Handling Exemptions

Sales tax exemptions apply when customers such as non-profits, resellers, and government agencies provide a valid exemption certificate. To ensure compliance, you must attach that certificate (or mark the order as exempt) when creating your cart; once an order is finalized, you cannot retroactively add exemptions.

This guide walks you through:

• What you need before attaching an exemption certificate
• Two ways to apply an exemption: directly by certificate ID or automatically through matching.
• Best practices and common errors to avoid.

By following these steps, you can ensure exempt transactions are processed smoothly and remain compliant with state requirements.

What you’ll need

• A certificate already created in TaxCloud and showing an “Active” status. (Use the Create Exemption Certificate endpoint if you don’t have the certificate yet).
• Either the certificate’s ID or enough matching data: customerID, destination.state, and your connectionID, for auto-match to work.

Applying Exemption Certificates

Once you have an active certificate, you can apply it to a cart in one of three ways:

Option A – Direct attach by ID

Add an exemption object with exemptionID to the same cart payload you used earlier.

Sample Request (Python)

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payload = {
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    "items": [
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        {
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            "currency": { "currencyCode": "USD" },
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            "customerId": "customer-453",
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            "destination": { "city": "Austin", "state": "TX", "zip": "78701" },
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            "origin": { "city": "Austin", "state": "TX", "zip": "78701" },
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            "exemption": { "exemptionId": "a1b2c3d4-ID" },
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            "lineItems": [
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                {
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                    "index": 0,
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                    "itemId": "item-1",
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                    "price": 100,
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                    "quantity": 1,
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                    "tic": 0
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                }
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            ]
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        }
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    ]
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}

TaxCloud validates the certificate ID, confirms it is active for that destination state, and returns zero tax on the response.

Option B – Auto-match

If you don’t know the certificate ID, set “exemption”: “isExempt”: true in your cart. TaxCloud will try to find an active certificate that matches the same connectionID, customerID, and destination state. If a match is found, tax is zeroed. If no certificate exists, the cart (and later the order) is flagged Exempt—No certificate and will need manual resolution before filing.

Best practices

• Store certificate IDs in your customer profile so you can attach them explicitly and avoid auto-match surprises.
• Certificates can expire; monitor expiry dates and renew as needed.
• A single buyer might hold multiple, state-specific certificates—always match the destination state.
• If you mistakenly mark isExempt: true and no valid certificate exists, TaxCloud flags the order as Exempt—No certificate, which must be resolved before the transaction can be filed.

Common errors

• 400 CertificateNotValid – Invalid Certificate ID.
• 422 IncorrectCertificate– Missing certificate details.

Next step

With tax (or zero tax) confirmed, proceed to Convert Carts to Orders to convert the transaction, and if complete, record the liability. For comprehensive knowledge on managing your tax exemptions, please see our guide here.