Resources: Common Sales Tax Exempt Categories

Qualified federally sponsored purchases by Stanford where the Federal government takes title at the time of purchase. This also applies to subcontracts with nongovernment entities where the prime contract/grant is federally funded.See Sales and Use Tax(page 17).

The sale of services (including consulting) where no tangible personal property is transferred, or where the transfer of property is incidental, is non-taxable.

Labor charges for the installation or application of a product are non-taxable. Labor charges to repair a product to perform its original function are non-taxable. However, improving or changing a product's function constitutes fabrication which is taxable.See Sales and Use Tax(page 7).

Property purchased for resale by Stanford, or property purchased that will become a part of such property, is exempt. However, sales tax must be collected on the price of the property when it is sold. If the property is used before it is resold, the purchaser becomes liable for use tax. SeeSee Sales and Use Tax(page 6).

Separately stated charges for transportation (freight) of property from the vendor directly to Stanford are not subject to tax if the property is transported by common carrier and the amount charged is the cost of the transportation.See Sales and Use Tax(page 7).

In general, food products purchased as groceries are exempt except for the following items which are taxable: alcoholic or carbonated beverages, dietary supplements, meals consumed on the seller's premises, hot prepared foods, and food served at places charging admission, which are taxable.See Sales and Use Tax(page 5).

A separate charge for an OPTIONAL software maintenance agreement is 50% taxable if the purchase includes delivery of any physical products during the term of the agreement (for example, purchaser receives software updates on CD). The tax will be charged at the time the invoice is paid. See State Board of Equalization – Warranties and Maintenance Agreements.

An optional warranty or maintenance agreement is a contract that the purchaser may choose to purchase for an additional charge. If the product can be purchased without buying the warranty, the warranty is optional. (e.g., an extended repair warranty for a computer or electronic device, an extended mileage warranty for a car, a service plan for a refrigerator.) See State Board of Equalization – Warranties and Maintenance Agreements.

Electronically delivered, commercially available, non-customized computer programs where no tangible media such as a CD or DVD is received. Vendor's invoice should state that the product is delivered electronically.

Computer programs prepared to the special order of Stanford are non-taxable. Separately stated service charges for modification to an existing prewritten program are also exempt only to the extent of the modification. Excluded are non-custom computer programs.See Sales and Use Tax(page 4).

Prescription medicines are non-taxable if 1) prescribed for human use and dispensed by a registered pharmacist, 2) furnished by or sold to a licensed medical professional for patient treatment; 3) furnished by a health facility pursuant to the order of a licensed physician or,4) furnished by a government-operated medical facility.See Sales and Use Tax(page 6).

Patents / licenses / copyright / royalties / other fees

Original works of art purchased for free public display in museums are non-taxable. See State Board of Equalization – Sales And Use Tax Regulation 1586. Works of Art and Museum Pieces for Public Display.