Exemption Certificates and GST/HST on Research Purchases

Which US states exempt research and development purchases from sales tax and how is the certificate presented to a vendor, when does use tax apply to supplies bought from out of state or abroad, and how do Canadian universities recover GST/HST through the public service body rebate?

In the United States, whether a research purchase is exempt from sales tax depends on the state. Some states, including New York, exempt tangible personal property used directly and predominantly in research and development, and the buyer claims the exemption by giving the vendor a certificate at the time of sale ^[1]. Where no exemption applies, or the vendor does not collect, the buyer may owe use tax directly.

In Canada the model is different. Goods and services tax and harmonised sales tax are charged on the purchase, and eligible institutions then recover part of the tax through the public service bodies' rebate. A university claims 67 percent of the federal part, and the provincial part varies by province ^[4]. One system exempts at the till. The other refunds later.

Exemption at the point of sale versus rebate afterwards

The difference is practical, not just technical. With an exemption, the vendor's invoice shows no tax and the buyer's job is to supply a certificate before the sale. With a rebate, the invoice shows the full tax, the grant is charged for it or the institution absorbs it, and the recovery happens in a periodic claim handled by finance staff.

For a lab, this changes what you ask the vendor. A US buyer asks whether the vendor will accept the institution's certificate and in what format. A Canadian buyer asks that the invoice show the tax separately, with the vendor's registration number, because without that the claim cannot be supported.

US state research and development exemptions

There is no federal sales tax, so every rule here is a state rule. Two states show how far they differ.

The New York bulletin, issued in 2014 and last updated on 25 February 2026, lists exclusions. They include testing or inspecting materials or products for quality control, efficiency and consumer surveys, items used in activities collateral to the research such as office furniture, and installation and repair services on exempt equipment, which remain taxable ^[1]. A reagent used in an experiment is within the intended scope. The same reagent used only in routine quality testing of a manufactured product may not be.

California's treatment is different in kind, and the details, including rate and conditions, are on the state's own guide, which should be read on the live page ^[2]. Other states have no research exemption at all, or confine it to specific industries. Do not assume that a rule that applies in one state applies in the next.

The exemption certificate

The certificate is the buyer's statement to the vendor that the purchase qualifies. In New York the form for this is the Exempt Use Certificate, Form ST-121, given to the supplier. A refund route also exists: where the buyer paid tax on a qualifying purchase, Form AU-11 claims a refund or credit ^[1].

A number of states accept a common multi-state form. The Streamlined Sales Tax Governing Board publishes a Certificate of Exemption that member states accept, and its pages explain which states and which exemption reasons it covers ^[3]. Whether a given state accepts it for a research claim is a question for that state's guidance, not for the form.

Certificates are issued as single-purchase or blanket. A single-purchase certificate covers one transaction. A blanket certificate covers repeated purchases of a described kind from one vendor, usually for a stated period. A blanket certificate is convenient for a lab that reorders the same consumables, but it must still match the actual use of each purchase. Many vendors will ask for a fresh certificate periodically, and each state sets its own validity rules.

Use tax: when the buyer owes what the vendor did not collect

Use tax complements sales tax. It applies when tax was due on a purchase and the seller did not collect it, typically because the seller has no obligation to collect in the buyer's state. The buyer reports and pays it directly to the state, at the rate that would have applied if the sale had been local.

Two points follow for a research purchase. First, a research exemption, where it exists, reduces use tax in the same way as sales tax, so a qualifying purchase from an out-of-state supplier may owe nothing. Second, the exemption has to be claimed. If the invoice shows no tax and the purchase does not qualify for an exemption, the institution's tax office usually accrues use tax on the invoice at payment. Ask your accounts payable team how they handle it so the lab does not double-pay by accepting tax from the vendor and also accruing it.

For goods imported from outside the United States, customs duty is a separate charge from state sales or use tax. Do not treat one as covering the other.

Canada: GST/HST and the public service body rebate

A Canadian university pays GST or HST on its purchases like any other buyer. It then recovers part of that tax by filing a public service bodies' rebate application, Form GST66, with a provincial schedule where the provincial part of HST is involved. The Canada Revenue Agency's guide RC4034 explains how the rebate is calculated and claimed ^[4].

As stated in the guide when read on 10 October 2026, a university may claim 67 percent of the GST or the federal part of the HST paid on property and services used in operating the university. The provincial part depends on the province. The chart in the guide shows 78 percent for Ontario and 67 percent for Nova Scotia, and 0 percent for universities in New Brunswick, Newfoundland and Labrador, and Prince Edward Island ^[4]. These percentages are set in the Public Service Body Rebate (GST/HST) Regulations ^[5], and they can change. Read the current chart before relying on any of them.

Supporting records are not sent with the claim but must be kept; the guide says original invoices and records are to be kept for six years ^[4]. Finance offices therefore need invoices that show the vendor's name, the date, the tax amount and the vendor's registration number.

Quebec and other provincial differences

Quebec administers its own sales tax, the QST, separately from the federal GST, and it has its own rebate rules for institutions. The same is true of the provincial sales taxes in the provinces that did not harmonise. A lab in one of those provinces will see a federal GST line and a separate provincial line on the invoice, and the two are recovered, if at all, through different channels.

Do not copy an Ontario or Nova Scotia treatment into another province. Ask the finance office which provincial rules apply to your institution and obtain the current text from the provincial revenue authority.

Keeping the certificate and rebate records with the invoice

• United States: a copy of the exemption certificate presented, with the date and the vendor's acknowledgment.
• United States: the basis for treating the purchase as qualifying, such as the project and the use, written at the time.
• United States: any use tax accrual entry, with the rate and the reference.
• Canada: the invoice showing the tax separately and the vendor's registration number.
• Canada: the rebate application period in which the tax was claimed.
• Both: the lot number and the receipt record, so the tax file and the research file point to the same item.

What to check next

Ask your finance office three things. Does our state or province treat this kind of purchase as exempt or rebate-eligible? Which certificate or claim form do you file, and who signs it? How do we want the vendor's invoice to look so that you can process it? Write the answers into the lab's purchasing procedure and review them once a year.