Qualifying for a sales tax exemption in Texas depends on who you are and what you are buying. Every shopper automatically pays no tax on most groceries and over-the-counter medicine. Beyond that, exemptions are tied to status: nonprofits with the right IRS designation, federal and Texas government bodies, businesses buying goods to resell, manufacturers purchasing production inputs and equipment, farmers and timber producers, and people with disabilities buying specific assistive items. Most of these require paperwork, usually a completed exemption certificate handed to the seller at the point of sale.
Texas charges 6.25 percent state sales tax on most retail purchases, and local jurisdictions add up to 2 percent more, so the combined rate can reach 8.25 percent.1Texas Comptroller. Sales and Use Tax Here is who gets to skip it.
Every Shopper: Groceries, Medicine, and the Back-to-School Weekend
You do not need a certificate, a number, or any registration to claim these. They apply automatically at the register.
Most unprepared food sold at a grocery store is tax-free, including bread, milk, eggs, meat, produce, cereal, rice, pasta, cheese, butter, coffee, tea, and snack items in multi-serving packages.2Texas Comptroller. Grocery and Convenience Stores Water, fruit and vegetable juices with more than 50 percent juice content, and frozen items like ice cream and frozen fruit bars are also exempt. The dividing line is whether the food is sold ready to eat. A frozen pizza you heat at home qualifies; a hot slice from the deli does not. Soft drinks, candy, and ice sold on their own are taxable even inside a grocery store, as is anything sold heated or mixed to order by the seller.3State of Texas. Texas Tax Code 151.314 – Food Products
Over-the-counter drugs and medicines labeled with an FDA Drug Facts panel are exempt. That includes pain relievers, allergy medication, antacids, cold remedies, sunscreen, first-aid antibiotic ointment, and nicotine patches.2Texas Comptroller. Grocery and Convenience Stores Dietary supplements with a Supplement Facts panel qualify as well, along with basic wound-care supplies like adhesive bandages, gauze, and medical tape.
Once a year, Texas also suspends tax on clothing, footwear, school supplies, and backpacks priced under $100 per item. In 2026, the holiday runs Friday, August 7 through midnight Sunday, August 9.4Texas Comptroller. Sales Tax Holiday You can buy as many qualifying items as you want, but the cap applies per item: a $90 pair of shoes qualifies, a $120 jacket does not.
Nonprofit and Charitable Organizations
The broadest nonprofit category covers groups with federal tax-exempt status under Internal Revenue Code Section 501(c)(3), (4), (8), (10), or (19), which captures most charities, churches, schools, social welfare organizations, fraternal lodges, and veterans’ organizations.5Texas Comptroller. Nonprofit and Exempt Organizations – Purchases and Sales Texas law also exempts organizations without federal recognition if they are organized exclusively for religious, educational, or charitable purposes and no earnings benefit a private individual. Volunteer fire departments, youth athletic organizations serving participants under 19, and chambers of commerce representing at least one Texas city or county also qualify.6Texas Public Law. Texas Tax Code Section 151.310 – Religious, Educational, and Public Service Organizations
The exemption is not automatic. Your organization applies to the Texas Comptroller, usually with Form AP-204.7Texas Comptroller. 501(c)(3), (4), (8), (10) or (19) Once approved, the exemption covers purchases related to the organization’s exempt purpose, including office supplies used in day-to-day operations. Personal purchases by staff members do not qualify.
Qualifying nonprofits also get two tax-free fundraising events per calendar year. At each one-day sale or auction, items priced at $5,000 or less can be sold without collecting sales tax. Donated items can be sold tax-free at any price, except back to the donor.6Texas Public Law. Texas Tax Code Section 151.310 – Religious, Educational, and Public Service Organizations
Government Entities
Federal, state, and local government bodies are exempt automatically, with no application required. The exemption covers all branches of the U.S. government and military, the State of Texas and its agencies, and every county, city, school district, and special district in the state.8Texas Public Law. Texas Tax Code Section 151.309 – Governmental Entities A government entity from a bordering state qualifies only if that state grants the same treatment to Texas government buyers. Purchases must be made directly by the entity or an authorized agent, using either Form 01-339 or an official purchase voucher in the entity’s name.5Texas Comptroller. Nonprofit and Exempt Organizations – Purchases and Sales
Foreign diplomatic and consular officials may be exempt as well, but the process is different: the seller must contact the U.S. State Department’s Office of Foreign Missions for a determination on the buyer’s status before completing the transaction.9Cornell Law. 34 Texas Admin Code 3.63 – Foreign Diplomatic Officials
Businesses Buying Inventory for Resale
When a business buys a product it intends to resell, that purchase is exempt. Tax gets collected when the final customer buys the item, so taxing every step in the supply chain would stack taxes on the same product.10Cornell Law. 34 Texas Admin Code 3.285 – Resale Certificate; Sales for Resale
To claim the exemption, the buyer must hold a Texas sales and use tax permit and give the seller a completed Texas Sales and Use Tax Resale Certificate. The certificate identifies the buyer, lists their permit number, and describes the items being purchased for resale. The seller keeps it on file as proof that no tax was due.10Cornell Law. 34 Texas Admin Code 3.285 – Resale Certificate; Sales for Resale
Manufacturers and Processors
Businesses that manufacture, fabricate, or process tangible goods for sale can buy certain inputs and equipment tax-free under Texas Tax Code Section 151.318. Two broad categories qualify.11Texas Comptroller. Manufacturing Exemptions
Raw materials and components that physically become part of the finished product are exempt. Steel welded into a trailer qualifies. Machinery and equipment used directly in manufacturing also qualify if they cause a physical or chemical change in the product and are essential to the process. Chemicals, catalysts, and materials used to remove impurities or make a product more marketable fall under the exemption, as do taxable services performed on the product to improve its marketability.11Texas Comptroller. Manufacturing Exemptions Items that merely support manufacturing indirectly, such as office furniture or janitorial supplies, do not qualify.
Divergent Use
If you buy equipment tax-free for manufacturing and later use it for something else, you may owe a prorated tax. The calculation runs month by month during the first four years after purchase: 1/48 of the purchase price, multiplied by the percentage of non-manufacturing use that month, at the tax rate from the original purchase date.12State of Texas. Texas Tax Code 151.3181 – Divergent Use of Property Used in Manufacturing If non-manufacturing use in any given month is 5 percent or less of total use, no tax is triggered for that month. Once four years have passed from the purchase date, you can repurpose the equipment entirely without owing anything.
Agricultural and Timber Producers
Farmers, ranchers, and timber producers qualify for exemptions on items used exclusively to produce agricultural or timber products for sale. Qualifying purchases include feed for livestock and wild game, seeds and annual plants, fertilizer, herbicides, insecticides, farm machinery and repair parts, irrigation components, and electricity or natural gas used in production.13Texas Comptroller. Agricultural and Timber Exemptions
“Exclusively” is doing real work in that sentence. Equipment and supplies that serve double duty for personal and farm use typically do not qualify. The Comptroller publishes a list of items that remain taxable even on a working farm or ranch:
- Motor vehicles, trailers, and automotive parts like tires for highway-licensed vehicles, even with farm plates
- Work clothing, safety apparel, and shoes
- Materials for houses, barns, offices, garages, or storage buildings
- Furniture, home furnishings, pet food, guns, ammunition, and recreational vehicles such as golf carts or dirt bikes
- Computers and software used for anything other than agricultural production
To claim any agricultural or timber exemption, you first obtain an Ag/Timber Number from the Comptroller and present it on a completed ag or timber exemption certificate at each qualifying purchase.13Texas Comptroller. Agricultural and Timber Exemptions The number must be renewed every four years regardless of when it was first issued. Current and newly issued Ag/Timber Numbers expire on December 31, 2027. When you renew, update every blanket certificate on file with retailers to reflect the new expiration date. Buying with an expired number can trigger penalties.
People with Disabilities
Texas exempts specific items purchased by people with disabilities from both sales tax and motor vehicle sales tax.15Texas Comptroller. Tax Exemptions for People with Disabilities The categories are narrower than many buyers assume, so if this applies to you or a family member, review the Comptroller’s publication directly for the full list of eligible items and qualifying conditions before counting on an exemption at the register.
How to Actually Claim It
For most entity-level and business exemptions, you claim the exemption by handing the seller a completed certificate at the point of sale. The standard form is Texas Comptroller Form 01-339, the Texas Sales and Use Tax Exemption Certification.16Cornell Law. 34 Texas Admin Code 3.287 – Exemption Certificates It asks for your name, address, the type of exemption claimed, and the relevant identification number: a tax permit number, Ag/Timber Number, or exemption letter number. The seller is required to keep completed certificates on file for at least four years.
A few paths work differently. Government entities can also use an official purchase voucher in the entity’s name. Agricultural and timber producers use a separate ag or timber certificate that must include a current Ag/Timber Number. Consumer-level exemptions on groceries and medicine take no paperwork at all.
What Happens If You Misuse a Certificate
Using a false exemption or resale certificate is a criminal offense in Texas. The severity depends on how much tax was avoided:
- 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
The statute covers anyone who intentionally creates a false certificate, presents one knowing it is fraudulent, or tampers with an existing certificate. This is where businesses sometimes get into trouble. Using a resale certificate to buy office furniture or personal items tax-free, for example, qualifies as fraud if the items were never actually intended for resale.
Suspected sales tax fraud can be reported to the Comptroller’s Criminal Investigation Division at 800-531-5441 (extension 3-3901) or CID@cpa.texas.gov. Reports can be anonymous.18Texas Comptroller. Report Fraud – Criminal Investigation Division – Contact Us