Nonprofit or exempt organizations do not have a blanket exemption from sales and use taxes. Some sales and purchases are exempt from sales and use taxes.The City of San José offers exemptions for specific types of businesses. A free will gift of property or goods and as such tax deductible if given to a tax exempt nonprofit. While organizations without 501c3 status can't apply for grants, there are still ways to legally accept donations, fund their business, and serve the community. To be taxexempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes. Usually, a nonprofit must be qualified under section 501(c)(3) (or certain other sections) for a contribution to be tax-deductible. While an application is pending, the organization can treat itself as exempt from federal income tax under section 501(c)(3). To help you better understand the tax obligations specific to nonprofit organizations we have created this guide. How to Use This Guide.