TRAVEL

State sales tax exemption for the GSA SmartPay travel business line applies primarily to hotels and car rentals and usually does not apply to meals and incidentals.

 

Question (applies to both CBA and IBA):  Why won’t a hotel exempt me from all taxes even though I am using a government charge card?  Aren’t all government employees exempt from all taxes?

Answer: No. In accordance with legal precedence detailed here, IBAs are subject to any tax that a state deems appropriate.  There are states that choose to extend exemption for state sales tax only.  For a list of states that provide state sales tax exemption for IBAs, please visit the tax map here for more information.  Please note that all states are required to honor state sales tax exemption for travel CBAs.  In summary, for both CBA and IBA solutions, states have the sovereign authority to levy any non-state sales tax for transactions using a GSA SmartPay program solution, unless specifically exempt in state law.

 

Question: Am I still exempt from state sales tax if I choose to use a personal credit card instead of a GSA SmartPay payment product for hotel stay?

Answer (applies to both CBA and IBA): No.State sales tax exemption is determined by method of payment, not by the Federal entity that employs the cardholder. Vendors are only required to honor state sales tax exemption (when applicable by state law) to users that present valid Federal Government forms of payment and many states specify GSA SmartPay payment solutions. Please note that nearly all agencies require the use of a Federal Government method of payment on travel. If you have any questions regarding mandatory usage of the GSA SmartPay travel card, please reach out to your agency’s charge card program directly.

 

Question: How do I know which card type is exempt from taxes?

Answer (applies to both CBA and IBA): If the 6th digit in the BIN prefix is 0, 5, 6, 7, 8, or 9, then the charge card statement is paid directly by the Federal Government and should not subject to state sales tax. If the 6th digit in the BIN prefix is 1, 2, 3, or 4, then the charge card is not paid directly by the Federal Government and therefore may be subject to state sales tax. For more information about how to identify CBA or IBA solutions, please visit our website here. Please also note that each state may have different documentation requirements for exemption.

 

Question:  A hotel indicates that a card doesn’t look like the card images on the GSA SmartPay website or images that the state provided. The BIN prefix however, does match. Is the card still tax exempt?

Answer (applies to both CBA and IBA): Yes. The card artwork located on the GSA SmartPay website and which was also provided to hotels and states taxation offices is the default card art for the GSA SmartPay 3 program. Some agencies requested permission from the Center for Charge Card Management to deviate from the default card artwork, or to issue “generic” card artwork.  The most reliable way to determine if a card is a GSA SmartPay charge card is to verify the BIN prefix (first 4 digits of the card), which is available here.

 

Question (applies to both CBA and IBA):  Why does every state have different forms and documentation requirements for state sales tax exemption?

Answer:  States have the authority to assess state sales taxes on consumers and hotels are responsible for collecting taxes on behalf of a state’s revenue authority.  Once a hotel has determined that a cardholder qualifies for state sales tax exemption under state law, the hotel must document the evidence for sales tax exemption eligibility.  Each individual state determines the level of information needed to constitute sufficient documented evidence and that is usually collected through forms and documentation requirements.  Once information has been collected, the state has the right to review the documented evidence and determine if the exemption was appropriately applied. If the state deems that the hotel did not collect the proper documentation, the state has the authority to collect the state sales tax and penalties from the hotel.  

 

Question (applies to both CBA and IBA): The hotel is asking for a form and/or information that doesn’t seem to be required. Do I need to provide it?

Answer: As stated in the previous answer, if a state determines that a hotel did not collect sufficient information in accordance with state law, the state has the authority to collect the state sales tax and penalties from the hotel. To mitigate this risk, hotels may over-document or ask for information not required by state law (e.g., tax identification numbers or tax exemption numbers). Cardholders are not required to provide forms or information to hotels if the state does not require it. If the hotel is insistent, recommend the hotel reaches out to the state taxation department directly for clarification.

 

Question (applies to both CBA and IBA):  Why isn’t there one form for all tax exemptions?

Answer: GSA and the broader Federal Government, do not have the authority to dictate state sales tax exemption documentation requirements. Each state has the sovereign authority to determine individual state requirements.

 

Question (applies to IBA only): I am in a state that should honor tax exemption for IBA travel cards, but the hotel is insistent on charging taxes. What should I do?

Answer: Recommend that the hotel reaches out to the state taxation department directly for clarification. If the hotel is not willing to, there may be an opportunity to reclaim the taxes assessed directly from the state, after your trip.  Please note reclamation requirements vary by state and cardholders should contact states directly for more information about the process. As a best practice, travelers are encouraged to contact the hotel and confirm state sales tax exemption status and documentation requirements to avoid confusion.

 

Question (applies to IBA only): I am in a state that should not honor tax exemption for IBA travel cards, but the hotel has given me an exemption form to complete. Should I fill it out and get the tax exemption?

Answer: No. Due to complexity in state law as applied to Federal Government tax exemption, there is often confusion around tax exemption. In efforts to provide customer service to Federal Government employees, hotels in states that do not honor state sales tax exemption for IBA travel may provide incorrect forms for tax exemption.  Cardholders should not complete these forms and claim exemption.

 

Question (applies to both CBA and IBA): A hotel exempted state sales tax, but I’m seeing all of these other taxes and fees on my bill. Are they allowed to do that?

Answer: Yes. Legal precedence only supports exemption for state sales tax, unless state law also extends tax exemption to other specific types of taxes.

 

Question (applies to both CBA and IBA): In addition to states, do counties and localities also exempt taxes?

Answer: Some municipalities may have separate tax exemption processes for Federal Government employees. As the program is made aware of these, the information is posted on the GSA SmartPay website.

 

PURCHASE

All GSA SmartPay purchase cards and accounts are CBAs.

 

Question: Why won’t a merchant exempt me from taxes even though I am using a purchase card? Aren’t all CBAs exempt from taxes?

Answer: CBAs are exempt from state sales tax in all states. However, states have the authority to assess state sales taxes on consumers and merchants are responsible for collecting taxes on behalf of a state’s revenue authority.  If a merchant determines a cardholder qualifies for state sales tax exemption under state law, merchants must document the evidence for sales tax exemption eligibility. Each individual state determines the level of information needed to constitute sufficient documented evidence and that is usually collected through forms and documentation requirements. Once information has been collected, the state has the right to review the documented evidence and determine if the exemption was appropriately applied.  If the state deems that the merchant did not collect the proper documentation, the state has the authority to collect the state sales tax and penalties from the merchant. As such, if a state determines that a merchant did not collect sufficient information in accordance with state law, the state has the authority to collect the state sales tax and penalties from the merchant. To mitigate this risk, merchants may over-document or ask for information not required by state law (e.g., tax identification numbers or tax exemption numbers).  Cardholders are not required to provide forms or information to hotels if the state does not require it. If the merchant is insistent, recommend the hotel reaches out to the state taxation department directly for clarification.

 

Question: Are there states that don’t honor state sales tax exemption for purchase cards?

Answer: No. However, there are a few states that do not directly tax the user and instead, choose to tax the merchant. This is an indirect or pass along tax, as the merchant can choose to pass along the amount of the gross receipts tax, to the purchase card user. Please note that once the merchant passes along the tax, it is no longer a state sales tax and it is allowable. Please also note that the merchant is not required to pass along the amount of the gross receipts tax to the cardholder. For more information about specific states, please visit our tax map here.

 

Question:  For states that directly tax the merchant, are GSA SmartPay cardholders exempt from these taxes?

Answer: Yes. There may be instances where the state will exempt the merchant from the gross receipts tax on Federal Government transactions, which may result in the merchant choosing to not pass the tax to the cardholder. Please note that in these states, the merchant is not required to engage in this process.

 

Question: What happens if a merchant refuses to honor state sales tax exemption and won’t contact the state for clarification?

Answer: As a best practice, cardholders should clarify with merchants, prior to purchase, that the merchants will honor the state sales tax exemption. If the merchants do not, explore other options with merchants that will honor tax exemption.

 

Question: The merchant refuses to honor state sales tax exemption and this is the only merchant I can use. What should I do?

Answer:  Recommend that the merchant reaches out to the state taxation department directly for clarification. If the merchant is not willing to, there may be an opportunity to reclaim the taxes assessed directly from the state. Please note reclamation requirements vary by state and cardholders should contact states directly for more information about the process.

 

Question: Can I use a purchase card for travel-related expenses?

Answer: The purchase card was not designed to be used on travel, especially for meals and incidental transactions.  There may be agencies that allow limited use for specific types of travel-related expenses (e.g., booking room blocks).  Prior to using a purchase card for travel-related expenses, cardholders must confirm that agency policy allows for this type of use and follow applicable policies and procedures for documentation.

 

Question: I’m using a GSA SmartPay purchase card at a hotel for a transaction that have been approved by my agency. Am I still exempt from state sales tax?

Answer: Yes. State sales tax exemption is based on payment liability and not by how an agency uses the charge card.  Please note that for CBAs such as Purchase, the 6th digit identifier determining payment liability does not apply.

 

Question: I am completing forms for the Amazon Tax Exemption Program. Do I have to complete all of these forms?

Answer: The Amazon Tax Exemption Program includes a process in which applicants must complete all tax exemption forms from each individual state. This occurs once during the application process to streamline future purchases as applicable tax exemption forms are saved and then applied for each individual transaction. Please note that applicants should refer to agency policy to determine if participation in the Amazon Tax Exemption Program is allowable.

 

Question: I am participating in the Amazon Tax Exemption Program. Why am I still being charged taxes?

Answer: For items sold by 3rd party vendors, please contact that sellers directly with the proper documentation or more information.

 

Question: If I am purchasing an item from a merchant not located in the same state, which taxes am I responsible for and where do I submit a claim for exemption?

Answer:  It depends on the state. Some merchants are required by law to charge taxes based on where the business is based, but most are required by law to charge taxes based on where the cardholder is based. Merchants are responsible for being familiar with this information.

 

Question: A merchant insists that I provide a tax exemption number or tax identification number. What should I do?

Answer: If the state does not require this information, the cardholder is not required to provide it.  If a merchant is insistent or refuses to honor tax exemption, recommend that the merchant reaches out to the state taxation department directly for clarification. If the state does require this information, please reach out to your agency’s budget or finance divisions to find out where this information may be housed within your agency/organization.

 

Question:  Am I exempt from taxes that are assessed by a Federal authority (e.g., Federal excise tax on telecommunications or fuel)?

Answer:  No.

 

Question:  As a GSA SmartPay cardholder, do I have to pay tariffs or any fees, surcharges, or pass along tax as a result from tariffs?

Answer:  Yes.

 

Question: As a GSA SmartPay cardholder, may I claim tax exemption from foreign or tribal governments?

Answer: Foreign and tribal governments are sovereign entities that have the discretionary authority to tax any person belonging to any other sovereign nation or entity. There may be treaties or agreements between the United States Government and these entities that govern taxation or exemption circumstances. In the instances that there are no treaties or agreements, cardholders are responsible for paying these taxes.

 

If I’m unsure of the specific tax exemption policies for a state, who should I call?

Please call the Department of Revenue for that state.  Their numbers may be found on the US State Tax Map on our website.