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What You Need to Know About Tax Exemptions

Frequently Asked Questions Important Notices

You probably don't study tax codes in your free time and looking at state forms may make your eyes glaze over. If you run a business, however, knowing a little about sales tax exemptions will save you a lot of headaches later.

It's definitely useful when it comes to ordering promotional items. Read on for everything you need to know about qualifying for sales tax and use exemption when you order with Quality Logo Products®.

What Does Tax Exempt Mean?

If your business is tax-exempt, it means that some or all of your transaction is free from federal, state, or local taxes. Your business must apply for tax exemption and submit the necessary forms in order to qualify.

Photo notes

Typically, the only organizations that are tax-exempt are those that are charitable, religious, educational, or governmental in nature. In other words, your cookie bakery probably doesn't qualify for tax exemption!


*DISCLAIMER: Quality Logo Products® only charges state and local taxes. Federal taxes will not apply to your order.

What Do I Need to Submit to Qualify as Tax Exempt?

Quality Logo Products® honors tax exempt sales. To qualify, you must submit:


  1. Required paperwork from your respective state's government.
  2. Your name and business's name
  3. Your or your business's address
  4. Type of business (industry)
  5. Reason for exemption
  6. Tax ID number (TIN)
  7. Signature

*Some states do not require you to submit your industry, reason for exemption, tax identification number (TIN), or signature. Always follow the rules of the state where your business/organization is located.

Did you know?

Tax exempt letters issued by the IRS do not qualify as proof of sales/use tax exemption. You need official forms from either the U.S. federal government or the state where your business is located.

What is a Resale Certificate and How Do I Know If I Need One?

You need to fill out a resale certificate if you're tax exempt and are ordering from Quality Logo Products® with the intent on selling the items. By filling out this form, the vendor won't be collecting sales tax from your business. Rather, the sales tax will be collected when the customer purchases one of the products.

Example

You order 10,000 custom tote bags from Quality Logo Products® for your grocery store. The plan is to sell these bags to your customers for $1 each, tax not included. In this case, you, as the reseller, would fill out a resale certificate to qualify for tax exemption.

What is the Required Paperwork for Tax Exemption?

In order for your business to qualify as tax exempt, you need to prove either:

  1. Federal Tax Exemption
    OR
  2. State Tax Exemption
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U.S. Federal Government Tax Exemption

This is a written form from the federal government stating that your organization is tax exempt. This documentation should explicitly express in writing the tax exemption. It should also list any applicable tax IDs.

According to the Internal Revenue Service(IRS), the following may qualify for U.S. Federal Government Tax Exemptions:


  • Branches of military
  • Federal credit unions that are part of the National Credit Union Administration
  • Disaster relief efforts
  • Federally recognized Native American tribes
  • Organizations exempt from income tax under Internal Revenue Code (IRC) 501
  • Labor unions
  • Political organizations described in IRC 527
  • Federal, state, and local governments
  • Employer sponsors of retirement plans

Note: You can submit proof of U.S. Federal Government Tax exemption in lieu of state documentation. If you don't have a federal exemption, then you need to send in state exemption documentation per your state. Proceed to the next section for more information about state exemptions!

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State Tax Exemption

The required paperwork for tax exemption varies from state to state and is outlined below. Click on your state for more information and for a list of acceptable documents for sales use and tax exemptions!



*Alaska, Delaware, Montana, New Hampshire, and Oregon do not impose state sales tax.

Alabama

What you need to know:

  • Information about sales tax and use exemptions is available from the Alabama Department of Revenue.
  • Religious organizations are not exempt from sales and use taxes in Alabama.
  • Charitable and nonprofit organizations have no special exemption from sales and use taxes.
  • The Code of Alabama 1975 has a list of goods that qualify for tax exemption.
  • The AL Sample Certificate of Exemption is not applicable to government organizations.

Acceptable forms:

California

What you need to know:

  • Information about sales tax and use is available as a PDF from the California Department of Tax and Fee Administration.
  • Nonprofits and religious organizations are not usually tax exempt in the state of California. There are exceptions, but your organization must meet the qualifications and have a letter from the state of California verifying the exemption.
  • Find Seller's Permit Varication forms for your industry here.

Acceptable forms:

Connecticut

What you need to know:

  • Information about sales tax and use exemptions is available from the Connecticut State Department of Revenue Services.
  • You must include an exemption permit issued by DRS under Conn. Agency Regs, or an IRS determination letter with a CT CERT-119 Purchases of TPP and Services by Qualifying Exempt Organizations.

Acceptable forms:

Michigan

What you need to know:

  • Information about sales tax and use exemptions is available from the Michigan Department of Treasury.
  • Michigan does not issue tax exempt numbers, and you may not rely on a number for substitution of an exemption certificate.
  • A copy of the federal exemption letter or a letter previously issued by the Michigan Dept. of Treasury must accompany a completed MI 3372 General Sales and Use Tax Certificate for Exemption for charitable organizations. The letter is not required for nonprofit schools, nonprofit hospitals, churches, or governmental agencies that have separate statutory exemption sections.

Acceptable forms:

New Jersey

What you need to know:

  • Information about sales tax and use exemptions is available from the New Jersey Department of Treasury.
  • If you have additional questions, you can always review New Jersey's Sales Tax Guide.
  • The NJ ST-5 state issued exemption certificate is not required for U.S./State of NJ Departments or Agencies, for NJ Political Subdivisions, or for Public Schools. Payments accompanying official letterhead or a purchase order signed by an officer is acceptable for exemption.

Acceptable forms:

New York

What you need to know:

Acceptable forms:

Did you know?

Avalara is a helpful website with a ton of information about tax compliance. Check out their articles if you want to read more about sales tax and use exemptions.

Non-Resellers: What Documentation Should I Submit for Tax Exemption When Shipping to a Different State?

If you're not a reseller, you need to submit valid tax exempt forms for the state where your business resides AND the state to which you are shipping. Without both of these forms, your order won't qualify for tax exemption.

Resellers: What Documentation Should I Submit for Tax Exemption When Shipping to a Different State?

Let's say your business is in Illinois, but you have to ship 1,000 stress balls to New York. Don't worry! You can simply fill out valid reseller certificate for the state of Illinois, and you'll be good to go. You're only charged sales tax from the state where an item is shipped to, but you don't have to deal with all the extra paperwork.

As a reseller, you only have to submit sales tax and use exemption for the state in which your business resides, not the state you're shipping to.

Be aware there are exceptions to this rule. The following nine states (and Washington D.C.) do not accept a different state's resale certification as proof of exemption:


  • Alabama
  • California
  • Florida
  • Hawaii
  • Illinois
  • Louisiana
  • Maryland
  • Massachusetts
  • Washington
  • Washington D.C.

In order to qualify for tax exemption in the states listed above, you'll need to submit both your state's resale certificate and the valid exemption/resale certificate from the state to which you are shipping. This rule applies only to resellers.

Quality Logo Products® is Here to Help!

Laws about sales tax and use exemptions are always changing. Do your research and check your state's website for more information.

Quality Logo Products® is always one call or email away. We're more than happy to answer any questions you have about sales tax and use exemptions. No question is too crazy!

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