State of Texas Tax Exemption Certificate: Form 01-339 and Who Qualifies

A Texas sales tax exemption certificate is Form 01-339, the document a qualifying buyer gives a seller so the seller does not collect the 6.25 percent state sales tax (and any local tax on top) at checkout. Two groups qualify: governmental entities and certain nonprofit organizations purchasing for their exempt purpose. The form goes to the seller, not to the Comptroller, and it must be filled out correctly or it will not hold up in an audit.

Who Qualifies

Texas law splits exempt purchasers into two broad groups.

Governmental Entities

Under Texas Tax Code Section 151.309, purchases are exempt when made by:

The United States, its unincorporated instrumentalities, and corporations wholly owned by the federal government.
The State of Texas, its counties, cities, special districts, and other political subdivisions.
A bordering state’s government or governmental unit, but only if that state extends the same courtesy to Texas agencies.

These entities are exempt by operation of law. They do not apply to the Comptroller for status, and they may not appear in the Comptroller’s online exempt-organization database.¹

Nonprofit and Charitable Organizations

Section 151.310 extends exemptions to several private organizations when the purchase relates to the exempt purpose and no item is used for the personal benefit of any individual or shareholder. Qualifying organizations include:

Religious, educational, and charitable organizations where no part of net earnings benefits a private individual.
Federally tax-exempt nonprofits recognized under IRC Sections 501(c)(3), (4), (8), (10), or (19).
Youth athletic organizations exclusively providing competition for participants under 19.
Volunteer fire departments and EMS providers whose members receive no compensation or only nominal pay.
Chambers of commerce and nonprofit tourism agencies representing at least one Texas city or county.

Religious, educational, charitable, and the listed federally exempt nonprofits also get a limited perk: each qualifying organization and each of its bona fide chapters may hold two one-day tax-free sales or auctions per calendar year. Items sold at these events for $5,000 or less are exempt, and donated items can be sold tax-free at any price, except back to the donor.²

One boundary worth stating clearly: Texas currently has no sales tax exemption for disabled veterans. Despite claims circulating online, no such legislation has passed and the Comptroller has not issued a related form.³

Pick the Right Side of the Form

Form 01-339 is two-sided, and the sides are not interchangeable.⁴

The resale certificate side is for businesses buying inventory or components they intend to resell. A retailer buying shirts from a wholesaler signs the resale side because the final customer will pay the tax. If the buyer later uses the item instead of reselling it, the buyer owes tax on its fair market rental value or original purchase price.

The exemption certificate side is for purchasers who are themselves exempt because of who they are or how the item will be used. These buyers are the end user, but they do not owe tax. Signing the wrong side, or citing the wrong legal basis, is one of the fastest ways to have a certificate thrown out during an audit.

How to Fill Out Form 01-339

The exemption side of the form is short, but every field matters. The completed certificate goes directly to the seller.⁵

Purchaser’s legal name and address. Use the name on file with the Comptroller or the IRS. A DBA or informal name creates verification problems.
Texas taxpayer number. An 11-digit number issued by the Comptroller. Organizations without one may use their federal Employer Identification Number instead.⁶
Description of items purchased. Be specific. “Office supplies” is too vague. “Paper, toner cartridges, and filing folders for administrative office” gives both the seller and any auditor enough to connect the purchase to the exempt activity.
Reason for exemption. This is the legal basis. Cite the relevant Tax Code section or the organizational classification that qualifies the purchaser. Getting this wrong can trigger a back-tax assessment with interest.
Signature and date. The certificate is a sworn statement. An unsigned form gives the seller no audit protection and is effectively worthless.

Blanket Certificates for Recurring Purchases

Buyers who repeatedly purchase exempt items from the same vendor do not need a fresh certificate for each sale. Texas allows a blanket exemption certificate that covers all future qualifying purchases from that seller. The limitation: a blanket certificate only works when every purchase from that vendor is exempt. If the buyer sometimes buys taxable items from the same seller, issue individual certificates per exempt transaction instead.⁷

Even with a blanket certificate on file, exempt status can lapse. A sensible seller re-confirms periodically, and a sensible buyer notifies vendors when anything changes.

What the Seller Does With It

When a buyer hands over a certificate, the seller is acting as the state’s collection agent. Without a valid certificate, the seller must charge the 6.25 percent state tax plus any local tax, which can bring the combined rate to 8.25 percent. If the seller fails to collect and has no valid certificate on file, the seller owes that tax personally.³

Under the Comptroller’s audit manual, a certificate accepted at the time of sale is presumed valid unless something is obviously wrong on its face, such as an invalid taxpayer number, blank required fields, or a description of items that clearly does not match the buyer’s exempt purpose. A hardware store accepting a certificate for lumber from an organization with no construction-related purpose is the kind of mismatch auditors flag.⁸

If a seller did not get a certificate at the point of sale, there is a narrow fix. Once the Comptroller sends written notice (typically at the start of an audit), the seller has 60 days to obtain the missing certificate from the buyer. Certificates delivered after that window are rejected and the sale becomes taxable.⁸

Sellers must keep exemption certificates on file for at least four years, matching the Comptroller’s general audit window. If an audit is open, records must be kept until the matter is fully resolved, including appeals or refund claims. Buyers should keep their own copies, but the legal burden sits with the seller.⁹

Penalties for Misuse

Using a fraudulent exemption certificate is a criminal offense. A person commits an offense by intentionally making a false entry on a certificate, presenting a certificate they know is invalid, or concealing or destroying one to block verification. Penalties scale with the tax evaded:

Less than $20: Class C misdemeanor.
$20 to $199: Class B misdemeanor.
$200 to $749: Class A misdemeanor.
$750 to $19,999: third-degree felony.
$20,000 or more: second-degree felony.

At the 6.25 percent state rate, it takes roughly $12,000 in fraudulent purchases to cross the felony line. Treat the signature on the form as what it is: sworn.⁷

Verifying an Organization’s Exempt Status

Before accepting a certificate from an unfamiliar buyer, a seller can confirm status through the Comptroller’s Texas Tax-Exempt Entity Search. The database updates nightly and covers organizations holding exemptions from sales tax, franchise tax, and hotel occupancy tax.¹⁰

Two things to know. Governmental entities such as federal agencies, state agencies, and independent school districts are exempt by statute and may not appear in the search. And the letter generated by the search tool does not replace the signed certificate; the seller still needs Form 01-339 on file. If an organization that should qualify is not listed, the Comptroller can be reached at 800-252-5555 or exempt.orgs@cpa.texas.gov.¹⁰

Getting a Refund When Tax Was Paid in Error

If an exempt buyer paid sales tax it did not owe, start with the vendor. The vendor collected the tax, so the vendor is the natural source of the refund. If the vendor will not refund it, ask for Form 00-985 (Assignment of Right to Refund), which lets the buyer file directly with the Comptroller.

A direct claim uses Form 00-957 (Texas Claim for Refund), with the original invoice, proof of payment, and the applicable exemption certificate attached. The claim must be filed within four years of the date the tax was originally due. Claims can go in online, by email, or by mail to the Comptroller’s office in Austin.¹¹

If the Comptroller denies the claim or approves only part of it, the claimant has 60 days from the denial notice to request a hearing or file notice of intent to bypass the hearing and go directly to court.¹¹

1
State of Texas. Texas Tax Code 151.309 – Governmental Entities
2
State of Texas. Texas Tax Code 151.310
3
Texas Comptroller of Public Accounts. Sales and Use Tax
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Texas Comptroller of Public Accounts. Texas Sales and Use Tax Forms
5
Texas Comptroller of Public Accounts. Texas Sales and Use Tax Exemption Certification
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Texas Comptroller of Public Accounts. Qualified Research Exemption
7
Legal Information Institute. 34 Texas Administrative Code 3.287 – Exemption Certificates
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Texas Comptroller of Public Accounts. Auditing Fundamentals – Chapter 5
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Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions – Keeping Records
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Texas Comptroller of Public Accounts. Texas Tax-Exempt Entity Search
11
Texas Comptroller of Public Accounts. Sales Tax Refunds