Government - Federal Government Industry Guide

richard.kachelmeyer Tue, 05/14/2019 - 08:16

field_block:node:guide:title

Government - Federal Government Industry Guide

field_block:node:guide:body

Purchases by the federal government are not taxable.

This information describes the Sales and Use Tax topics related to the federal government, its agencies and instrumentalities, and foreign missions. Use the links in the Guide Menu to see information about that topic.

What’s New in 2019

We updated the federal credit card information for the new GSA SmartPay Tax Advantage Travel card accounts. See Credit Card Payments.

Federal Government, Its Agencies, and Instrumentalities

richard.kachelmeyer Tue, 05/14/2019 - 08:20

field_block:node:guide:title

Federal Government, Its Agencies, and Instrumentalities

field_block:node:guide:body

The federal government, its agencies, and instrumentalities are exempt from tax. Agencies and instrumentalities are divisions of the federal government that serve a specific purpose.

Examples of federal agencies and instrumentalities:

American Red Cross
Central Intelligence Agency
Federal Trade Commission
Social Security Administration
Federal credit unions
Federal reserve banks

View a list of federal agencies and instrumentalities on the Federal Register.

The following organizations do not qualify for the federal government exemption and their purchases are taxable:

Federally chartered banks and savings and loans
State chartered credit unions, banks, and savings and loans

For more information, see Revenue Notice 96-06, Exempt Entities.

Sales and Purchases

richard.kachelmeyer Tue, 05/14/2019 - 08:23

field_block:node:guide:field_last_updated

Last Updated

April 12, 2023

field_block:node:guide:title

Sales and Purchases

field_block:node:guide:body

Sales

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

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 Credit Card Payments)

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

field_block:node:guide:field_paragraph

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 Contractors and Other Property Installers and Revenue Notice 17-10, Construction Contracts with Exempt Entities.

Lodging and Meals [+]

Credit Card Payments

richard.kachelmeyer Tue, 05/14/2019 - 08:29

field_block:node:guide:title

Credit Card Payments

field_block:node:guide:body

Sellers must determine the tax status of a transaction based on the card account number and type of purchase when accepting credit cards.

field_block:node:guide:field_paragraph

Federal Credit Cards [+]

Federal credit card types and what may be purchased are shown in the table below.

Card Type	What is purchased?	Is the purchase taxable?
Fleet	Fuel and maintenance supplies for government vehicles	Not Taxable
Purchase	General supplies and services	Not Taxable
Travel – sixth digit is 0, 6,7,8, or 9	Expenses related to official government travel (airline, hotel, meals, and incidentals)	Not Taxable
Travel – sixth digit is 1,2,3, or 4	Expenses related to official government travel (airline, hotel, meals, and incidentals)	Taxable
Travel – sixth digit is 5	Expenses related to official government travel (airline, hotel, meals, rental cars, and incidentals)	Not Taxable

Note: The United States Department of Interior uses a single, integrated card for all purchases. Tax is charged based on the item purchased and follows the same guidelines as the chart above.

Identifying a Federal Credit Card [+]

Identifying the Type of Card [+]

You can identify the different types of federal credit cards by their color and wording.

Card Type	Color or Stripe on Left	Wording
Fleet	Green	For Official Government Fleet Use Only
Purchase	Red	For Official US Government Purchases Only
Travel	Blue	For Official Government Travel Only
Integrated	Tan	For Official Government Use Only

Debit and Prepaid Cards [+]

All Other Cards [+]

Foreign Diplomatic and Consular Missions

richard.kachelmeyer Tue, 05/14/2019 - 08:41

field_block:node:guide:title

Foreign Diplomatic and Consular Missions

field_block:node:guide:body

Some purchases by foreign diplomats and consular personnel are not taxable. It depends on what type of exemption card is used, what is being purchased, and whether it is for the mission or an individual.

Purchases made on the internet and by telephone do not qualify for the foreign government exemption and are taxable unless some other exemption applies.

Exemption cards cannot be used to purchase the following:

Airline tickets or cruises
Gasoline or diesel fuel
Motor vehicles, boats, and aircraft
Utility services

Note: The listed items may be exempt from tax by using a different authorization process. For more information, see www.state.gov/ofm/tax.

field_block:node:guide:field_paragraph

Identifying a Diplomatic or Consular Exemption Card [+]

The United States Department of State’s, Office of Foreign Missions, and the American Institute of Taiwan issue exemption cards to some foreign diplomats and consular personnel. Each card contains the following:

Official’s name
Official’s picture
Mission employed by
Protocol identification (PID) number
North American animal image
What purchases are not taxable

There are two types of exemption cards:

Mission Cards
- Issued to the mission’s contact person. Mission personnel may purchase items in the name of the foreign mission. The contact person does not need to be present.
- Purchases must be necessary for the mission’s operations and functions.
- Cannot be used to purchase personal items, medical treatments, or travel/tourism.
- Purchases must be paid directly by the foreign mission with a check, credit card, or wire transfer. Cash or personal payments are not allowed.
Personal Cards
- Issued to the individual listed on the card. Only that individual can use the card; it is not transferrable to anyone else.
- Purchases must benefit the individual on the card.
- No restrictions on the form of payment, including cash.

Identifying the Type of Exemption Card [+]

Animal symbols identify the type of exemption card and if any additional restrictions apply.

Animal	Card Type	Authorized Purchaser	Additional Restrictions
Owl	Mission	Any mission personnel	None.
Buffalo	Mission	Any mission personnel	Restrictions. See card for details.
Eagle	Personal	Only person listed on card	None.
Deer	Personal	Only person listed on card	Restrictions. See card for details.

Record-Keeping

richard.kachelmeyer Tue, 05/14/2019 - 08:50

field_block:node:guide:field_last_updated

Last Updated

August 03, 2020

field_block:node:guide:title

Record-Keeping

field_block:node:guide:body

When sellers make a tax-exempt sale, they must keep records that prove the sale is not taxable. This proof of exemption may vary depending on the purchaser, what they bought, and how they paid.

field_block:node:guide:field_paragraph

Sales to the Federal Government [+]

If you do not charge tax on a sale to the federal government, you must keep proof the purchase is not taxable. Examples include:

A completed Form ST3, Certificate of Exemption.
A completed purchase order, or similar document, that clearly identifies the purchaser.
Proof of direct payment by the federal government such as a check or credit card number. Keep a copy of the sales invoice, receipt, or online transaction log that includes payment information.

Sales to Foreign Diplomats or Missions [+]

If you do not charge sales tax on a sale to a foreign diplomat or mission, review the exemption card being used to make sure the sale qualifies. You must keep proof the purchase is not taxable. Examples include:

A completed Form ST3, Certificate of Exemption.
A copy of the exemption card.

If the card is expired, the sale is taxable. You may verify the card at: https://www.state.gov/sales-tax-exemption/.

Note: Pay close attention to any restrictions listed on the card. For example, some cards require sales tax on prepared food, hotel rooms, or on purchases under a certain dollar amount.

Exemption Questions [+]