Being tax exempt means that you will become partially or totally exempt from paying taxes. Being exempt means that you are not held to the law saying that you need to pay those monies to the state. Although there are not many people or businesses the in the United States that can become tax exempt it is possible for certain groups to become tax exempt after filling the proper paperwork.
Paying taxes is something that most people become accustomed do as it is something that they have to do every year. They pay the state tax on the money that they make. Any money they earn they will pay taxes to the Internal Revenue Service on.
There are a few groups of people that can become tax exempt. The main group that are eligible to be tax exempt are non-profit organizations. Since non profits do not actually take in income for themselves they are generally able to become tax exempt quite easily. Although non profits bring in money from donations none of that money is considered assets or income because the money gets distributed to help others and the economy so they are not required to pay taxes on that.
Tax exemption doesn't always mean that they will not have to pay taxes at all. Sometimes tax exemption doesn't necessarily mean full exemption from tax. Sometimes the Internal Revenue Service will make it so you only have to pay taxes on a very minimal amount of money or assets.
Tax emption requires you to fill out paperwork in order to become exempt. Generally when filing to become tax exempt there is a larger amount of paperwork due then there would be if you were simply filing for income taxes. You will need to be able to show the Internal Revenue Service on paper that you are eligible to have you income taxes exempted. It usually is quite easy for non profits to prove this. If your paperwork is in order and you have your non-profit license on hand it's usually a pretty easy process.
Although there are not many groups that can get exempt tax status the ones that get exempt status are the ones that deserve it. If non profits had to pay money on the income they made but did not keep they would lose a significant amount of their donations to taxes.