A. Sales tax is not due on credit card
purchases which are direct-billed to and paid for by the federal government.
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. The following information is designed to assist you in determining
whether or not tax applies to transactions paid for with GSA SmartPay®2
B. Cards which 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
C. Prefixes 4486, 4614, 5565,
and 5568 are issued on cards which are both direct-billed and
individually-billed. To know the difference you must look at the sixth
D. If the sixth digit is 0,
6, 7, 8, or 9; the card is direct-billed and the transactions are tax-exempt.
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. State sales and
tourism taxes apply only against transactions made with federal Visa or
MasterCard credit cards which begin with the prefix 4486, 4716, or 5568 and
have the sixth digit as either 1, 2, 3, or 4.
The following are two exceptions to the
The Department of
Interior will use an integrated MasterCard issued by Nations Bank. The same
card will be used for both direct-billed and individually-billed purchases. The
bank will sort the purchases during the billing process depending on the
merchant's code. Purchases for office supplies and other procurements will be
direct-billed to the federal government and, therefore, tax-exempt. Purchases
for lodgings and restaurant food will be individually-billed to the federal
employee and, therefore, taxable. These cards will have the agency's federal
tax-exempt identification number (14-0001849) on the face of the card.
The account numbers will begin "5568-16." 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.
2. The cards issued to the Bureau of
Reclamation will be direct-billed for all purchases, including lodgings and
restaurant charges. Accordingly, cashiers will have to differentiate purchases
on cards issued to the Department of Interior and purchases on cards issued to
the Bureau of Reclamation. Purchases for lodgings and restaurant food on cards
issued to the Department of Interior are taxable. Purchases for lodgings and
restaurant food on cards issued to the Bureau of Reclamation are tax-exempt.
This system is expected to be in place for approximately one year beginning in
1999 at which time all purchases on this integrated card will be direct-billed