38 Products That May Not Be Subject to Sales Tax in Every State

by | Feb 19, 2020

Summary: Certain categories of products have special sales tax considerations because they are generally not taxable in each state. In this post, we’ve outlined the most common types of products where state-level exemptions might apply.

The purpose of this blog post is to provide insight into common types of products that may be exempt from sales tax in certain states.

Jump ahead to lists of:

E-Commerce products that might be exempt from sales tax in certain states

Software products that might be exempt from sales tax in certain states

Other products that might be exempt from sales tax in certain states

It might be an understatement to say that sales tax is complex. When we look to determine if a transaction is subject to sales tax, there are a number of factors that need to be considered such as:

  • Does the business have sales tax nexus?
  • Who are they selling the product to and for what purpose?
  • What product is being sold?

In this post, we’ll be focusing on that third bullet point by sharing products that are frequently exempt from sales tax in certain states. 

If you sell a product where you believe a sales tax exemption might apply, you’ll need to be sure that your product meets the state’s statutory requirements. This can be done through a product taxability study (which can be included as an add-on project as part of your Sales Tax Done-for-You Service).

Many of the state’s statutes are incredibly specific, and you should take special care to examine each state’s laws to ensure that your product or service qualifies for the exemption. While this can be a time and labor-intensive process, you’ll be glad you did it. You’ll be better off spending some money researching a state’s product taxability statutes than to find out down the road that your product didn’t qualify for an exemption. If you claim an exemption that you didn’t qualify for, you could have to pay a ton of money out-of-pocket during an audit. Not good! 

Please note that while this list is fairly comprehensive, it is not exhaustive. 

E-Commerce Products That May Be Exempt from Sales Tax in Certain States

  • Clothing
  • Digital Products
  • Food and Beverage
  • Marijuana and CBD (if prescribed)
  • Medicines
  • Medical Devices
  • Packaging
  • Repairs
  • Supplements
  • Textbooks
  • Women’s Hygiene Products

Software Products That May Be Exempt from Sales Tax in Certain States

Other Products That May Be Exempt from Sales Tax in Certain States

  • Admissions
  • Construction
  • Environmental Conservation Products
  • Hotels Charges and Purchases
  • Leases and Rentals
  • Machinery and Equipment
  • Manufacturing
  • Newspapers and Periodicals
  • Services
  • Storage
  • Telecommunications
  • Training Seminars
  • Transportation
  • Travel Agents
  • Utilities
  • Veterinarians
  • Vending Machines
Disclaimer: Our attorney wanted you to know that no financial, tax, legal advice or opinion is given through this post. All information provided is general in nature and may not apply to your specific situation and is intended for informational and educational purposes only. Information is provided “as is” and without warranty.

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