Exemptions from tax — Federal credit card purchases

(a)(1) Sales tax is not due on credit card purchases that are direct-billed to and paid for by the federal government.

(2) Sales tax is due on credit card transactions where the purchases are billed to and paid for by federal employees who are then reimbursed by the federal government.

(3) The following information is designed to assist you in determining whether or not tax applies to transactions paid for with GSA SmartPay®2 charge cards.

(b) Cards that are always direct-billed to the federal government and are therefore exempt from sales or lodgings taxes begin with digits 4486, 4614, 4716, 5565, 5568, or 8699.
(c)(1) Prefixes 4486, 4614, 5565, and 5568 are issued on cards that are both direct-billed and individually billed.

(2) To know the difference you must look at the sixth digit.
(d)(1) If the sixth digit is 0, 6, 7, 8, or 9, the card is direct-billed and the transactions are tax-exempt.

(2) If the sixth digit is 1, 2, 3, or 4, the card is billed to the individual federal employee and the transactions are subject to tax.

(3) State sales and tourism taxes apply only against transactions made with federal Visa or MasterCard credit cards that begin with the prefix 4486, 4716, or 5568 and have the sixth digit as either 1, 2, 3, or 4.

(e) The following are two (2) exceptions to the above statements:
(1)(A) The United States Department of the Interior will use an integrated MasterCard issued by NationsBank.

(B) The same card will be used for both direct-billed and individually billed purchases.

(C) The bank will sort the purchases during the billing process depending on the merchant’s code.

(D) Purchases for office supplies and other procurements will be direct-billed to the federal government and, therefore, tax-exempt.

(E) Purchases for lodgings and restaurant food will be individually billed to the federal employee and, therefore, taxable.

(F) These cards will have the agency’s federal tax-exempt identification number (14-0001849) on the face of the card.

(G) The account numbers will begin “5568-16”.

(H) Although it would appear that this number means the card is direct-billed to the federal government and all transactions would be tax-exempt, in fact, lodgings and restaurant charges will be individually billed to the federal employee and the transaction will be taxable; and (2)(A) The cards issued to the United States Bureau of Land Reclamation will be direct-billed for all purchases, including lodgings and restaurant charges.

(B) Accordingly, cashiers will have to differentiate purchases on cards issued to the United States Department of the Interior and purchases on cards issued to the United States Bureau of Land Reclamation.

(C) Purchases for lodgings and restaurant food on cards issued to the United States Department of the Interior are taxable.

(D) Purchases for lodgings and restaurant food on cards issued to the United States Bureau of Land Reclamation are tax-exempt.

(E) This system is expected to be in place for approximately one (1) year beginning in 1999, at which time all purchases on this integrated card will be direct-billed and tax-exempt.