A Texas seller who accepts a bad exemption certificate owes the tax itself. Missing, incomplete, or invalid certificates make the seller liable for the uncollected tax, plus penalties and interest, in a Comptroller audit. Texas charges a 6.25% state sales and use tax, and local jurisdictions can add up to 2%, for a maximum combined rate of 8.25%, all administered by the Texas Comptroller of Public Accounts. Kelly Hancock serves as acting Texas Comptroller as of July 2026, per the Comptroller’s office.
This Texas sales tax exemption guide covers what is exempt, who qualifies, every form, and the audit and renewal rules for Texas sales and use tax.
What Is a Texas Sales Tax Exemption Certificate?
A Texas sales tax exemption certificate is a document an eligible buyer gives a seller to buy tangible personal property or taxable services tax-free, stating the exemption reason. Tangible personal property is property that can be seen, weighed, measured, felt, or touched, defined under Texas Tax Code Chapter 151. A resale certificate differs: it defers tax to the final retail sale rather than exempting the purchase.
Form 01-339 is one document with two parts. The front is the Texas Sales and Use Tax Resale Certificate. The back is the Texas Sales and Use Tax Exemption Certification. Resellers use the front. Nonprofits, manufacturers, and other exempt buyers use the back. A resale certificate is not strictly an exemption certificate, because resale shifts the tax to the final sale instead of erasing it.
What Is Exempt From Sales Tax in Texas?
Texas exempts two kinds of purchases: goods that are exempt by statute for every buyer, and purchases that are exempt only when the buyer provides a certificate. Statutory exemptions cover basic necessities and a few specific categories. The table below lists the main goods exempt for everyone, with their conditions and sources. Certificate-based categories follow in the next sections.
| Exempt item | Key condition | Source |
|---|---|---|
| Unprepared grocery food | Exempt; prepared and restaurant food, candy, and soft drinks stay taxable | Texas Comptroller |
| Prescription drugs | Exempt | Texas Comptroller |
| Over-the-counter drugs | Exempt only when required to carry an FDA (Food and Drug Administration) “Drug Facts” panel | 34 Tex. Admin. Code §3.284 |
| Newspapers and certain periodicals | Exempt | Texas Comptroller |
| Occasional (isolated) sales | Exempt; up to two taxable items per 12 months, or personal-use items totaling $3,000 or less per year | Tax Code §151.304 |
Who Qualifies for a Texas Sales Tax Exemption?
Resellers, Comptroller-approved nonprofits, farmers and ranchers with an Ag/Timber Number, manufacturers, and government entities qualify for Texas sales tax exemptions. Each category uses its own form and its own registration path. The table below maps every category to its certificate form, its registration requirement, and its primary source.
| Exemption category | Who qualifies | Certificate form | Registration required | Source |
|---|---|---|---|---|
| Resale | Retailers and wholesalers reselling, leasing, or renting goods | Form 01-339 (front) | Active Texas Sales and Use Tax Permit | Texas Comptroller |
| Nonprofit | Organizations granted exempt status by the Comptroller | Form 01-339 (back) | Comptroller exemption grant (AP-20x) | Comptroller Pub 96-122 |
| Agricultural | Farmers and ranchers producing agricultural products for sale | Form 01-924 | Ag/Timber Number (Form AP-228) | Texas Comptroller |
| Timber | Commercial timber operations | Form 01-925 | Ag/Timber Number | Texas Comptroller |
| Manufacturing | Manufacturers of tangible personal property for sale | Form 01-339 (back) | None to claim; permit if selling | Comptroller Pub 94-124 |
| Government entities | Federal, state, and local government | Form 01-339 (back) | None | Texas Comptroller |
How Does the Texas Resale Exemption Work?
A buyer holding an active Texas Sales and Use Tax Permit issues Form 01-339 (front) to buy items it will resell, lease, or rent, and writes its permit number on the certificate. The resale certificate defers the tax to the final retail sale rather than removing it. Buying items for the buyer’s own use under a resale certificate violates Texas law and is a common audit trigger.
A valid Texas Sales and Use Tax Permit number is 11 digits and begins with 1 or 3, per 34 Texas Administrative Code §3.285. A resale certificate issued while a permit application is still pending is valid for only 60 days, per the same rule. Buyers who need a permit first can start with the Texas sales tax permit guide.
How Do Nonprofits Get a Texas Sales Tax Exemption?
Federal 501(c) status does not automatically grant Texas sales tax exemption. The organization must apply to the Texas Comptroller and be granted exempt status first, then use Form 01-339 (back) for tax-free purchases. The Comptroller reviews applications by organization type. The table below lists the AP-20x application forms and the entities each covers.
| Application form | Applies to | Source |
|---|---|---|
| AP-204 | Organizations with a federal 501(c) determination letter, including (c)(3), (4), (8), (10), and (19) | Texas Comptroller |
| AP-205 | Charitable organizations | Texas Comptroller |
| AP-206 | Religious organizations | Texas Comptroller |
| AP-207 | Educational organizations | Texas Comptroller |
| AP-209 | Federal and state government agencies | Texas Comptroller |
Qualifying nonprofits can also hold two one-day tax-free sales or auctions each calendar year, on which their sales are exempt, per Comptroller Publication 96-122, which covers both purchases and sales.
What Is the Texas Agricultural Exemption?
Farmers and ranchers buying qualifying items claim the agricultural exemption on Form 01-924, which requires an Ag/Timber Number obtained through Form AP-228. Qualifying items include feed, seed, fertilizer, and farm machinery used to produce agricultural products for sale. “Ag/Timber” is the Comptroller’s agricultural and timber registration. The timber equivalent is Form 01-925, which also requires an Ag/Timber Number.
Form 01-924 asks for the name and address of the purchaser and seller, the Ag/Timber Number, a description of the items, and the purchaser’s signature and date, per the official form. Ag/Timber Numbers are not permanent. They must be renewed on the Comptroller’s four-year cycle, and every current number expires December 31, 2027, per the Texas Comptroller Ag/Timber page.
What Qualifies for the Texas Manufacturing Exemption?
Machinery and equipment used directly in manufacturing tangible personal property for sale qualifies for the Texas manufacturing exemption, claimed on Form 01-339 (back). The item must cause or be essential to a physical or chemical change in the product, per Comptroller Publication 94-124. Manufacturers state the manufacturing reason on the certificate. The exemption also reaches certain consumables and utilities.
| Item | Manufacturing exemption treatment | Source |
|---|---|---|
| Machinery causing a physical or chemical change | Exempt | Pub 94-124 |
| Consumables used directly in manufacturing | Can qualify | Pub 94-124 |
| Required pollution control equipment | Exempt | Pub 94-124 |
| Gas and electricity, over 50% of the meter’s use in exempt manufacturing (predominant use study) | Exempt | Pub 94-124 |
| Hand tools, janitorial supplies, forklifts for intra-plant transport, office equipment, pre- or post-process machinery | Not exempt | Pub 94-124 |
How Do You Fill Out Form 01-339?
Choose the side first. Use the front (Resale Certificate) for resale purchases and the back (Exemption Certification) for every other exemption. Then complete the buyer and seller details, the permit number or exemption reason, a description of the items, and the signature. Form 01-339 is one document with both parts, published by the Texas Comptroller.
Complete these fields from the official Comptroller Form 01-339 PDF:
- Purchaser name and address.
- Texas Sales and Use Tax Permit number on the resale side, or the exemption reason on the exemption side.
- Seller name and address.
- Description of the items purchased.
- Signature and date.
A missing permit number, a missing exemption reason, or no signature makes the certificate invalid and leaves the seller liable for the tax.
Are Government Purchases Exempt From Texas Sales Tax?
Texas exempts purchases by government entities from sales tax. For federal purchases on GSA (General Services Administration) SmartPay cards, both individually billed accounts (IBA) and centrally billed accounts (CBA) are exempt from Texas state sales tax, per the GSA SmartPay Texas tax page. Purchase-card buyers document the exemption on Form 01-339. Travel-card lodging uses the separate Texas hotel occupancy exemption form.
How Do You Verify a Texas Exemption Certificate?
Sellers verify buyers with the Comptroller’s Texas Tax-Exempt Entity Search for nonprofit and exempt status, and the sales tax permit lookup in the Comptroller’s eSystems for resale permits. Ag/Timber Numbers are verifiable through the Comptroller. Good-faith acceptance depends on a complete, plausible certificate accepted at or before the sale, per 34 Texas Administrative Code §3.285.
Verification protects the seller in an audit. A certificate accepted in good faith, with no reason to know it is invalid, relieves the seller of collection liability. Verifying the permit or exempt status at the point of acceptance closes the gap that audits target.
How Long Is a Texas Exemption Certificate Valid?
Form 01-339 certificates have no set expiration while the buyer’s eligibility remains valid. Ag/Timber Numbers do expire and must be renewed on the Comptroller’s four-year cycle. Sellers must keep certificates and supporting records for at least four years under Texas law. Digital copies are acceptable when complete and legible. The table below summarizes validity and retention by document.
| Document | Validity | Retention | Source |
|---|---|---|---|
| Form 01-339 resale certificate | No set expiration while the permit stays active | At least 4 years | 34 Tex. Admin. Code §3.285 |
| Form 01-339 exemption certification | No set expiration while eligibility holds | At least 4 years | Texas Comptroller |
| Form 01-924 / Ag/Timber Number | Expires on the four-year cycle; current numbers expire Dec. 31, 2027 | At least 4 years | Texas Comptroller |
| Records retention | Not applicable | At least 4 years | Texas law (statute of limitations) |
What Do Texas Auditors Look For in Exemption Certificates?
Texas auditors check that every untaxed sale has a complete, timely certificate with the right form, the permit or exemption number, the stated reason, and a signature. Missing or invalid certificates make the seller liable for the uncollected 6.25% state tax plus up to 2% local tax, plus penalties and interest, per the Texas Comptroller. The seller carries the burden of proof.
Reduce audit exposure with a few habits:
- Collect the certificate at transaction time, before completing the sale.
- Verify the buyer’s permit or exempt status before accepting the certificate.
- Retain certificates and records for at least four years, paper or legible digital.
- Review your certificate file periodically for missing numbers, reasons, or signatures. Periodic re-verification is a best practice, not a Texas requirement.
- Watch for resale-certificate misuse and lapsed nonprofit status, the two most common findings.
How Commenda Automates Texas Exemption Certificate Management
Commenda’s global indirect tax software collects, validates, and stores your Texas exemption certificates and keeps them audit-ready. It tracks renewal deadlines, including Ag/Timber Number expirations, so no certificate lapses before an audit. Commenda connects to your billing and finance stack through 100+ ERP, API, and custom integrations, which keeps exempt and resale transactions correctly classified.
For rates and rules, see the Commenda Texas sales tax guide. If you sell across state lines, the US economic nexus guide shows where you have registration obligations.
Book a demo to see how Commenda keeps every Texas exemption certificate valid, verified, and audit-ready.
