To qualify for tax exemption, a nonprofit charity must devote most of its activities to alleviating poverty, disease, pain and suffering by providing food, medical treatment, shelter, clothing or counseling directly to individuals for little to no fee. The charity must get its primary funds from sources other than fees, such as donations and fundraising.
A charity that is exempt under Internal Revenue Code (IRC) Sections 501(c)(3), (4), (8), (10) or (19) can apply for a sales tax exemption on items purchased for use by the organization. Exempt organizations must collect tax on most of their sales of taxable items.
A charity that is exempt under IRC Sections 501(c)(2), (3), (4), (5), (6), (7), (8), (10), (16), (19) or (25) can apply for a franchise tax exemption.
A qualifying charity can apply for an exemption from the 6 percent state portion of hotel occupancy tax, unless its exemption is based on a federal exemption.
To apply for exemption, submit Form AP-205, Texas Application for Exemption – Charitable Organizations (PDF), to the Comptroller's office.
Unincorporated organizations must include a copy of the organization's governing document, such as the bylaws or constitution, with the application. The document must show that the organization is nonprofit.
The Comptroller’s office will review a corporation's formation documents on file with the Texas Secretary of State to verify that the corporation's purpose is consistent with our requirements. Non-Texas corporations must also include a copy of the corporation's formation documents and a current Certificate of Existence issued by their state of incorporation.
If your application is approved, our office will send a letter or email notification that includes links to print additional verification letters and Form 01-339, Texas Sales and Use Tax Resale / Exemption Certification (PDF) to give to sellers.
When buying a taxable item, give the seller a completed exemption certificate (PDF) to document the exempt sale.
If a seller chooses not to accept an exemption certificate, ask the seller to provide a completed Form 00-985, Assignment of Right to Refund (PDF), so your organization can request a refund from the Comptroller’s office.
For exemption from the state portion of the hotel occupancy tax, charities must present Form 12-302, Texas Hotel Occupancy Tax Exemption Certificate (PDF), to the hotel.