t enough
The federal government	Yes, when the government pays	A government purchase order or a centrally billed GSA SmartPay card
A state or local government	Often	That state’s exemption form or a purchase order. Rules vary by state
A manufacturer buying machinery or raw materials	Often, for qualifying items	The state’s manufacturing exemption certificate
A farm buying agricultural supplies	Often, for qualifying items	The state’s agricultural exemption, e.g. a Texas ag/timber number
A large business with a direct pay permit	Yes, the buyer pays tax directly	A copy of the permit or a certificate claiming direct pay
Anyone without a certificate	No	Charge tax. They may be able to claim a refund later

What is a tax exempt certificate?

A tax exempt certificate is a form a buyer gives a seller to buy without paying sales tax. It’s also called a sales tax exemption certificate, certificate of exemption, sales and use tax exemption certificate or simply an exemption form.

Every US sales tax state starts from the same rule: every sale is taxable unless proven otherwise, and the burden of proof is on the seller. The certificate shifts that. If you accept a valid certificate in good faith, the state generally can’t come after you for the tax, even if the buyer turns out not to qualify. The state pursues the buyer instead.

That protection only works if the certificate is complete, on time, plausible and still valid. The rest of this guide is about those four conditions.

Types of sales tax exemption certificates

Exemption type	Who uses it	Examples of forms
Resale	Retailers, wholesalers, dropshippers buying stock or components	CA CDTFA-230, TX 01-339 (front), NY ST-120, NJ ST-3. See the resale certificate guide
Nonprofit (charitable, religious, educational)	501(c)(3) charities, churches, private schools, PTAs, once approved by the state	NY ST-119.1, FL DR-14, TX 01-339 (back)
Federal government	Federal agencies, paying directly	Purchase order, GSA SmartPay centrally billed card. Some states also use a form
State and local government	Public schools, cities, counties, state agencies	The state’s exemption certificate or a purchase order. NY government agencies use purchase orders, not ST-119.1
Manufacturing / industrial processing	Manufacturers buying production machinery and materials	GA ST-5M, MI 3372 (industrial processing), KS ST-201, ME ST-A-117
Agricultural	Farmers, ranchers, timber producers	TX ag/timber number, GA GATE certificate, NC qualifying farmer number (E-595QF / E-595CF)
Direct pay permit	Large businesses that pay use tax straight to the state instead of to vendors	State direct pay permit. Reason J on the SST certificate
Export / out-of-state delivery	Buyers taking goods out of the state	NC E-599C (Purchaser’s Affidavit of Export), FL nonresident dealer statement
Foreign diplomats	Diplomats and consular staff	U.S. State Department Office of Foreign Missions tax exemption card
Contractors on exempt projects	Contractors working for an exempt organization	NJ ST-13, depending on the state

Two points cause the most trouble:

• Nonprofit status is state-specific. California has no general sales tax exemption for nonprofits. Texas exempts some 501(c) groups only after they apply to the Comptroller. A 501(c)(3) letter from the IRS is not an exemption certificate.
• Exemptions are usually item-specific. A manufacturer’s certificate covers production machinery, not the office coffee machine. A farm’s certificate covers qualifying farm supplies, not the farmer’s TV.

What makes an exemption certificate valid: checklist

Check every certificate against this list when you receive it. If anything is missing, ask for a corrected one before you remove tax.

1. The right form for the state the goods are delivered to, or a multistate form that state accepts (see uniform certificates).
2. Buyer’s name and address, matching their registration.
3. Buyer’s ID number: sales tax permit number for resale, or the state-issued exemption number for nonprofits, farms and others.
4. Type of business, e.g. “retail clothing store” or “nonprofit school”.
5. Reason for exemption ticked or written in. Ohio disallows certificates on audit if the reason is missing.
6. Description of the items being bought, where the form asks for it (Texas and California do).
7. Your name and address as seller, where required. Most states require it, New Jersey doesn’t.
8. Signature and date on paper certificates. Electronic certificates don’t need a signature in SST states.
9. Single purchase or blanket marked. On the SST form, an unticked box means blanket.
10. It makes sense. The exemption exists in that state, could apply to what they’re buying, and fits their type of business.
11. It’s on time: received within the state’s deadline (see good faith).
12. It hasn’t expired (see expiry).

Item 10 is the good-faith test. A bakery sending a resale certificate for 40 laptops should make you ask questions. California’s rule is that if a buyer wants to buy something it doesn’t normally resell, you should get a specific statement that this item is for resale (Regulation 1668).

Good faith: when you’re protected

In most states, a seller who takes a complete certificate, on time, in good faith isn’t liable if the buyer lied. The states differ on what “on time” means and how much checking you must do.

State	Deadline to get the certificate	Keep it for	Source
SST states (default)	Within 90 days of the sale. In an audit, 120 days after the state’s request	State rules apply	SST certificate
California	”Timely”: before you bill, within your normal billing cycle, or at delivery	At least 4 years	CDTFA
Texas	At the sale. In an audit, 90 days after the Comptroller’s written request	4 years	Texas Comptroller
New York	Within 90 days of the sale	At least 3 years after the related return was due	ST-120
Florida	At the sale (copy of certificate or DOR authorization number)	3 years	FDOR
Pennsylvania	Within 60 days of the sale	4 years	REV-1220
Ohio	At the sale or within 90 days	4 years (department advice)	Ohio
Michigan	Within 120 days of the sale	4 years	RAB 2024-11
New Jersey	Within 90 days. In an audit, at least 120 days after the request	4 years from the last sale covered	S&U-6
Washington	Up to 120 days from the sale	5 years	WA DOR

How much you must check also varies:

• Most SST states don’t make you verify the buyer’s ID number. Georgia does.
• Illinois doesn’t use a good-faith standard at all. You must confirm the buyer has a valid, active Illinois registration or resale number at the time of sale, or charge tax.
• Florida expects you to hold a copy of the customer’s current Annual Resale Certificate or get an authorization number from the Department of Revenue for each sale or each year.
• Washington recommends verifying reseller permits at least once a year, and keeping expired copies, because an audit asks whether the permit was valid at the time of the sale.

Uniform certificates: SST and MTC

If you sell B2B into many states, you’ll receive two multistate forms constantly. They’re not interchangeable.

The SST Certificate of Exemption in detail

The Streamlined Sales Tax Certificate of Exemption (Form F0003, revised 12/21/2021) is accepted by all 24 SST states: 23 full members plus associate member Tennessee. The Streamlined Sales Tax guide covers the basics. What matters when you’re the seller:

• It covers most exemption types, not just resale. Section 4 lists: federal, state, local and tribal government, foreign diplomat, charitable, religious and educational organizations, resale, agricultural production, industrial production or manufacturing, direct pay permit, direct mail and “other”.
• Not every state allows every exemption on it. The form says so. The buyer is responsible for checking eligibility, but you can’t accept an entity-based exemption (such as a nonprofit) at your own store location in a state that doesn’t offer that exemption.
• Blanket by default. If the single-purchase box isn’t ticked, it’s a blanket certificate. It stays valid until the buyer cancels it, as long as there are no more than 12 months between purchases.
• ID number rules are flexible for resale. A buyer not registered in that state can give any state’s number, then its FEIN, then a driver’s license number. Foreign buyers can use a home-country tax number in 13 states (AR, IN, KS, KY, ND, NJ, OK, RI, SD, TN, UT, WA, WY). Nebraska, Ohio, South Dakota and Wisconsin accept “Not Required” if the buyer has none.
• Your protection is strong. You aren’t liable for tax, interest or penalty if the buyer claims an exemption improperly, provided: you received the fully completed certificate at the sale or within 90 days, you didn’t fraudulently fail to collect tax, and you didn’t solicit customers to claim exemptions they don’t have.
• In an audit, you get 120 days after the state’s request to obtain a completed certificate. The SST Agreement (Section 317) adds a good-faith test for late certificates: the exemption must have existed in that state on the sale date, could apply to the item, and must be reasonable for the buyer’s type of business.
• Drop shippers are covered. A drop shipper that gets a completed resale certificate from its retailer isn’t liable for tax on items it ships to that retailer’s customers in SST states.

Several states use the SST form as their own: North Carolina’s E-595E, Ohio’s STEC-SST and New Jersey’s ST-SST are versions of it.

The MTC Uniform Sales & Use Tax Certificate

The Multistate Tax Commission’s Uniform Sales & Use Tax Resale Certificate (Multijurisdiction), revised October 14, 2022, lists 37 states plus Alaska’s remote seller commission. It covers resale only. If a nonprofit or manufacturer sends you an MTC form, it doesn’t support their exemption: ask for the state’s own form or the SST certificate.

State notes on the MTC form change how you accept it. Florida requires you to get a DOR authorization number. Illinois accepts only an Illinois number. Maryland requires a Maryland number. The full list of caveats is in the resale certificate guide.

When exemption certificates expire

Many certificates stay valid until revoked. These are the main ones with an expiry date or a renewal rule:

State	Certificate	Expiry or renewal rule
Florida	Annual Resale Certificate for Sales Tax (DR-13)	Expires December 31 every year. Registered dealers get a new one annually
Florida	Consumer’s Certificate of Exemption (DR-14), for nonprofits	Valid for 5 years. The Department reviews it 60 days before expiry
Washington	Reseller Permit	Generally 4 years. 2 years for contractors, businesses open under 12 months and some others. The last two digits of the number are the expiry year
Michigan	Form 3372 blanket	Up to 4 years if dated. No renewal needed while sales are no more than 12 months apart
Texas	Ag/timber registration number	Renewed every 4 years. Current numbers expire December 31, 2027
Georgia	Georgia Agricultural Tax Exemption (GATE)	Expires every year. Most other Georgia certificates don’t expire
Illinois	CRT-61 blanket certificate of resale	No legal expiry, but IDOR says update at least every 3 years
Vermont	Blanket resale certificates	Update at least every 3 years (MTC form note)
SST states	SST blanket certificate	Valid while purchases are no more than 12 months apart, unless a state allows longer
California	Resale certificate	Valid until revoked in writing

Two practical rules: when a customer’s certificate expires, keep the old one (it covers past sales) and get the new one before the next order. And if a Florida or Washington customer’s certificate expires mid-year, start charging tax until you have the replacement.

What happens in an audit

Sales tax audits typically cover the last three or four years. The auditor lists every sale where you didn’t charge tax and asks for the certificate behind each one.

• Certificate on file, complete and valid: the sale is accepted. You’re done.
• Certificate missing or incomplete: you get a window to fix it. That’s 120 days after the request in SST states and 90 days after the Comptroller’s written request in Texas. A certificate obtained late must still meet the state’s requirements, and some states then apply a stricter good-faith test.
• Still no certificate: the auditor treats the sale as taxable. You pay the tax you didn’t collect, plus interest, and possibly a penalty. You can try to recover it from your customer, but you’ll need their cooperation and possibly a contract clause.

Worked example: a missing certificate in a Texas audit

A Dallas wholesaler of craft supplies sells to an Austin gift shop. Over three years the shop buys $120,000 of stock and the wholesaler charges no tax, because the shop “said it was a reseller”. There’s no Form 01-339 on file.

The Comptroller audits the wholesaler. The Austin rate is 8.25%.

	Amount
Untaxed sales to the gift shop	$120,000.00
Tax due at 8.25%	$9,900.00
Interest (illustration: 7.75% a year, the 2026 Texas rate, over an average of 1.5 years)	$1,150.88
Penalty (10% added when an audit determination becomes final)	$990.00
Total owed by the wholesaler	$12,040.88

Texas sets interest each year at prime plus 1%, starting 61 days after the tax was due, so the real interest depends on the years involved. Texas also treats an audit as a request to waive penalty and interest, and waivers are usually limited to periods you filed on time, so the penalty may come off. The tax won’t.

How to fix it: the wholesaler has 90 days from the Comptroller’s written request to obtain a valid, complete Form 01-339 from the gift shop. If the shop is still trading and genuinely resold the goods, one signed form can cancel the whole $9,900. If the shop has closed, the wholesaler pays. That’s why the certificate belongs in onboarding, not in an audit.

Exempt sales and economic nexus

This catches B2B sellers out: sales you don’t charge tax on can still create nexus. A wholesaler selling only to resellers can cross a state’s threshold and have to register, file returns, and report those exempt sales.

State	Threshold	Do exempt sales count?
California	$500,000	Yes. Total sales of tangible goods, including sales for resale. Registration applies if you also make at least one retail sale (CDTFA)
Texas	$500,000	Yes. Includes sales for resale, sales to exempt entities and marketplace sales (Texas Comptroller)
New York	$500,000 and more than 100 sales	Yes. Taxable or exempt, including sales for resale (NY DTF)
Washington	$100,000	Yes. All gross receipts, including wholesale and exempt sales (WA DOR)
New Jersey	$100,000 or 200 transactions	Yes. Includes nontaxable sales. Sellers making only resale or nontaxable sales must still register if over (NJ Division of Taxation)
Illinois	$100,000	Partly. Sales for resale and certified marketplace sales are excluded. Other exempt sales count (IDOR FY 2024-08). The 200-transaction test was removed from January 1, 2026 (FY 2026-12)
Florida	$100,000	No. Only taxable remote sales count (FDOR)

Other states use their own definitions, and they change. Check your numbers with the US nexus calculator and confirm each state’s rule in the state sales tax index.

The buyer side: how to get a tax exempt certificate

If you’re the buyer, here’s where your certificate comes from:

• Businesses buying to resell: register for a sales tax permit, then fill in the state’s resale form. Full steps in the resale certificate guide.
• Nonprofits: apply to each state where you buy tax-free.
  • Texas: Form AP-204 for 501(c)(3), (4), (8), (10) or (19) organizations based on federal status, or AP-205 for charities. Once approved, you buy tax-free with Form 01-339 (back).
  • New York: Form ST-119.2. If approved, you get Form ST-119 with a six-digit exemption number, and Form ST-119.1 to hand to sellers.
  • Florida: Form DR-5. If approved, you get a Consumer’s Certificate of Exemption (DR-14), valid for five years.
  • California: no general nonprofit exemption, so most nonprofit purchases are taxable. A few specific exemptions apply (Publication 18).
• Federal agencies: pay with a centrally billed GSA SmartPay account, which is exempt in every state. Individually billed travel cards are exempt only where the state chooses (GSA SmartPay).
• Farms and manufacturers: apply for the state’s program where one exists, such as a Texas ag/timber number or North Carolina’s qualifying farmer exemption. Elsewhere, fill in the state’s exemption form with the right reason.

Whoever you are, the organization has to be the buyer and the payer. In New York and Florida, an employee who pays personally and is reimbursed can’t buy tax-free.

Exemption certificate management for small teams

You don’t need enterprise software to manage certificates, but you do need a process:

1. Collect at onboarding. Make the certificate part of opening a wholesale or B2B account. No certificate, no tax-free pricing. It’s far easier to get a form from a new customer than from a former one during an audit.
2. Store one record per customer, per state. A customer’s Texas certificate doesn’t cover deliveries to Illinois. Record the state, form type, exemption reason, ID number, blanket or single, date received and expiry date.
3. Check it before you exempt the customer. Run the validity checklist and verify the number where the state offers a lookup (Florida, Washington, Georgia, Illinois).
4. Mark customers exempt only for covered states. In your billing system or store, exempt the customer for the states on file, not everywhere.
5. Track expiry dates. Set reminders for Florida (every December), Washington permits, dated Michigan blankets and Texas ag/timber numbers (December 2027). Request renewals 60 days early.
6. Keep everything for at least four years, five for Washington sales, including expired certificates that cover past sales.
7. Review once a year. Drop certificates for customers who haven’t bought in 12 months in SST states, and ask for fresh ones when they return.

Selling B2B across several states?

Tell us where your customers are and how much you sell to each state, taxable and exempt. We’ll tell you where you have nexus under each state’s own rules, register you, calculate tax at checkout and file your returns, including the exempt sales those returns ask for.

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FAQ

What is a tax exempt certificate?

A tax exempt certificate (also called a sales tax exemption certificate or certificate of exemption) is a form a buyer gives a seller to buy without paying sales tax. It states why the purchase is exempt, for example resale, a nonprofit or government purchase, manufacturing or farming. The seller keeps it on file as proof of why no tax was charged.

How does a nonprofit get a sales tax exemption certificate?

It applies to the tax agency of each state where it wants to buy tax-free. For example, Texas uses Form AP-204 or AP-205, New York uses Form ST-119.2 and Florida uses Form DR-5. Once approved, the state issues an exemption number or certificate that the nonprofit gives to sellers.

Does 501(c)(3) status make a nonprofit exempt from sales tax?

Not automatically. Federal 501(c)(3) status is an income tax exemption. Most states require a separate state application before a nonprofit can buy tax-free, and some, such as California, have no general sales tax exemption for nonprofits at all.

Do tax exempt certificates expire?

Some do. Florida’s Annual Resale Certificate expires every December 31, Florida’s Consumer’s Certificate of Exemption is valid for five years, Washington reseller permits generally last four years, and Texas ag/timber numbers expire on December 31, 2027. Many other certificates stay valid until revoked, as long as the customer keeps buying from you.

What happens if I don’t have an exemption certificate in an audit?

The state treats the sale as taxable and bills you, the seller, for the tax you didn’t collect, plus interest and possibly penalties. Most states give you a short window after the auditor’s request to obtain a valid certificate: 120 days in Streamlined Sales Tax states and 90 days in Texas.

Do exempt sales count toward economic nexus thresholds?

In many states, yes. California, Texas, New York, Washington and New Jersey count exempt sales, including sales for resale, toward their thresholds. Florida counts only taxable sales, and Illinois excludes sales for resale but counts other exempt sales.

Is the federal government exempt from sales tax?

Yes, when the federal government itself pays. Purchases on centrally billed GSA SmartPay accounts, such as government purchase cards, are exempt in every state. Purchases on individually billed travel cards are exempt only in states that choose to exempt them.

Related guides

• Resale certificate: how to get one in your state: the buyer’s guide, with forms for the 12 biggest states
• Streamlined Sales Tax: the 24 SST states and one-stop registration
• US nexus calculator: check which states your sales put you over
• State sales tax index: thresholds and registration for every state
• US sales tax for e-commerce sellers: the full picture, including B2B sales
• US seller compliance checklist: every step for a US-based seller
• Foreign seller compliance checklist: the same for sellers outside the US