Use the Tax Exemption feature if your state requires a customer's signature of compliance on purchases of normally taxable items that are being sold as tax-exempt. With this feature enabled, the customers you specify must read a tax exemption statement and sign it as a testament of their compliance. The combination of the exemption verbiage and signature is commonly referred to as "Farmer’s Exemption Certificate" or "Farmer’s Exemption Statement" or "Agricultural Exemption Permit." Typically the items being purchased will be used in the production of crops or livestock for human consumption (or crops to feed livestock intended for human consumption).You can require a signed statement for all normally taxable items sold as non-taxable, or for only some items that are sold as non-taxable. The signed statement requirement can apply to all your customer accounts, or to only certain accounts.
Tax exemption can be set up for purchases made by government entities, non-profit organizations, disabled veterans, for and resale purposes. You can also set up a tax plan for non-taxable sales across state lines. Items sold to customers set up with these options can be taxable, non-taxable, or sometimes taxable, depending on their intended use.
At POS, you are asked whether the item should be taxed when the item is marked as taxable while the customer is set up to be tax exempt, and their tax plan does not contain the item being sold. If you sell the item as non-taxable, you must record the reason.
If you have Document Management/Signature Capture, the system stores the signed statements, which means you have a convenient paperless record of your signed tax-exempt transactions. If you don't have Document Management/Signature Capture, you can still use this feature and physically store your signed tax-exempt transactions.
The below table illustrates some different tax situations that can be set up using tax exemption.
|
Tax Situation |
SKU Example |
SKU Taxable Flag |
SKU on Farmer Type Tax Exempt Plan? |
POS Behavior for Farmer Type Customers |
| Never taxable for any customer | Bottled Water | N = Never taxed | No | Always posts without tax |
| Always taxable for all customers | Cigarettes | A = Always taxed | No | Posts with tax |
| Taxable for most customers; never Taxable for Farmers | Bale Wrap | Y = Taxable | Yes on default 0% plan | Posts without tax |
| Taxable for most customers; also always taxable for Farmers | Soft Drink | Y = Taxable | Yes on sub plan with appropriate tax code | Posts with tax |
| Taxable for most customers; sometimes tax-exempt for Famer type customers, dependent on how the item will be used. | Garden Hose | Y = Taxable | No | POS will ask if item should be taxed |
The example above uses a Farmer Type Customer. Different Tax Exempt types (such as resale customers) can be set up with different tax exempt plans, causing them to have a different yes / no / maybe taxable setup.