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Tax & Compliance
Tax Exempt
Definition
Goods, services, or entities not subject to certain taxes.
Overview
Tax exemptions apply to specific products (like groceries in some states), services, or organizations (like nonprofits). Exempt status must be verified and documented.
Example
A nonprofit with 501(c)(3) status is exempt from federal income tax and may be exempt from sales tax.
Best Practices
Verify exemption status, keep certificates on file, and don't collect tax on exempt transactions.
Common Mistakes to Avoid
Not verifying exemption certificates
Assuming exemption without documentation
Applying exemptions incorrectly
Frequently Asked Questions
How do I verify tax-exempt status?
Request exemption certificates and verify through tax authority databases.