Tools are always taxable unless you have a valid tax exemption that is not related to resale. State tax boards consider any items you are the final user of, such as solders, taxable.
Resale items include findings, metals, and gemstones. These can be non-taxable if you have a current reseller's tax license for the state your items are shipped to.
What counts as resale vs not
Eligible for resale exemption (with a valid certificate):
- Findings, chains, and beads that become part of jewelry you sell
- Sterling silver, gold-filled, and base metals you set or fabricate
- Gemstones and cabochons you set into pieces for resale
Always taxable (you are the final user):
- Hand tools (pliers, saws, hammers, files, burs, mandrels)
- Equipment (torches, kilns, motors, lathes, rolling mills)
- Measuring tools (loupes, calipers, scales)
- Shop supplies (solders, flux, pickle, polishing compounds)
- Books, software, and educational materials
When tools CAN be tax-exempt
If your tax exemption is based on the buyer being a tax-exempt entity, not on resale, tools may qualify. This applies to:
- Public schools, universities, and accredited educational institutions
- Federal, state, and local government agencies
- 501(c)(3) charitable organizations and 501(c)(6) qualifying non-profits
- Religious organizations (in some states)
If you fall into one of these categories, use the Submit Tax Exemption wizard and pick Educational, Federal Government, State or Local Government, Charitable, or Religious (depending on which option your state offers). Send a copy of your IRS Determination Letter or institution exemption letter to info@ottofrei.com so we can verify.
Common scenarios
I'm a self-employed jeweler with a resale certificate. Are my tools tax-exempt? No. Your resale cert covers metals and stones used in pieces you sell. Tools are still taxable.
I run a metalsmithing program at a public high school. Are tools tax-exempt? Likely yes, under your school's tax-exempt status. Use the wizard's Educational or State/Local Government option.
I'm a 501(c)(3) jewelry-making program for at-risk youth. Are tools exempt? Likely yes, under your charitable status. Use the wizard's Charitable option.