Golden Rule: The Four Exceptions

There are four major exceptions to the Golden Rule of Taxability which basically says that all sales and use of TPP are taxable and all sales of services are not taxable.

1. Just about every state will tax some mix of services, with rental of TPP, utilities, lodging, and food service being the most common.
2. The purchases of several types of organizations, including government agencies and non-profit organizations are usually exempt. Sales by these organizations are often exempt to some extent, often if it's related to fund-raising activities.
3. Purchases may be exempt based on how the purchase will be used. Typical exemptions are purchases by farmers for agricultural use, and by manufacturers for use in the manufacturing process.
   
4. Then there are exemptions based simply on what the item is, such as grocery store type food and prescription drugs.

A good starting point for your research into all of these exceptions is our taxing policies article. Remember though, it is work in process. Another article that may help your understanding is about decision factors.

By the way, a short plug: these four exceptions are essentially the basis for our Taxing Policies by State webinar. Please join us for states you're interested in.

Sales Tax Guy

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