Burden of Proof

Does the burden of proving tax-exempt status lie with buyer or seller? StaffApril 27, 2001

Q: If a customer tells you they are tax-exempt, does the burden of proof lie with the customer or with the seller?

Pattie Ormsby

A: Like most questions covering sales and use taxes, there is no single uniform answer to your question among the states. The states are behind the curve in providing guidance in many areas of tax compliance, including the area of exemption certificates. By obtaining an exemption certificate, the burden of proving that the sale was not exempt is on the state. Without an exemption certificate, the selling company will have the burden of proving on audit that the sale was exempt. Although states have become more relaxed in accepting other proof of exemption, and the customer purchase order may be acceptable proof on audit, the old-fashioned method of demanding tax exemption certificates from customers is still a safe bet.

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