To buy something in Texas without paying sales tax, the buyer fills out the Texas sales tax exempt form, Form 01-339, and hands it to the seller at or before the sale. The form works two ways: the front side is a resale certificate for businesses buying inventory to resell, and the back side is the exemption certification for qualifying organizations and purchases. The seller keeps the completed form on file instead of collecting tax. Getting the details right matters, because a bad certificate can leave the seller owing the tax and can expose the buyer to penalties that climb into felony territory.
Who Can Use the Form
Texas Tax Code Chapter 151 lists the organizations and transactions that qualify for exemption from sales and use tax.1State of Texas. Texas Code Tax Code Chapter 151 – Limited Sales, Excise, and Use Tax Not every nonprofit or business purchase counts. The form is only valid if the buyer or the purchase actually fits one of the recognized categories.
Qualifying Exempt Organizations
Religious, educational, and charitable organizations can buy items related to their mission tax-free, provided none of the organization’s earnings benefit a private individual. Nonprofits with federal tax-exempt status under IRC Section 501(c)(3), (4), (8), (10), or (19) qualify, again only for purchases tied to the exempt purpose.2State of Texas. Texas Tax Code Section 151.310 – Religious, Educational, and Public Service Organizations Nonprofit youth athletic organizations serving participants under 19, volunteer fire departments and EMS providers, chambers of commerce, and governmental entities are also covered.
There is a step nonprofits often miss. You cannot walk into a store with your IRS determination letter and buy tax-free. You have to apply for exemption with the Texas Comptroller’s office first and be approved. Purchases made before that approval are fully taxable, and the Comptroller will not refund tax paid before the postmark date on the application.3Texas Comptroller of Public Accounts. Nonprofit and Exempt Organizations – Purchases and Sales
Resale Purchases
A business buying inventory to resell uses the front side of Form 01-339, the resale certificate, rather than the exemption side.4Texas Comptroller of Public Accounts. Texas Sales and Use Tax Resale Certificate and Exemption Certification The tax is not skipped, only deferred: it will be collected from the final consumer. A resale certificate does require the buyer’s 11-digit Texas sales tax permit number, which an exemption certificate does not.
Manufacturing
Manufacturers can buy machinery and equipment tax-free when the items are used directly in the manufacturing process and cause a physical or chemical change in the product being made for sale. Intermediate products that become part of the finished item also qualify. Office furniture, delivery trucks, and other equipment that only supports operations do not.5Texas Comptroller of Public Accounts. Manufacturing Exemptions
Agriculture and Timber
Farmers, ranchers, and timber producers can buy livestock, feed, seeds for food crops, fertilizers, herbicides, and machinery used exclusively on a farm or ranch to produce agricultural products for sale.6Texas Public Law. Texas Tax Code Section 151.316 – Agricultural Items These buyers must register with the Comptroller for an ag/timber number and present it at purchase. The word “exclusively” carries real weight here. An item split between personal use and farm use does not qualify.
How To Fill Out Form 01-339
The form is a free PDF on the Texas Comptroller’s website.7Texas Comptroller of Public Accounts. Texas Sales and Use Tax Forms The purchaser fills it out; the seller does not. The form calls for:
- Full legal name and address of both the buyer and the seller.
- A description of the items being purchased, specific enough to show the items match the claimed exemption.
- The reason for the exemption, either checked from the listed options or written in (for resale, for use in manufacturing, purchased by a qualifying exempt organization, and so on).
- The purchaser’s signature and the date.
One point on the form itself is worth reading carefully. Form 01-339 states in bold that a number is not required for the certificate to be valid, and that sales tax “exemption numbers” or “tax exempt numbers” do not exist in Texas.4Texas Comptroller of Public Accounts. Texas Sales and Use Tax Resale Certificate and Exemption Certification The form has a field for a Texas sales tax permit number, but leaving it blank on an exemption certificate does not invalidate the form. Some sellers still refuse certificates without a number, which is their right. The legal requirement is that the form be properly completed and signed, not that it carry a tax ID. Resale certificates are the exception, since a permit number is part of what makes them work.
Giving the Certificate to the Seller
Hand the completed, signed form to the seller at or before the transaction. In person, that means a paper copy. For online purchases, most sellers accept a scanned or electronic version. Once the seller has a properly completed certificate on file, the sale proceeds without tax.
Accepting the form shifts the tax liability off the seller. Texas Administrative Code Section 3.287 sets three conditions for good-faith acceptance: the certificate was received at or before the sale, all required fields are legible, and the seller has no reason to believe the sale is not actually exempt.8Cornell Law Institute. 34 Texas Administrative Code 3.287 – Exemption Certificates That last condition has teeth. Sellers are expected to know which exemptions fit the products they sell. A hardware store accepting an agricultural exemption certificate for a flat-screen television is not acting in good faith, no matter how neatly the form is completed.
Sellers are never required to accept an exemption certificate. If the seller refuses, an exempt buyer can ask for Form 00-985, Assignment of Right to Refund, and use it to file directly with the Comptroller.3Texas Comptroller of Public Accounts. Nonprofit and Exempt Organizations – Purchases and Sales
Keeping the Certificate on File
Both buyer and seller must keep copies of the certificate for at least four years after the last sale it covered. If an audit or legal proceeding is pending at that four-year mark, the retention period extends until the matter is resolved.9Cornell Law Institute. 34 Texas Administrative Code 3.281 – Records Required; Information Required During an audit, that certificate is the seller’s main evidence for why tax was not collected. Missing certificate usually means the seller owes the tax plus penalties and interest.
A single certificate can serve as a blanket document covering recurring purchases from the same vendor, so a new form is not needed for every transaction. Resale certificates in Texas do not formally expire and stay valid as long as the buyer keeps using them properly. A new certificate is needed when the buyer’s information changes in a meaningful way: a new legal name, a change in ownership, or a revocation of tax-exempt status. The Comptroller recommends that sellers periodically review the certificates they hold to confirm the information is still accurate.
Getting a Refund for Tax You Already Paid
If you paid sales tax on a purchase that should have been exempt, you can recover the money, but the order matters. Buyers without a Texas sales tax permit have to request the refund from the seller first. If the seller cannot or will not refund the tax, ask for Form 00-985, Assignment of Right to Refund, which lets you file the claim yourself with the Comptroller.10Texas Comptroller of Public Accounts. Sales Tax Refunds
A refund claim to the Comptroller uses Form 00-957, Texas Claim for Refund, along with copies of invoices, proof of payment, a description of the items, and the exemption or resale certificates that should have applied. If you are submitting more than 10 invoices, the Comptroller requires them in a schedule format. Claims can be filed online, emailed, or mailed to the Comptroller’s office in Austin.10Texas Comptroller of Public Accounts. Sales Tax Refunds
The statute of limitations is four years from the date the tax was due and payable. If the Comptroller denies the claim in whole or part, you have 60 days from the denial notice to request a refund hearing or file a notice of intent to bypass the hearing and proceed to court.10Texas Comptroller of Public Accounts. Sales Tax Refunds
Penalties for Misusing the Form
Texas does not treat exemption certificate fraud as a paperwork problem. Under Tax Code Section 151.707, intentionally making a false entry on a certificate, presenting a certificate you know is false, or concealing or altering one are all criminal offenses. The severity scales with the amount of tax avoided:11State of Texas. Texas Tax Code TAX 151.707
- Less than $20 avoided: 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.
Those thresholds turn on the tax avoided, not the purchase price. At the 6.25% state rate, roughly $12,000 in purchases produces $750 in avoided tax, which is enough to cross into felony territory. A second-degree felony in Texas can carry 2 to 20 years in prison.
A seller who knowingly accepts a fraudulent certificate loses the good-faith protection. The Comptroller can assess the unpaid tax against the seller with a 5% penalty, an additional 5% after 30 days, and interest starting 60 days from the due date. Verify that the certificate makes sense for the transaction, keep it on file, and do not look past details that seem wrong.