Every owner of a government charge card is eligible for GSA tax exempt as long as the GSA SmartPay card is used to pay for goods and services. Although, there are certain aspects to consider discussed in this article.
What are Government Charge Cards?
The GSA SmartPay card allows Federal Government employees to purchase services and goods below the micro-purchase threshold with minimum paperwork involved. The card greatly streamlines the procurement process. Also, the card’s holder is eligible for tax exemption.
Currently, there are three types of Government Charge Cards:
- Centrally Billed Accounts or CBA cards allow card holders to pay for services on behalf of a federal agency. The payment goes directly from the government to the bank.
- Individually Billed Accounts or IBA cards are personalized cards issued for an employee for travel expenses: hotels, fleet, car rental and so on.
- GSA SmartPay Tax Advantage Travel accounts are a relatively new card type that makes it easy to obtain tax exempt if certain purchases are made. The card works as CBA if authorized payments are made, and works as IBA for anything else.
Every type of card offers tax exempt, that is why it is often called a tax exempt credit card.
What is a tax exempt credit card?
So, why do GSA offers tax exempts for certain purchases? In fact, government tax exemptions are not universal. You only get the exempt if you use GSA Charge Card to pay for lodging or for car rental. Such costs are tax-free, because the government pays the taxes from these expenses for you.
Note that depending on the type of the card, the GSA state tax exemption rules may vary. CBA cards benefit from tax exemption in every state, while IBA travel cards may or may not be eligible for tax exemption in each particular state (see below).
GSA state tax exemption information
GSA state tax exemption letters clarify how each particular state treats the tax issues for payments using GSA charge cards. In order to find out whether certain purchases are eligible for a tax exempt in a given state, open the GSA website and switch to the State Tax Exemption page. There you can select a state and see if a tax exempt is possible for specific purchases using the card type you have.
How do I get a tax exempt form?
For government employees, receiving tax exemption is a matter of filling a standard government tax exemption form 1094 (SF1094). Since the form can vary across states, the best way to obtain it is to go to the Forms Library section at gsa.gov and download the up-to-date state tax exemption form there.
Note that some states do not require filling a form for a tax exempt. Check the particular state tax exemption information to make sure whether you need to fill the form or not.