How to Get a Tax Exempt Certificate Number

A tax-exempt certificate is not a blanket permission to avoid all taxes, but rather a specific exemption from sales tax on purchases that directly relate to an entity’s qualifying purpose. The number, issued by a state’s taxing authority, serves as proof to vendors that the holder is a legitimate, tax-exempt entity under that state’s laws.

Qualifying for a Tax Exempt Number

Eligibility for a sales tax exemption number falls into distinct categories of organizations and businesses. The most common recipients are qualified nonprofit organizations, such as charities, educational institutions, and religious groups. These entities are granted an exemption for purchases made to carry out their primary, mission-related activities.

For-profit businesses can also obtain a number, though its function is different. These businesses receive what is known as a resale certificate. This certificate allows them to buy goods that they intend to resell to an end consumer without paying sales tax on the initial inventory purchase. The tax is instead collected when the final sale is made to the customer, which prevents tax from being applied multiple times to the same product as it moves through the supply chain.

A third category includes federal, state, and local government agencies. These entities are inherently exempt from paying sales tax on purchases made for official government use. Their exemption is a function of their status as a governmental body, and they have established procedures for making tax-free purchases. For all entities, the exemption is tied to the use of the purchased items, not the identity of the organization itself.

Information and Documentation for Your Application

A foundational requirement for any organization is a Federal Employer Identification Number (EIN). This nine-digit number is assigned by the IRS to identify a business entity, and state agencies use it to track the organization for tax purposes. An EIN is a prerequisite for nearly all state-level tax applications.

For nonprofit organizations, the primary document is the determination letter from the IRS. This letter confirms that the organization has been granted federal tax-exempt status under Internal Revenue Code Section 501(c)(3). This federal approval is the primary evidence states look for when evaluating an application for sales tax exemption.

Application forms are found on the website of the state’s Department of Revenue or equivalent tax agency. Applicants will need to provide specific information, including the organization’s legal name, physical address, EIN, and a detailed description of its purpose or business activities. Some states may also require copies of the organization’s articles of incorporation or bylaws to verify its structure and mission.

The State Application Process

Most states now encourage or require online submission through a dedicated portal on their tax authority’s website. This method is the most efficient, providing instant confirmation of receipt and often leading to faster processing times. For organizations unable to file electronically, a paper application can be requested and submitted via mail or fax.

After submission, the application enters a review period, which can vary in length from a few weeks to several months depending on the state and the complexity of the application. During this time, the state agency verifies the provided information, including the federal exempt status with the IRS. Upon approval, the state will notify the applicant through mail or email and provide the newly assigned tax-exempt number and a certificate, which may be a physical or printable digital version.

Proper Use and Record Keeping

Receiving a tax-exempt number comes with compliance responsibilities. When making a qualifying purchase, the organization must present its exemption certificate or number to the vendor at the point of sale. The vendor is responsible for documenting the number on the invoice to justify why sales tax was not collected.

The holder of the certificate must ensure it is used exclusively for purchases that align with the basis of their exemption. Using the number for personal purchases or for items that do not qualify under the state’s specific exemption rules is illegal and can lead to severe penalties.

Maintaining meticulous records of all tax-exempt transactions is a requirement. Organizations should retain all invoices and receipts that show the use of their exemption number. This documentation serves as proof of compliance in the event of an audit by state tax authorities.