Texas Tax Exemption Certificate: Form 01-339, Refunds, and Penalties

To get a Texas tax exemption certificate, a qualifying nonprofit applies to the Texas Comptroller of Public Accounts, waits for a written approval letter, and then presents Form 01-339 to sellers at the time of each tax-free purchase. Government entities are exempt by law and can use Form 01-339 without applying. The exemption covers the state’s 6.25% sales tax plus any local sales tax of up to 2%, and the Comptroller charges no fee to process the application.¹

Who Qualifies

Federal, state, and local government bodies — federal agencies, military branches, Texas state agencies, public school districts, cities, counties, and other political subdivisions — are exempt by law and do not apply. Anyone acting for one of these entities can use Form 01-339 immediately.²

Private nonprofits are different. They must apply and receive written approval before making any exempt purchases. To qualify, the organization needs a federal tax-exempt designation under Internal Revenue Code Section 501(c)(3), (4), (8), (10), or (19).³ The IRS designation alone is not enough. The organization must also meet the Comptroller’s own criteria for religious, charitable, or educational purposes.⁴

Charitable organizations must be devoted substantially to relieving poverty, disease, or suffering, and their funding must come primarily from sources other than fees charged for services. Educational organizations need a regular curriculum, qualified instructors, and an enrolled student body. Religious organizations must be organized for worship, religious instruction, or similar purposes.

A benefit many applicants miss: an organization approved for sales tax exemption also qualifies for franchise tax and hotel occupancy tax exemptions.³

How to Apply

The Comptroller uses a different application form for each type of organization. Filing the wrong one delays approval.³

Form AP-204 — organizations applying based on their federal 501(c) status, or any category not covered by the forms below.⁵
Form AP-205 — charitable organizations.
Form AP-206 — homeowners’ associations.
Form AP-207 — educational organizations.
Form AP-209 — religious organizations.⁶

Most 501(c)(3) organizations that don’t sit neatly in the charitable, educational, or religious buckets should start with Form AP-204.

Documents to Include

Gather everything before you file, because the Comptroller returns incomplete applications:

The IRS determination letter confirming your federal tax-exempt status under a qualifying IRC section, required for anyone applying on the basis of a federal exemption.⁵
Your Articles of Incorporation or equivalent governing documents, as filed with the Texas Secretary of State.
Your federal Employer Identification Number.
Your Texas Secretary of State file number and date, entered on the application itself.

Organizations formed outside Texas have one extra step: include a file-stamped copy of your formation documents and a current Certificate of Existence from your home state’s Secretary of State or equivalent office.⁵

Where to Send It

Send the completed application and supporting documents to the Comptroller’s Exempt Organizations Section by mail, fax, or email. There is no filing fee. Applications are reviewed in the order received, and the office may follow up if something is missing. Once approved, you receive a written notification confirming your exempt status. You cannot make tax-free purchases until that letter is in hand.

Using Form 01-339 at the Point of Sale

After approval, you claim the exemption on individual purchases by completing Form 01-339, the Texas Sales and Use Tax Exemption Certification, and giving it to the seller.⁷ Fill out the exemption section on the back with your organization’s name, address, and the reason the purchase is exempt, such as “Religious Organization” or “Charitable Organization.” The form goes directly to the seller. It is not filed with the Comptroller.

One detail trips people up. The form does not require any special exemption number. The Comptroller states plainly that “Sales and Use Tax ‘Exemption Numbers’ or ‘Tax Exempt’ Numbers do not exist” in Texas.⁷ If a vendor insists on one, point to the form itself, which says so on its face.

The exemption covers only purchases that directly relate to the organization’s exempt activities. Printer paper and office furniture for the nonprofit’s operations qualify. A personal laptop for a board member does not, even if the certificate gets used.

Getting a Refund When Tax Was Paid by Mistake

If your exempt organization pays sales tax on a qualifying purchase by accident — you forgot to present the form, or your approval letter had not arrived yet — you can recover it. Ask the seller for a refund first. If the seller declines, they can give you Form 00-985, Assignment of Right to Refund, which lets you file a claim directly with the Comptroller.⁸

To file with the Comptroller, submit Form 00-957, Texas Claim for Refund, with a written explanation of each ground for the claim and the period covered. You generally have four years from the date the tax was due and payable to submit the claim.⁸ Track mistaken payments as they happen rather than letting old receipts accumulate.

Keeping the Exemption Active

Approval is not permanent. Your organization must keep meeting the same qualifications, and you should notify the Comptroller when the organization’s name, address, or structure changes. Drifting from the exempt purpose — for example, a charitable organization that shifts to charging market-rate fees for its services — can cost you the exemption.

The Comptroller runs a public search tool, the Texas Tax-Exempt Entity Search, that reflects an organization’s current sales tax, franchise tax, and hotel occupancy tax exemption status.⁹ Vendors can use it to confirm a certificate is legitimate before selling tax-free. Exempt organizations are also relieved of filing franchise tax reports, but only while the exemption is active; if it is revoked, franchise filing obligations return.¹⁰

Criminal Penalties for Misuse

Fraudulent use of an exemption certificate is a criminal offense under Texas Tax Code Section 151.707. This covers knowingly making false entries, presenting a certificate you know is invalid, or concealing or altering one. Penalties scale with the amount of tax avoided:¹¹

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.

On top of criminal charges, the person who misused the certificate owes all the sales and use tax that should have been collected. The felony threshold is lower than it sounds: at the 6.25% state rate, roughly $12,000 in purchases produces about $750 in avoided tax and crosses into third-degree felony territory. Train anyone authorized to use the certificate on what qualifies as an exempt purchase and what doesn’t.

1
Texas Comptroller of Public Accounts. Sales and Use Tax
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Texas Comptroller of Public Accounts. Nonprofit and Exempt Organizations – Purchases and Sales
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Texas Comptroller of Public Accounts. Guidelines to Texas Tax Exemptions
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Legal Information Institute. 34 Texas Administrative Code 3.322 – Exempt Organizations
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Texas Comptroller of Public Accounts. Texas Application for Exemption – Federal and All Others
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Texas Comptroller of Public Accounts. Frequently Asked Questions About Exemptions
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Texas Comptroller of Public Accounts. Texas Sales and Use Tax Resale Certificate and Exemption Certification
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Texas Comptroller of Public Accounts. Sales Tax Refunds
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Texas Comptroller of Public Accounts. Texas Tax-Exempt Entity Search
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Texas Comptroller of Public Accounts. Franchise Tax Frequently Asked Questions
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State of Texas. Texas Tax Code 151.707 – Resale or Exemption Certificate; Criminal Penalty