Common Sales & Use Tax Nontaxable Sales and Partial Exemptions

Below are some common nontaxable or partially exempt sales and use tax transactions. For a list of all exemptions, see publication 61, Sales and Use Taxes: Tax Expenditures.

Sales for Resale

Purchasers who are engaged in the business of selling tangible personal property (items) may issue a resale certificate when purchasing items to be sold in the regular course of business. In general, when a seller accepts a valid resale certificate in good faith and in a timely manner, the seller does not owe sales or use tax on that sale. A seller should keep the resale certificate to support a sale was for resale.

For more information, see:

Food Products

The sale and purchase of food products for human consumption are generally exempt from sales and use tax under Revenue and Taxation Code (R&TC) section 6359. The exemption generally applies unless the food products are sold in a heated condition (except hot bakery items or hot beverages, such as coffee, sold for a separate price), served as meals, consumed at the seller's facilities, or sold for consumption at a location where admission is charged.

Nontaxable sales of food products must be separately accounted for and supported by documents.

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Nontaxable Labor

Generally, tax does not apply to itemized charges for repair or installation labor. However, in California some types of labor charges are subject to tax. For instance, charges for fabrication labor are generally taxable, whether the labor charge is itemized or included in the price of the product.

Labor charges claimed as nontaxable sales must be supported by documents such as sales invoices.

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Sales to the United States Government

The sale and lease of items to the United States (U.S.) or its unincorporated agencies and instrumentalities (U.S. government) are generally exempt from sales and use tax. However, other special taxes and fees in connection with sales to the U.S. government may not be exempt. For more information on special taxes and fee programs, see Special Taxes and Fees.

An exempt sale or lease to the U.S. government must be supported by the following documentation:

  • Government purchase orders
  • Documents showing direct payment by the U.S.

For more information, see:

Sales in Interstate or Foreign Commerce

Sales of items that involve shipments or deliveries from California to locations outside the state are generally exempt from sales or use tax if certain conditions are met.

Sales in interstate or foreign commerce must be supported by certain documentation, including documents showing the property was shipped or delivered to a point outside of California.

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Liquefied Petroleum Gas

The sale and purchase of liquefied petroleum gas (LPG) that is sold for household use in a qualified residence, provided that the LPG is delivered by the seller to the qualified residence into a tank with a storage capacity of 30 gallons or more are generally exempt from the sales and use tax under R&TC section 6353. The exemption also generally applies to the sale and purchase of LPG that is purchased for use by a qualified person to be used in producing and harvesting agricultural products, provided that the LPG is delivered into a tank with a storage capacity of 30 gallons or more.

To claim the exemption, the seller must timely and in good faith obtain and keep a exemption certificate from purchasers.

For more information, see:

Partial Exemptions

Manufacturing, Research and Development, and Electric Power Equipment Exemption

The sale and purchase of certain items purchased for use by a qualified person to be used primarily in manufacturing, research and development, and electric power generation or production, storage or distribution are generally partially exempt from sales and use tax under R&TC section 6377.1.

The partial exemption applies only to a portion of the state sales and use tax rate and does not apply to any local or district taxes.

To claim the partial exemption, the seller must timely and in good faith obtain and keep a partial exemption certificate from the purchasers.

For more information, see:

Diesel Fuel

The sale of diesel fuel used in certain farming activities and food processing are generally partially exempt from sales and use tax under R&TC section 6357.1.

The partial exemption applies only to a portion of the state sales and use tax rate and does not apply to any local or district taxes.

To claim the partial exemption, the seller must timely and in good faith obtain and keep a partial exemption certificate from purchasers.

For more information, see:

Farm Equipment and Machinery

The sale and purchase of certain farm equipment and machinery and their parts purchased for use by a qualified person to be used primarily in producing and harvesting agricultural products are generally partially exempt from sales and use tax under R&TC section 6356.5. The partial exemption may also apply to leases of certain farm equipment and machinery.

The partial exemption applies only to a portion of the state sales and use tax rate and does not apply to any local or district taxes.

For more information, see:

Racehorses

The sale and purchase of certain racehorse breeding stock are generally partially exempt from sales and use tax under R&TC section 6358.5.

The partial exemption applies to only to a portion of the state sales and use tax rate and does not apply to any local or district taxes.

To claim the partial exemption, the seller must timely and in good faith obtain and keep a partial exemption certificate from purchasers.

For more information, see:

Teleproduction or Other Postproduction Service Equipment

The sale and purchase of certain items purchased for use by a qualified person to be used primarily in teleproduction or other postproduction services are generally partially exempt from sales and use tax under R&TC section 6378. The partial exemption also generally applies to the sale and purchase of certain items purchased by a qualified person to be used primarily to maintain, repair, measure, or test the qualifying purchased items. The partial exemption may also apply to leases of certain teleproduction or postproduction equipment and machinery.

The partial exemption applies only to a portion of the state sales and use tax rate and does not apply to any local or district taxes.

To claim the partial exemption, the seller must timely and in good faith obtain and keep a partial exemption certificate from purchasers.

For more information, see:

Timber Harvesting

The sale and purchase of certain off-road commercial timber harvesting equipment and machinery, and their parts, purchased by a qualified person for use primarily in harvesting timber are generally partially exempt from sales and use tax under R&TC section 6356.6. The partial exemption may also apply to leases of certain off-road commercial timber harvesting equipment and machinery.

The partial exemption applies only to a portion of the state sales and use tax rate and does not apply to any local or district taxes.

To claim the partial exemption, the seller must timely and in good faith obtain and keep a partial exemption certificate from purchasers.

For more information, see: