Pursuant to his authority under Ark. Code Ann. §
§
26-18-301 and
26-19-108, the
Director of the Arkansas Finance and Administration promulgates the following
regulation. This regulation is to be read in conjunction with the previous
regulations and laws of the Department and tins State.
This regulation is promulgated to clarify that as of November 30, 1998,
the federal government substantially changed its credit card program. The
I.M.P.A.C. purchase cards, the American Express/Discover travel cards, and the
Wright Express fleet cards are no longer in use. Instead, the General Services
Administration (GSA) has entered into a series of contracts with a variety of
card-issuing banks under a new program named GSA SmartPay. The GSA SmartPay
program will be in effect for five to ten years.
The majority of these new cards will be direct-billed to the federal
government and will thus represent tax-exempt purchases for sales and tourism
tax purposes. However, there will be both a Visa and a MasterCard that will be
billed to the federal employee (for later reimbursement). Purchases with these
credit cards will continue to be subject to sales tax.
The Arkansas Gross Receipts Tax Regulations are hereby amended to add a
new provision to read as follows:
GR
28.1 EXEMPTIONS FROM TAX - FEDERAL CREDIT CARD PURCHASES
A. Sales tax is not due on credit card
purchases winch 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
cards.
B. Cards winch are always
direct-billed to the federal government and are therefore exempt from sales or
lodgings taxes begin with digits 8699 or 5568.
C. Prefixes 4486, 4716, and 5568 are issued
on cards which are both direct-billed and individually billed. To know the
difference you must look at the sixth digit.
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.
E. The
following are two exceptions to the above statements:
1. The Department of Interior will use an
integrated MasterCard issued by NationsBank. 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 recognize the Interior
Department's federal tax exempt identification number to realize that purchases
for lodgings and restaurant food are taxable (nothing on the card will tell the
cashier that the card holder is with the Bureau of Reclamation, whose lodgings
and restaurant charges are tax-exempt.) This system is expected to be in place
for approximately one year at which time all purchases on this integrated card
will be direct-billed and tax-exempt.
