Tax Exemptions

Tax exemptions manage customers, products, and transactions that are exempt from tax collection. This guide covers exemption configuration and certificate management.

Overview

Tax exemptions enable you to:

• Manage exempt customers
• Store exemption certificates
• Track certificate expiration
• Handle partial exemptions
• Support exemption types
• Maintain compliance

Accessing Tax Exemptions

Navigate to Tax Management → Tax Exemptions to manage exemptions.

Understanding Exemptions

Exemption Types

Type	Description
Resale	Reseller exemption
Non-Profit	501(c)(3) organizations
Government	Federal/state/local
Manufacturing	Production equipment
Agricultural	Farm supplies
Medical	Healthcare items

Certificate Status

Status	Description
Valid	Active and current
Pending	Awaiting verification
Expired	Past expiration date
Revoked	No longer valid
Invalid	Failed verification

Exemption Scope

Scope	Coverage
Full	All purchases exempt
Partial	Specific items only
Jurisdiction	State-specific
Product	Category-specific

How-To Guides

How to Add Exempt Customer

Customer Exemption Setup

1. Go to Customers → [Customer]
2. Click Tax Exemption tab
3. Add exemption:
   • Exemption type
   • Certificate details
   • Valid jurisdictions
4. Upload certificate
5. Save exemption

Exemption Configuration

Customer Tax Exemption

Customer: ABC Wholesale Inc.
Type: Resale Certificate

Certificate Details:
├─ Certificate Number: RSC-123456789
├─ Issue Date: Jan 1, 2024
├─ Expiration Date: Dec 31, 2026
├─ Issuing State: California
└─ Status: Valid

Jurisdiction Coverage:
├─ California: ✓ Exempt
├─ Nevada: ✓ Exempt
├─ Arizona: ✓ Exempt
├─ Oregon: N/A (no sales tax)
└─ Texas: ✗ Not covered

Products Covered:
├─ Physical Goods: ✓ All
├─ Digital Goods: ✗ Not included
└─ Services: ✗ Not included

How to Upload Certificates

Certificate Management

1. Go to Tax Exemptions → Certificates
2. Click Upload Certificate
3. Select file (PDF, image)
4. Link to customer
5. Enter details:
   • Certificate number
   • Expiration date
   • Jurisdictions
6. Save certificate

Certificate Record

Exemption Certificate

File: resale_cert_abc_wholesale.pdf
Size: 245 KB
Uploaded: Jan 15, 2026
Uploaded By: J. Smith

Certificate Information:
├─ Type: Resale Certificate
├─ Number: RSC-123456789
├─ Customer: ABC Wholesale Inc.
├─ Issued: Jan 1, 2024
├─ Expires: Dec 31, 2026
└─ Status: Verified

Jurisdictions:
├─ California
├─ Nevada
└─ Arizona

Verification:
├─ Verified Date: Jan 16, 2026
├─ Verified By: System (auto)
└─ Method: State database lookup

How to Track Expiration

Expiration Management

Certificate Expiration Dashboard

Expiring in 30 Days:
┌────────────────────────────────────────────────────────────┐
│ Customer              │ Certificate   │ Expires    │ Action│
├────────────────────────────────────────────────────────────┤
│ XYZ Distributors      │ RSC-987654   │ Feb 15     │ Renew │
│ Acme Manufacturing    │ MFG-112233   │ Feb 20     │ Renew │
│ State University      │ GOV-445566   │ Feb 28     │ Renew │
└────────────────────────────────────────────────────────────┘

Expired (Action Required):
├─ Metro Schools: Expired Jan 10 - Contact customer
├─ County Hospital: Expired Jan 5 - Awaiting renewal

Alerts Configured:
├─ 60 days before: Email customer
├─ 30 days before: Email customer + internal
├─ 14 days before: Dashboard alert
├─ Expired: Block exemption

How to Configure Exemption Types

Exemption Type Setup

1. Go to Settings → Tax → Exemption Types
2. Click Add Type
3. Configure:
   • Type name
   • Documentation required
   • Verification rules
   • Default validity

Exemption Types

Exemption Type Configuration

Resale Certificate:
├─ Document Required: Yes
├─ Expiration: Per state rules
├─ Auto-Verify: California, Texas, New York
├─ Renewal Reminder: 60 days
└─ Products: Physical goods only

Non-Profit (501c3):
├─ Document Required: IRS determination letter
├─ Expiration: None (verify annually)
├─ Auto-Verify: IRS database
├─ Renewal Reminder: Annual verification
└─ Products: All qualifying

Government:
├─ Document Required: Government ID/purchase order
├─ Expiration: None
├─ Auto-Verify: No (manual review)
├─ Renewal Reminder: None
└─ Products: All purchases

Manufacturing:
├─ Document Required: Mfg exemption cert
├─ Expiration: Per state rules
├─ Auto-Verify: State database
├─ Renewal Reminder: 90 days
└─ Products: Production equipment only

How to Handle Partial Exemptions

Partial Exemption Setup

Partial Exemption: Research University

Customer: State Research University
Type: Government/Educational

Full Exemption:
├─ Educational supplies
├─ Laboratory equipment
├─ Research materials
└─ Classroom technology

Taxable (Not Exempt):
├─ Food service items
├─ Retail merchandise
├─ Personal items
└─ Non-educational

Configuration:
├─ Tax Group: Educational = Exempt
├─ Tax Group: Standard = Taxable
└─ Override: Per purchase order

How to Verify Certificates

Verification Process

1. Receive certificate
2. Check validity:
   • State database
   • IRS lookup
   • Manual review
3. Record verification
4. Approve/reject
5. Notify customer

Verification Methods

Method	Description
Auto	System database lookup
Manual	Staff verification
Third-Party	External service
Customer	Self-certification

How to Generate Exemption Reports

Exemption Report

Exemption Report - January 2026

Summary:
├─ Total Exempt Sales: $567,890
├─ Tax Exempted: $48,270
├─ Exempt Transactions: 234
└─ Unique Exempt Customers: 45

By Exemption Type:
├─ Resale: $345,678 (61%)
├─ Non-Profit: $123,456 (22%)
├─ Government: $78,901 (14%)
└─ Manufacturing: $19,855 (3%)

By Jurisdiction:
├─ California: $234,567
├─ Texas: $178,901
├─ New York: $89,456
└─ Other: $64,966

Advanced Features

Automatic Verification

Certificate validation:

• State database integration
• IRS verification
• Real-time checking
• Batch verification

Multi-State Certificates

Streamlined Sales Tax:

• SST registration
• Multi-state coverage
• Uniform exemption
• Central management

Digital Certificates

Electronic management:

• E-signature support
• Digital storage
• Easy retrieval
• Secure access

Compliance Alerts

Proactive monitoring:

• Expiration warnings
• Invalid certificates
• Missing documentation
• Audit preparation

Best Practices

Certificate Collection

• Collect before first sale
• Verify authenticity
• Store securely
• Update regularly

Documentation

• Keep copies
• Note verifications
• Document decisions
• Maintain audit trail

Monitoring

• Track expirations
• Review regularly
• Request renewals
• Update promptly

Compliance

• Follow state rules
• Proper documentation
• Regular audits
• Staff training

Configuration

Exemption Settings

Navigate to Settings → Tax → Exemptions:

• Types - Exemption types
• Verification - Validation rules
• Expiration - Warning periods
• Defaults - Default settings

Certificate Settings

• Storage - File storage
• Format - Accepted formats
• Verification - Auto-verify
• Notifications - Alert settings

Troubleshooting

Common Issues

Exemption not applied

• Check certificate valid
• Verify jurisdiction
• Review product type
• Check expiration

Certificate rejected

• Verify number format
• Check state requirements
• Review documentation
• Contact authority

Expiration alerts not sent

• Check email settings
• Verify alert config
• Review recipient list
• Test notification

Cannot upload certificate

• Check file format
• Verify file size
• Review permissions
• Try different format

Related Documentation

Learn about Tax Reports to generate compliance reports for filing.