KealyWalker provides automated tax compliance and regulatory support, simplifying complex sales tax, telecom tax, and other industry-specific requirements with accuracy and expertise.

Are raw materials exempt from sales tax?

In most states, raw materials and components that become a physical part of a manufactured product for sale are exempt from sales tax, generally under a resale or manufacturing input exemption. The exemption is fact-specific — items consumed in production but not incorporated into the final product (such as cleaning supplies or certain catalysts) may be treated differently — and the manufacturer must hold appropriate documentation to support each exempt purchase.

Does manufacturing equipment qualify for a sales tax exemption?

Most states provide a machinery and equipment (M&E) exemption for assets used directly in manufacturing, but the qualifying rules are tightly drawn: equipment must typically be used predominantly in qualifying production activity, and ancillary items (forklifts, packaging equipment, repair parts) are sometimes excluded. A state-by-state M&E review is essential to apply the exemption correctly and defend it on audit.

How does drop-shipping affect my sales tax obligations?

Drop-shipping involves three parties — the seller, the customer, and the manufacturer or distributor who ships directly to the customer — and state rules vary on who is responsible for tax. In states that do not accept out-of-state resale certificates, the shipping party may be required to collect tax from the reseller even when the underlying sale to the end customer is for resale. Mapping these scenarios is critical to avoiding unexpected exposure.

What creates sales tax nexus for a manufacturer?

Manufacturers typically create physical nexus through plants, warehouses, sales reps, traveling technicians, and inventory storage — including consigned inventory. Economic nexus also applies once a manufacturer crosses the remote-seller threshold of a state for taxable sales. Because manufacturers often ship into many states and may have field service or installation activity, nexus can be present in places that are not always obvious.

Industries · Manufacturing & Distribution

Manufacturing & Distribution Compliance

Manufacturing sales tax compliance is built on exemption certificates, accurate use tax accruals, and tight documentation. KealyWalker provides manufacturer sales tax exemption management and multi-state manufacturing tax filing for producers, processors, and distributors that ship across the country — so the exemptions you are entitled to actually survive an audit.

Who this is for

1
Discrete and process manufacturers
2
Industrial fabricators and contract manufacturers
3
Distributors and wholesalers with manufacturing operations
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Drop-shippers and direct-ship vendors
5
Equipment and capital goods producers

Industry-tuned: compliance guidance built around how you actually operate.

Who This Is For

Built for your business model

We specialize in the compliance patterns common to your industry — so you get advice grounded in how your business actually operates.

Discrete and process manufacturers
Industrial fabricators and contract manufacturers
Distributors and wholesalers with manufacturing operations
Drop-shippers and direct-ship vendors
Equipment and capital goods producers

Key Compliance Challenges

The compliance terrain you face

Raw materials and component exemptions

Inputs consumed in production are typically exempt — but documentation requirements vary by state and the exemption is often denied on audit.

Machinery and equipment exemptions

Most states offer M&E exemptions, but qualifying rules differ widely. Maintenance, repair parts, and consumables are often treated separately.

Use tax accrual

Untaxed purchases consumed in operations create use tax exposure. Most audits surface here.

Drop-ship transactions

Three-party drop-ship deals have inconsistent sourcing and exemption rules — and the manufacturer often ends up on the hook.

Exemption certificate management

Resale and exempt-use certificates have to be collected, validated, and refreshed. Missing one invalidates the exemption on audit.

Multi-state filing footprint

Operating, shipping into, or warehousing in multiple states quickly creates a complex monthly filing calendar.

How KealyWalker Helps

A focused services bundle

Our work for this industry is anchored by our Sales & Use Tax Compliance practice.

Exemption certificate program

Collection, validation, storage, and renewal.

M&E and raw materials review

State-by-state mapping of qualifying purchases.

Use tax accrual & filing

Identify accruable purchases and report correctly.

Drop-ship transaction support

Documentation and sourcing under three-party rules.

Multi-state SUT returns

Monthly and quarterly filings across all jurisdictions.

Audit defense

We manage the auditor relationship and exposure cleanup.

FAQ

Frequently asked questions

Let us map your compliance footprint

Schedule a working session — we will review your exposure and outline a practical next-step plan.

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