Items exempt from sales tax vary by state, but a common core runs through almost every state that collects the tax: groceries for home preparation, prescription drugs and prescribed medical equipment, purchases by governments and qualifying nonprofits, and goods bought for resale. Menstrual products are now exempt in roughly half of taxing states, and most professional services fall outside the sales tax base entirely. Five states — Alaska, Delaware, Montana, New Hampshire, and Oregon — impose no statewide general sales tax at all, so everything sold there is exempt from a state-level charge, though some Alaska localities apply their own tax.
Groceries and Unprepared Food
Groceries bought for home preparation are exempt in the large majority of states. As of January 2026, only eight states still impose any statewide tax on groceries: Alabama, Hawaii, Idaho, Mississippi, Missouri, South Dakota, Tennessee, and Utah. That list keeps shrinking. Arkansas and Illinois both eliminated their grocery taxes at the start of 2026, Kansas dropped its in January 2025, and Oklahoma removed its 4.5% grocery tax in late 2024. Several of the remaining states are phasing rates down instead of ending the tax outright. Alabama cut its grocery rate to 2%, and Mississippi reduced its to 5% with annual decreases scheduled through 2036.
The exemption almost always covers only unprepared food. A bag of rice, a carton of eggs, or a package of raw chicken qualifies. A rotisserie chicken from the deli counter or a sandwich from a restaurant usually does not. States draw the line at food sold ready to eat and treat those purchases like any other taxable retail sale.
Prescription Drugs and Medical Equipment
Prescription medications are exempt from sales tax in every state that collects sales tax. This is one of the few truly universal exemptions.
Most states also exempt durable medical equipment when a licensed provider prescribes it. Wheelchairs, oxygen concentrators, prosthetic limbs, hearing aids, and corrective eyeglasses commonly qualify. The key requirement is usually a prescription or a letter of medical necessity. The same physical product bought without one may be fully taxable. Over-the-counter medications get less consistent treatment. Some states exempt them; many do not, so aspirin and cough syrup can carry sales tax even where prescription drugs are completely exempt.
Menstrual Products and Diapers
Roughly 24 states with a sales tax have passed legislation eliminating the tax on menstrual products. The argument that pads and tampons are basic health necessities rather than luxury goods has gained broad bipartisan support. Several states have also extended exemptions to diapers for both children and adults. Arkansas has a 2026 ballot initiative that would exempt both feminine hygiene products and diapers from state sales tax, which could push the total higher.
Clothing and Sales Tax Holidays
A handful of states permanently exempt basic clothing from sales tax. Most states tax clothing at the standard rate year-round, with one big exception: sales tax holidays. These designated weekends, usually in late July or August before the school year begins, temporarily remove sales tax from clothing, school supplies, backpacks, and sometimes computers. Nineteen states held sales tax holidays in 2025, and multiple states have scheduled them for 2026.1Tax Foundation. Sales Tax Holidays by State, 2025
The details vary. Some states cap clothing exemptions at $100 per item, others at $125. School supplies are often capped at $20 to $50 per item. Computers may qualify up to $750 or $1,500 depending on the state. Items above the price cap remain fully taxable during the holiday. Back-to-school shopping is the most common category, but some states also run holidays targeting emergency preparedness supplies like generators and batteries, or ENERGY STAR-rated energy-efficient appliances.
Holidays typically last only two to four days. Missing the window means paying full tax, and not every state participates.
Nonprofit and Government Purchases
Sometimes it’s the buyer’s status, not the item, that triggers an exemption. Federal, state, and local government agencies are generally exempt from paying sales tax on purchases made for official use.
Private organizations can qualify too, but the bar is higher. The starting point is usually federal recognition as a tax-exempt entity under Section 501(c)(3) of the Internal Revenue Code, which covers organizations operated exclusively for charitable, religious, educational, or scientific purposes with no private profit motive.2Office of the Law Revision Counsel. 26 USC 501 – Exemption From Tax on Corporations, Certain Trusts, Etc. Federal 501(c)(3) status alone doesn’t automatically exempt an organization from state sales tax. Most states require a separate application for a state-level sales tax exemption and issuance of a certificate or exemption letter. The organization then presents that certificate to vendors when making purchases.
Purchases also need to align with the organization’s exempt purpose. Office supplies for a charity’s operations qualify. Personal items charged to the charity’s account do not, and auditors look for that kind of mismatch. Misusing an exemption certificate can bring fines, liability for all unpaid tax plus interest, and in cases of deliberate fraud, criminal charges.
Business Purchases for Resale
Sales tax is designed to be paid once, by the final consumer. A retailer buying inventory from a wholesaler doesn’t pay sales tax on that purchase because the retailer will collect tax when the item sells to the customer. Manufacturers use the same mechanism when buying raw materials or components that become part of a finished product.
To claim the exemption, the purchasing business gives the seller a resale certificate showing the business’s legal name, state tax registration number, and a description of what’s being bought for resale. The seller keeps that certificate on file. If a business later uses a resale-purchased item internally instead of reselling it, the business owes the avoided tax, plus interest in most states. Some states issue resale certificates that never expire; others require periodic renewal.
Professional Services and Repair Labor
Sales tax was built around physical goods changing hands across a counter. Professional services, where the value is expertise rather than a tangible product, generally fall outside the sales tax base. Legal advice, accounting work, medical consultations, and management consulting are not subject to sales tax in most states. The few states that broadly tax services, such as Hawaii and New Mexico, are the exception.
Repair and maintenance work sits in a middle ground. In most states, the parts installed during a car repair or plumbing job are taxable, but the labor is not. Providers usually need to itemize their invoices so the correct amount of tax applies. When invoices lump everything together, the entire charge may become taxable by default in some states.
Digital Products and Software
Digital treatment varies more than any other category. Under the Streamlined Sales Tax framework that many states follow, downloaded digital products like music, movies, and e-books are taxable in participating states. Streaming subscriptions are a separate question. Unless a state’s law specifically reaches subscriptions or temporary access, the tax may only apply to permanent downloads.3National Conference of State Legislatures. Taxation of Digital Products
Software as a Service, where the program runs in the cloud and nothing is downloaded, adds another layer. About half the states now tax SaaS. The other half treat it as a nontaxable service because no tangible property or permanent digital copy changes hands. A business subscribing to project management software might owe sales tax in one state and nothing in another. Someone streaming movies pays tax in roughly half the country. Checking your specific state’s position matters more here than following any general rule.
Agricultural and Manufacturing Inputs
Most states exempt agricultural inputs to keep food production costs from cascading through the supply chain. Feed for livestock raised for food, seed for planting, fertilizer, and pesticides commonly qualify. The exemption typically requires commercial agricultural use, not hobby farming. Feed for pets or non-food animals usually remains taxable.
Manufacturing gets similar treatment. Machinery and equipment used directly in production are exempt in many states, on the theory that taxing them would ultimately raise the price of finished consumer goods. The qualifying criteria tend to be specific: the equipment must be used at a fixed location, its primary function must be manufacturing (often meaning more than half the activity at that location), and it must produce goods for sale. Office furniture, delivery vehicles, and general-purpose tools that aren’t part of the production line usually don’t qualify.
When Exempt Doesn’t Mean Free: Use Tax
Exemptions only tell half the story. Even when you buy something without paying sales tax, you may owe a separate obligation called use tax. Use tax exists to close the gap on out-of-state and online purchases. If you buy furniture from an out-of-state retailer that doesn’t collect your state’s sales tax, you generally owe your state the equivalent amount as use tax at the same rate.
Since the Supreme Court’s 2018 decision in South Dakota v. Wayfair, most large online retailers and marketplace platforms like Amazon and eBay are required to collect sales tax once they exceed a state’s economic nexus threshold, typically $100,000 in sales into that state. That has cut the number of untaxed online purchases sharply. Smaller sellers below those thresholds may not collect tax, and purchases from individuals, foreign websites, or businesses not set up for tax collection can still arrive tax-free. In those situations, the buyer technically owes the use tax.
Enforcement against individual consumers is rare for small purchases, but many states include a use tax line on their income tax returns. Some provide a lookup table based on income so you can estimate what you owe without tracking every receipt. The obligation is worth knowing about for large cross-state purchases like equipment, vehicles, or furniture, where the dollar amounts can attract attention.