(a) General. Non-taxable transactions, including sales made for resale, shall be shown separately from taxable charges on sales invoices. The entire invoice amount shall be subject to the sales/use tax if the nontaxable or exempt charges are not separately shown and distinguishable from taxable charges.
(b) Certificates of Exemption. - (i) Vendors shall obtain completed exemption certificates for all sales transactions, other than those qualifying under section 6 of these rules, where sales tax is not collected from the purchaser at the time of sale. Purchasers shall file a single exemption certificate with each selling vendor for exempt purchases made. The certificates shall be in a format as prescribed by the Streamlined Sales and Use Tax Agreement and shall be retained in the selling vendor's records. The seller shall obtain identifying information of the purchaser and the reason for claiming a tax exemption at the time of the purchase. A purchaser is not required to provide a signature to claim an exemption from tax unless the paper exemption certificate is used. The seller shall use the standard format for claiming an exemption electronically when that format is adopted by the Governing Board of the Streamlined Sales Tax Project.
- (ii) Vendors shall be relieved of the tax otherwise due if the seller obtains a fully completed exemption certificate or captures the relevant data elements listed in subsection (i) above within ninety (90) days of the date of the sale.
- (iii) Should the vendor not obtain an exemption certificate or the required relevant information, the vendor shall be allowed 120 days subsequent to a request for substantiation:
- (A) To obtain a fully completed exemption certificate from the purchaser taken in good faith which means that the vendor obtains a certificate that claims an exemption that was statutorily available on the date of the transaction in the jurisdiction where the transaction is sourced, could be applicable to the item being purchased, and is reasonable for the purchaser's type of business; or
- (B) To obtain other information establishing that the transaction was not subject to the tax.
(c) Religious and Charitable Organizations. Organizations operated primarily for religious or charitable purposes shall be exempt from sales and use tax on their purchases. Organizations verifying its federal 501(c)(3) status with the Department shall be issued an exemption approval letter on this documentation alone. All other organizations must furnish the documents set forth in the following subsection. The organizations shall apply to the Department in writing for exemption approval and registration. - (i) The Department shall consider the following documentation to determine whether the organization is primarily engaged in charitable or religious activities:
- (A) Articles of incorporation;
- (B) Organizational charter or constitution;
- (E) Income and expense statements; and
- (F) Evidence of federal tax exempt status.
- (ii) To be considered primarily organized and operated for charitable or religious activities, an organization shall establish that:
- (A) The organization is organized and operated for a purpose designed to benefit an indefinite number of persons in an educational, moral, physical, or social manner; and
- (B) The organization's assets are completely and permanently pledged to that same charitable or religious purpose; and
- (C) No part of the net earnings of the organization shall be distributed to the organization's members, trustees, officers, or other similarly situated persons as salary or profit earned from organizational activities; and
- (D) The organization is a non-profit organization, and has expended at least sixty five percent (65%) of its annual income for the prior three (3) years on programs, other organizations, foundations, or similar groups and/or activities directly related to its charitable purposes.
- (iii) Organizations shall notify the Department if the conditions allowing exempt status change.
- (A) Organizations which have existed for less than three (3) years and which have insufficient history to comply with section 9(c)(ii)(D), as determined by the Department, may be issued exemption approval for one (1) year.
- (iv) Occasional sales of tangible personal property or services by religious or charitable organizations for fund raising purposes for the conduct of their regular religious or charitable functions and activities shall be exempt from the sales tax.
- (v) Purchases made by religious or charitable organizations in or for their regular religious or charitable functions and activities shall be exempt from the sales and use tax. Purchases made by members or employees of religious or charitable organizations shall be subject to the sales or use tax if not paid directly by the organization.
- (vi) For the purpose of this chapter, construction contractors shall be considered self-employed and not employees of religious or charitable organizations. Therefore, contractors shall be subject to the sales and use tax on all equipment, materials, fixtures and supplies purchased by the contractor to perform under the contract.
(d) Employees of Exempt Agencies. Sales to employees of exempt agencies or organizations shall be taxable, even when the employee is reimbursed by the exempt employer. Payment by the employee shall establish that the employee is acting in his own behalf.
(e) Interstate Commerce. Purchasers and lessees of vehicles used in interstate commerce shall hold valid U.S. Department of Transportation (USDOT) permit or authority as follows to qualify for exemption: - (i) Common or contract for hire interstate carriers shall document their USDOT number, motor carrier's permit, and insurance requirements to qualify for exemption.
- (ii) Private carriers not subject to federal regulation shall be subject to the sales or use tax on the purchase or lease of vehicles.
(f) Containers. Sales of containers and packing, when sold to persons who resell the containers together with their contents, shall be exempt from the sales and use tax. Disposable items purchased by restaurants, drive-ins, lunch counters, motels, hotels, and similar retailers, for their customers' consumption shall be exempt from the sales and use tax. All purchases of reusable products used or directly consumed by vendors shall be subject to sales and use tax at the time of purchase.
(g) Manufacturing, Processing, Agriculture. - (i) Fuel and Power Purchases. Exempt Purchases of power or fuel shall be separately accounted for, by separate metering, storage, or engineered calculation as required by the Department, and distinguishable from taxable purchases of same.
- (ii) Shipping Materials. Shipping materials shall be unique to the property and consumed as part of the shipping. Shipping materials which are reusable are not exempt under this exemption clause.
(h) School fundraising activities. School fundraising activities for public schools shall be sales tax exempt. The fundraising activities shall be recognized by the school district receiving the funds as an appropriate activity. Sales made by private vendors on school grounds, not associated with fundraising activity for the school, are considered taxable sales.