Most purchases by local governments or nonprofit organizations are exempt from sales tax. However, certain purchases are taxable:

• Items not used to perform the exempt functions of a nonprofit organization
• Prepared food, candy, soft drinks, alcoholic beverages, and catered food
• Lodging
• Construction materials for buildings or facilities which are not principally used by the local government or nonprofit organization
• Construction materials and supplies by a contractor or subcontractor under a lump-sum contract
• Purchases subject to other taxes, such as solid waste management tax or petroleum tax

Purchases made by an employee, even if reimbursed, are taxable. Exempt organizations must directly purchase goods and services for their exemption to apply.

Although cities, counties, and townships are exempt from general sales and use taxes, they must pay other types of special local taxes, such as restaurant, liquor, or lodging taxes.

For more information, see Governments – Local Governments.