The following categories of purchased goods or services are generally exempt from sales tax. Select a category for description and examples:
Qualified federally sponsored purchases by Stanford where the Federal government takes title at the time of purchase. This also applies to subcontracts with non government entities where the prime contract/grant is federally funded. For more information, refer to Sales and Use Tax Guidelines (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. For more information, refer to Sales and Use Tax Guidelines (page 6).
Property purchased for resale by Stanford, or property purchased that will become a part of such property, is exempt. A resale certificate should be issued to the vendor. 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. For more information, refer to Sales and Use Tax Guidelines (page 13).
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. "Shipping and Handling" is not a separately stated charge. Note: Handling is taxable. For more information, refer to Sales and Use Tax Guidelines (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. For more information, refer to Sales and Use Tax Guidelines (page 5).
A separate charge for an OPTIONAL software maintenance agreement is 50 percent 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. For more information, refer to Publication 119: 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). For more information, refer to Publication 119: 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 documents 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. For more information, refer to Sales and Use Tax Guidelines (page 14).
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. For more information, refer to Sales and Use Tax Guidelines (page 5).
As a research institution, certain purchases made by Stanford are eligible for a reduced California sales tax rate. iProcurement automatically determines eligibility of requisitions that qualify for the tax discount. Submit a Support Request to inquire about eligibility for this tax discount.
For more information on exemptions, please refer to CDTFA Publication 61: Sales and Use Taxes: Exemptions and Exclusions.
Note: The "System Generated Tax Exemption" category used in iProcurement is reserved for Oracle system use only. Please do not select when specifying tax status. This tax exempt category is programatically assigned by the system when a line item meets special non-taxable criteria.
Disclaimer: Stanford University does not offer personal tax advice. Nothing on this website shall be construed as the offering of tax advice. Stanford recommends seeking professional tax