Administrative Procedure AP 101: Organizations Exempt From Sales Tax
Table of Contents
101.1. Organizations Exempt From Sales Tax
G.L. c. 64H, § 6(d) and (e) provide an exemption from sales tax for organizations that are:
Agencies of the United States (sales made directly to the United States Government do not require an exemption certificate);
Agencies of the Commonwealth of Massachusetts or its political subdivisions (sales made directly to agencies of the Commonwealth do not require an exemption certificate); or
Religious, scientific, charitable or educational organizations exempt from federal taxation under § 501(c)(3) of the Internal Revenue Code and has obtained certification from the commissioner that it is entitled to such exemption.
For information regarding exemption from sales tax on purchases of tangible personal property by exempt government or 501(c)(3) organizations, see TIR 99-4. These organizations are also exempt from tax on certain building materials purchased by hired contractors. G.L. c. 64H, § 6(f). This exemption only applies, however, to building materials and supplies purchased exclusively for use in the construction, remodeling or repair of buildings or other structures "owned by" or "held in trust" for the benefit of these organizations. For general guidance on the types of purchases that may qualify for exemption under § 6(f), see DD 02-16. In certain cases, the exemption may be available to agents of exempt entities. Also see G.L. c. 64H, § 6(tt) and TIR 01-7, relating to contractor or subcontractor of a government body or agency providing qualified services in a public project.
Sales to § 501(c)(3) organizations are exempt when (1) the organization has obtained and presents a valid Certificate of Exemption, Form ST-2 and a properly completed Form ST-5, Sales Tax Exempt Purchaser Certificate; (2) if the goods purchased are used for the organization's stated purposes; and (3) the vendor keeps adequate records of the transactions as set out below in AP 101.1.7.
Government entities are encouraged, but are not required, to obtain a Certificate of Exemption and use an Exempt Purchaser Certificate when making exempt purchases. If the government entity does not offer an Exempt Purchaser Certificate, the vendor must maintain adequate documentation, generally, a copy of the government check, verifying that the purchaser is a government entity.
In the case of agencies or employees of the United States, an exemption may also be granted upon presentation of an official bankcard issued through the bankcard system and provided to federal government employees by the General Services Administration (GSA). See AP 101.2, Sales to the United States by Way of the General Service Administration, and TIR 99-9.
101.1.1. Application for Certification - Agencies of the United States or Commonwealth
Agencies of the federal government or the Commonwealth of Massachusetts are encouraged, but are not required, to complete an Application for Registration on-line through MassTaxConnect. The taxpayer will be notified the organization’s request is approved or denied.
101.1.2. Application for Certification - 501(c)(3) Organizations
Complete Application for Registration on-line through MassTaxConnect. The federal identification number and organization name must be entered on the application exactly as they appear on the IRS Determination Letter of Exemption. If the information submitted is insufficient, DOR may request additional information. Organizations must respond within the time limit specified by DOR.
Group Exemptions (for subordinate organizations covered by an IRS group exemption)
Complete Application for Registration on-line through MassTaxConnect. The subordinate organization's federal identification number not that of the parent organization, must appear on the application. If the information submitted is insufficient, DOR may request additional information. Organizations must respond within the time limit specified by DOR.
The DOR will notify the organization if the request is approved or denied.
Temporary Certificates - See TIR 96-9.
101.1.3. Use of the Certificate of Exemption (Form ST-2), Sales Tax Exempt Purchaser Certificate (Form ST-5) and Contractor's Sales Tax Exempt Purchase Certificate (Form ST-5C)
If the organization's request for exemption is approved, the organization will receive a Certificate of Exemption, Form ST-2, a Sales Tax Exempt Purchaser Certificate, Form ST-5, and a Contractor’s Sales Tax Exempt Purchase Certificate, Form ST-5C. An exemption certificate is effective as of the date on the certificate. In order to obtain the sales tax exemption, members or employees of the organization (or contractors working for the organization) must present these certificates to the vendor, unless an official U.S. Government bankcard is used. See AP 101.2, Sales to the United States.
Organizations making an occasional purchase of one or more items should check the "Single Purchase Certificate" box on the Form ST-5 and list the item(s) on the "Description of Property to be Purchased" line. If the organization repeatedly buys items from the same vendor, the "Blanket Certificate" box should be checked and the items should be listed on the "Description of Property to be Purchased" line. The organization needs only present that one Form ST-5 to the vendor provided that the items listed on the Form ST-5 accurately describe the items to be purchased. A copy of the organization's Form ST-2 must accompany the Form ST-5 given to the vendor if a 501(c)(3) organization.
Contractors purchasing materials to perform work for an exempt organization must sign Form ST-5C under the penalties of perjury and state that the items purchased will be used exclusively for that work. Contractors must also give: (1) the contract number; (2) the date of the contract and the estimated date of its completion; and (3) the location and description of the project. The exemption may be disallowed if the form is not completely filled out. Form ST-5C may not be used as a "Blanket Certificate;” contractors must present Form ST-5C each time they purchase building materials and supplies. A copy of the organization's Form ST-2 must accompany the Form ST-5C given to the vendor. Form ST-2 is not required for United States and Massachusetts governmental entities. The exempt organization must also sign and date both the Form ST-5 and the Form ST-5C.
If DOR discovers that the organization was incorrectly certified for the exemption, it may revoke its exempt status. The organization must then return its Certificate of Exemption, Form ST-2, to the Department of Revenue. Revocation of the Form ST-2 may subject an organization to audit.
101.1.5. Renewal Requirements
Exempt certificates are valid for ten years. See TIR 04-26. Assuming there are no changes in the organization, DOR will issue a renewal notice approximately thirty days prior to the expiration date.
101.1.6. Requesting Duplicate or Amended Copies of the ST-2
Requests for a duplicate or amended copy of the Certificate of Exemption, Form ST-2, can be made in writing, on-line or by phone. The following information may be necessary in order to complete your request:
(1) Corporate Name. If changed, state the old and new names and enclose a copy of the Articles of Amendment as filed with the Secretary of State.
(2) Address. If changed, give present and former ones.
(3) Federal Identification Number. If the organization is a subordinate organization, provide the subordinate organization's federal identification number, not the parent's identification number.
(4) Other Documents. If a corporate merger has occurred, send a copy of the Articles of Merger as filed with the Secretary of State and an updated IRS Determination Letter of Exemption reflecting the name of the surviving corporation. If a consolidation has occurred, send a copy of the Articles of Consolidation as filed with the Secretary of State. If the merger or consolidation has resulted in a new federal identification number, submit an application on MassTaxConnect for the new entity.
101.1.7. Instructions for Vendors
A vendor presented with a request for an exemption must:
(1) Verify that the organization's exemption is still valid by checking the expiration date of the Form ST-2 or renewal notice.
(2) Obtain a copy of the organization's Form ST-2 and Form ST-5 or Form ST-5C. The Form ST-5 and the Form ST-5C must be completely filled out. For each exempt transaction, the vendor must record the sales price, the name of the purchasing organization, the date of sale and the certificate numbers. The vendor should keep this information with his or her other business tax records.
If a government entity does not offer an Exempt Purchaser Certificate, the vendor must maintain adequate documentation, generally, a copy of the government check, verifying that the purchaser is a government entity.
For more information call or write:
Exempt Organizations Unit
P.O. Box 7010
Boston, MA 02204
G.L. c. 64H, §§ 6(d), (e), (f), (tt)
I.R.C. § 501(c)(3)
Form ST-2, Certificate of Exemption
Form ST-5, Sales Tax Exempt Purchaser Certificate
Form ST-5C, Contractor’s Sales Tax Exempt Purchase Certificate
The GSA utilizes a payment program for administering United States government purchases made by federal employees with bank cards or other credit cards (GSA cards). This program, called the GSA SmartPay Payments Program (GSA SmartPay), allows each federal agency to issue GSA cards to employees who are authorized to make government purchases on the credit of the United States. Federal employees may use the GSA cards for United States government purchases of goods, within an authorized spending limit, and for authorized travel and lodging, meals, entertainment or for personal purchases. Purchases using cards associated with Centrally Billed Accounts (CBA) are paid directly by the United States government and are exempt from taxation. Purchases using cards associated with Individually Billed Accounts (IBA) are paid by the cardholder and are generally subject to tax, even though the cardholder may be reimbursed later by the United States government. As of November 30, 2018, GSA SmartPay authorized purchases by federal employees using four different types of charge cards: Purchase, Fleet, Travel and Integrated. The program will be in effect until at least November 2022, and may be extended in three year increments until 2031. The Massachusetts Department of Revenue will accept the appropriate GSA card as evidence that a particular sale is exempt from sales tax under G.L. c.64H, § 6(d).
The following GSA cards are associated with Centrally Billed Accounts, and therefore a vendor or operator that accepts these cards is not responsible for collecting or remitting tax in connection with purchases made using these cards, as such purchases are generally exempt:
- GSA Purchase cards which state “U.S. Government Tax Exempt” and “Purchase” on the front of the card.
- GSA Fleet Cards which state “Fleet” on the front of the card.
- GSA Travel Cards which state “Travel” on the front of the card, if the first four digits on the card are 4614, 4615, 4486, 5565 or 5568, and the sixth digit from the left is 0, 5, 6, 7, 8, or 9.
- GSA Tax Advantage Travel cards which state “U.S. Government CBA Tax Exempt” and “Tax Advantage” on the front of the card, if the sixth digit is 0.
- GSA Integrated cards which state “U.S. Government Tax Exempt” and “Integrated” on the front of the card.
The rules governing room occupancy tax can be found in TIR 01-21, TIR 98-1 and TIR 99-9.
In order for a purchase to be exempt from Massachusetts tax, an authorized federal employee must present to the vendor the GSA card with appropriate identification at the time of purchase. A Certificate of Exemption (Form ST-2) and a Sales Tax Exempt Purchaser Certificate (Form ST-5) are not required. If the credit card system authorizes the sale, the vendor will charge no sales tax, but will otherwise treat the purchase as an ordinary credit card transaction. The words "U.S. Government Tax Exempt" will be imprinted on the vendor's copy of the sales receipt.
101.2.3. Record Retention
The vendor must retain the merchant copy of the GSA credit card sales receipt. The vendor has the burden of proving that an exemption was properly given. G.L. c. 64H, § 8; 830 CMR 62C.25.1.
If you have any questions about GSA credit card sales, you may call (617) 887-MDOR 6367 or write:
Massachusetts Department of Revenue
P.O. Box 7010
Boston, MA 02204
G.L. c. 64H, §§ 6(a), 8
830 CMR 62C.25.1
TIR 99-9 which supersedes TIR 88-9
Form ST-2, Certificate of Exemption
Form ST-5, Sales Tax Exempt Purchaser Certificate