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Last Updated: 6/26/2018

Sales and Purchases

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Sales and Use Tax

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Taxable goods or services sold by the federal government are subject to tax, unless an exemption applies. 

Customers who purchase taxable goods or services from the federal government must report and pay use tax if sales tax was not paid at the time of purchase.


Purchases by the federal government, its agencies, and instrumentalities are not taxable.

To be exempt from tax, purchases must be billed to, and paid for directly by, the federal government. The buyer must provide Form ST3, Certificate of Exemption, or proof of direct billing and payment.

Examples of acceptable proof include:

  • Purchase orders
  • Payment vouchers
  • Work orders
  • Credit card number (see Payment Methods)

Note: Purchases by employees are taxable even when reimbursed by the federal government.

Construction Contracts

Building, construction, or reconstruction materials are not taxable when purchased directly by the federal government or its agencies. The materials are taxable when purchased by a contractor or a subcontractor, unless they are purchased under a valid purchasing agent agreement. 

For more information, see Fact Sheet 128, Contractors and Revenue Notice 95-05, Construction Contracts – Purchasing Agent Exemption.

Lodging and Meals

Prepared food, drinks, and lodging are not taxable when billed directly to and paid for by the federal government.

Note: Prepared food, drinks, and lodging billed to an employee are taxable even if reimbursed by the federal government. 

For more information see the Hotels and Other Lodging Establishments and Food and Bar Establishments Industry Guides.

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