Glossary definition

What is tax exempt?

Tax Exempt

Tax exempt (or exempt from tax) is an employee-level setting in payroll. The company and/or the employee is not subject to the tax, so wages are not reported and no tax is calculated for the exempt tax.

See also: Subject Do Not Take Tax, Subject to Tax

Note: It is good payroll practice to obtain a copy of the company’s certificate of exemption and keep it on file should questions arise as to why a tax was not calculated for a company.

 

Subscribe to our Sage Advice Newsletter

Get our latest business advice delivered directly to your inbox.