There are a variety of exemptions for businesses. Some of them apply to Religious institutions, manufacturing companies, or non-profit organizations. Others apply to individuals who travel on a regular basis. The exemption you may qualify for depends on the time and type of item you’re selling. This article will discuss the different types of exemptions available and how to apply for them.
Non-profit organizations
Nonprofit organizations can apply for sales tax exemption from the state in which they do business. However, they should first be sure to check their local rules to ensure that they qualify for sales tax exemption. If they do not, they may end up paying the sales tax to the state. In some states, nonprofits can apply for sales tax exemption from two or more states.
In most states, nonprofit organizations cannot claim sales tax exemption without filing a sales tax return. They must also prove that they are nonprofit organizations by presenting a valid sales tax exemption certificate to the state. This process is inefficient for the state and local governments because it results in thousands of extra filings each year. Non-profit organizations must also be certain that they are using the sales tax exemption in a proper manner.
Some states require that nonprofit organizations be formally organized and have a letter from the IRS confirming that they are exempt. For example, in Illinois, nonprofits must present an IRS determination letter before they can apply for a sales tax exemption. In Connecticut, nonprofit organizations must also file a letter with the state tax department.
Manufacturing companies
Fortunately, manufacturers can take advantage of exemptions for many different types of goods. Often, manufacturers are exempt from sales tax on certain materials and supplies used in their operations, such as packaging materials and dunnage. Additionally, manufacturers can exempt some of the tangible personal property they use in their manufacturing process, such as pallets. In 2014, the exemption was expanded to include consumable items that a manufacturer may use, such as tools, supplies, or equipment.
Sales tax exemptions are a great way for manufacturers to cut down on up-front costs and keep their product inventory healthy. In addition, many types of equipment and machinery are exempt from local and state sales taxes. These combined exemptions can save manufacturers anywhere from five to eight percent on their purchases. However, manufacturers typically underutilize these sales tax exemptions.
The exemptions are applied differently to different types of businesses. Some businesses may qualify for full exemption, while others may qualify for partial exemptions.
Religious institutions
Those who work for a religious institution don’t have to worry about paying sales tax. These institutions are exempt from property taxes and income taxes, too. The only requirement is that the business is used to further the mission and purpose of a religion. For instance, a church’s school or hospital does not have to pay property taxes.
However, the number of tax-exempted properties varies by county. This is because tax rates and property values vary in different places. In Manatee County, there are only a handful of religiously-exempted properties. The state and local government are losing about $6 billion annually because of this decision.
While the Walz Court held that tax exemptions for religious organizations were not prohibited by the First Amendment, the court also said that they were not required by the Constitution. Even if the exemptions are a longstanding practice, a religious organization’s first amendment rights do not require them to pay it.
Individual travelers
In some states, you can purchase goods without paying sales tax if you’re an individual traveling from another state. This is possible with a Government Purchase Card or a Centrally Billed Account (CBA). Generally, you are not liable to pay state sales taxes on items purchased using a CBA card unless you are a government entity. However, some states have additional requirements.
