'tax-exempt' originates from the combination of 'tax' and 'exempt', where 'tax' refers to a compulsory contribution to state revenue, and 'exempt' means free from an obligation or liability imposed on others.

'tax-exempt' evolved from the Middle English word 'exempte', which was derived from the Latin word 'exemptus', meaning 'taken out, freed'.

Initially, it meant 'freed from an obligation', and over time it evolved into its current meaning of 'not subject to taxation'.