New York State provides a range of sales tax exemptions for specific types of buyers, specific types of goods, and specific uses of purchased items. Understanding which exemptions are available — and which ones your business may be entitled to claim or required to honor — is fundamental sales tax compliance knowledge for any business operating in New York.
This article provides a plain-English overview of the most common and most significant New York sales tax exemptions. It is not an exhaustive list — New York's exemption framework is extensive — but it covers the categories that affect the largest number of businesses and transactions.
While our office is based on Long Island, we represent businesses navigating NYS sales tax exemptions and compliance issues throughout New York State.
Resale exemption: the most widely used exemption in New York
The resale exemption allows businesses to purchase goods without paying sales tax when those goods will be resold to customers in a taxable transaction. A retailer buying inventory from a wholesaler, a contractor buying materials that will be incorporated into a taxable job, a restaurant buying food that will be served to taxable customers — these are all resale transactions exempt from tax at the point of purchase.
The exemption requires a valid resale certificate (Form ST-120) from the buyer and applies only to goods that will actually be resold. Goods purchased for internal use — office supplies, equipment, items consumed in the business — are not eligible for the resale exemption even if the buyer is in the business of selling similar goods.
Clothing and footwear under $110
New York exempts clothing and footwear items that cost less than $110 per item from the state sales tax. This exemption is significant for clothing retailers and applies statewide — with the important caveat that New York City imposes its local tax on all clothing regardless of price. Accessories, sporting equipment used for athletic activity, and protective gear generally do not qualify for this exemption.
Food for home consumption
Unprepared food sold for off-premises consumption is generally exempt from New York sales tax. This exemption covers groceries, raw ingredients, packaged food items, and most products sold in a grocery store context. The exemption does not extend to candy and confections, most beverages, prepared food, or hot food — all of which are taxable regardless of where they are consumed.
Prescription drugs and durable medical equipment
Prescription drugs dispensed pursuant to a valid prescription are exempt from New York sales tax. Durable medical equipment prescribed by a licensed health professional for a patient's medical use is also exempt. The prescription requirement is essential — over-the-counter drugs and medical supplies sold without a prescription are generally taxable.
Manufacturing and production equipment
New York provides a significant exemption for machinery, equipment, and tools used directly and predominantly in the production of tangible personal property for sale. A manufacturer who purchases equipment used on the production floor to make goods that will be sold is purchasing that equipment for an exempt manufacturing purpose.
The manufacturing exemption is specific and requires that the equipment be used directly in production — not in administration, shipping, or other non-production functions. Equipment used partly in production and partly in non-production activities may be partially exempt.
Nonprofit and exempt organization exemption
Qualifying nonprofit organizations, religious institutions, educational institutions, and governmental entities are exempt from New York sales tax on purchases made for their exempt purposes. These organizations must have a valid exemption certificate (Form ST-119.1) and must use the purchased goods or services for their exempt activities — not for commercial or unrelated business purposes.
Agricultural exemption
New York provides exemptions for purchases made by qualifying farmers for direct use in agricultural production. Feed, seeds, fertilizer, farm machinery, and other qualifying agricultural inputs are exempt when purchased by a qualifying farmer for use in agricultural production. The exemption requires that the buyer be engaged in farming and that the purchased items be used directly in that farming activity.
Capital improvements to real property
The capital improvement exemption — where a property owner who has work performed on their real property does not pay sales tax on the contractor's charge — is one of the most economically significant exemptions in New York. The contractor pays tax on materials but does not charge the property owner tax on the contract price. The property owner must complete Form ST-124 certifying the capital improvement status of the work.
Energy exemptions
New York provides sales tax exemptions for certain energy purchases, including fuel and utilities used directly in manufacturing and production, and residential energy purchases in some circumstances. These exemptions are complex and fact-specific — the specific use of the energy and the character of the purchasing entity both matter.
For situations where exemptions have been incorrectly claimed or incorrectly refused, see our guide on what to do when you owe NYS sales tax.
Why work with an experienced New York sales tax attorney
NYS sales tax matters are not like federal tax issues. The New York State Department of Taxation and Finance has its own procedures, its own auditors, and its own enforcement playbook — and it moves aggressively. New York's exemption framework is complex — qualifying for an exemption requires not just meeting the substantive criteria but following the correct procedures, using the right forms, and maintaining proper documentation. Mistakes in either direction — over-collecting or under-collecting — create compliance issues. Here is what an experienced New York sales tax attorney brings to the table:
Deep knowledge of DTF audit procedures. We know how auditors are trained, what indirect methods they use, and where their assessments can be challenged. Generic tax help is not enough here.
Direct negotiation with the Tax Department. We communicate with the DTF on your behalf from day one — protecting you from statements that can be used against you and positioning the case correctly from the start.
Personal liability protection. NYS sales tax is a trust fund tax. If your business owes it, the state can and will pursue you personally. An attorney identifies and limits that exposure before it becomes a personal financial crisis.
Knowledge of every resolution option. From installment agreements to Voluntary Disclosure to formal appeals — we know which path fits your situation and how to negotiate the best possible outcome.
Local presence, statewide reach. Our practice is based on Long Island and focused exclusively on New York tax problems. We are not a national call center. When you work with us, you work directly with an attorney who knows New York State tax law from the inside.
Speak with a New York sales tax attorney
If you are dealing with a question about whether your business qualifies for a specific exemption, an exemption certificate dispute in a DTF audit, or a compliance review of your exemption practices, do not wait for the situation to escalate. The sooner you have qualified representation, the more options remain available to you.
Contact our office to speak directly with a New York sales tax attorney. While our office is based on Long Island, we represent businesses and individuals facing NYS sales tax problems throughout New York State — from New York City and Long Island to Westchester, the Capital Region, the Hudson Valley, and beyond. Call us or use the contact form at Tax Problem Law Center to schedule a consultation.