In all states, some items are exempt from sales tax; most of these products are medicines and food. Occasionally, they are not exempt, but the rates are taxed lower than usual.
You may also have exemptions if the purchases or sales are made outside the state where you reside; however, you must properly evaluate the conditions of those items.
How do sales tax exemptions work for non-residents?
Depending on the laws of the state you are in, if you are not a resident of that state, you may be exempt from sales tax on some purchases. Generally, you get this benefit on the sale of:
- Some types of vehicles, e.g., trailers, farm machinery, or boats
- For foreign diplomats or a member of the U.S. government
- Where you receive the item, e.g., deliveries and receipts outside of Washington are considered interstate or foreign sales
Ideally, you should consult each state’s list of exemptions for out-of-state sales. If you qualify as a non-resident, you can claim a refund of a portion of the state tax you paid on purchases upon sale in the state.
Some U.S. states do not have sales and use taxes
Five U.S. states do not have state sales taxes: Alaska, Montana, Delaware, Oregon, and New Hampshire. However, each city has its regulations on some products.
These five states have become the best place for investment for many business people; it is common to find citizens from other sites making their purchases in some mentioned areas to avoid sales tax.
Occasional sales may also be exempt
In almost every state, you will find exemptions for occasional, isolated, or casual sales. So, you can see how many people have garage sales with fascinating and competitive prices every spring.
You can travel from state to arrange these sales and avoid paying sales tax. Before proceeding, you should investigate whether the products fall under these exemptions.
The main sales tax exemptions you will encounter
In addition to out-of-state purchases that may be exempt, you will find other exemptions depending on the type of property sold and the use to which the will put the property identity of the purchaser.
Property purchased identified as essential to a person’s survival is exempt from sales tax in most cases. You will find clothing, prescription drugs, food, and medical devices like prosthetics here.
You should be aware of each state’s regulations; some do not have a full exemption for these items but have a lower tax rate. When it is stated that the exemption depends on the type of purchaser, charitable, educational, or religious non-profit sales are included.
For exemptions based on the type of use you intend to make of the products purchased, categories where special services are provided to the community are included, such as the agricultural industry, industrial processing, or manufacturing.
Although, to acquire some exemptions, you must have a document that allows you to claim the benefit. Depending on the state where you live, the state government will indicate the procedure to process the documentation and obtain your benefit.
Finally, going out of state to avoid purchase taxes may be considered a crime, especially when you purchase a vehicle and want to avoid the taxes of the state where you live.