How do product-based exemptions work?

State sales tax laws typically feature wide-ranging definitions that apply to broad categories of transactions. That said, within these categories, states often exclude certain specific types of transactions from sales tax.

Exemptions come into play once the extent of sales tax is established. They pertain to items or services that are typically taxable but are explicitly designated as "exempt" in terms of state laws and regulations.

One of the most common types of exemptions relates to the nature of the items or goods sold. Many states provide exemptions or reduced sales tax rates for specific items, such as groceries, feed for commercial agriculture, and prescription drugs to name a few.

Exemptions may apply to occasional or isolated sales of property that are not part of the seller's regular type of business or to transactions for which the seller holds a state seller’s permit.

For example, a jewelry store owner who sells an old painting in the store, which they plan to replace, may qualify for an occasional sale exemption, as the jeweler is not in the business of selling paintings.

Given the complex and ever-changing sales tax landscape across different jurisdictions, maintaining compliance with sales and use tax rates and regulations is challenging. Taxually provides a global tax engine that serves as a valuable resource for companies operating in the U.S., offering a straightforward and efficient way to manage sales and use tax requirements!

FAQ

What are sales tax exemptions?

How do use-based exemptions work?