| Date: | 08/08/2003 |
|---|---|
| Organization: | Massachusetts Department of Revenue |
| Referenced Sources: | Massachusetts General Laws |
Tax Administration
I. Introduction
This Directive sets forth the rules with respect to the taxation of occupancy of rooms and purchases of meals and other tangible personal property made by employees of the United States government. The rules have been treated in several prior public written statements, and are unchanged here. The Department restates the principles contained in the earlier documents and revokes: [1]
- TIR 88-9: Sales Tax Treatment of Purchases with United States Government Bankcards.
- TIR 98-1: Room Occupancy Excise Exemption for Employees of the United States Military Traveling on Official United States Military Orders;
- TIR 99-9: Tax Treatment of Purchases with United States Government Bankcards;
- TIR 01-21: Room Occupancy Exemption for Employees of the United States;
This Directive also supercedes Letter Rulings 80-79, 82-18, 83-29, 85-46.
II. General Rule
Sales made directly to the United States or its agencies are exempt from Massachusetts sales and use taxes. G.L. c. 64H, § 6(d), c. 64I, § 7(b). All purchases or room occupancies are also exempt if the credit of the United States Government is bound on the sale or occupancy. See Alabama v. King & Boozer 314 U.S. 1, 13 (1941). The credit of the government is not bound unless payment is made directly by the United States with a government check, for example, or a government bankcard that is billed directly to the government.
When the credit of the United States is not bound, a federal employee or an agent [2] of the United States Government who makes a purchase subject to the sales or use excises, or occupies a room subject to the room occupancy excise, must pay the tax, even if he or she will later be reimbursed by the government. An exception exists for employees or agents of the federal government with respect to the room occupancy excise. See section IV.a. of this Directive.
III. Tax Treatment of Purchases with United States Government Bankcards
a. Introduction
As of November 30, 1998, the General Services Administration (GSA) announced a revised program for administering United States Government purchases made by federal employees with bankcards or other credit cards (GSA cards). The GSA SmartPay system replaces the Visa International Merchant Purchase Authorization Program (IMPAC), and allows each federal agency to issue GSA cards to employees who are authorized to make government purchases on the credit of the United States. [3] Federal employees may use the GSA cards for United States Government purchases of goods, within an authorized spending limit, and for authorized travel and lodging, meals, entertainment or for personal purchases. Some cards are billed directly to the federal government and all purchases made with them are exempt. Other cards are billed to the employee and purchases made with them are generally taxable. This program is in effect until at least November 2003 and may be extended on a year-by-year basis until 2008. The Massachusetts Department of Revenue has agreed to participate in the GSA program.
b. Tax on Purchases Made with GSA Cards
- Purchases made with GSA cards with the first four digits 8699 are exempt.
- Purchases made with GSA Cards with the first four digits 4486, 4716 or 5568 are taxable if the sixth digit from the left is 1, 2, 3, or 4.
- Purchases made with GSA Cards with the first four digits 4486, 4716 or 5568 are exempt if the sixth digit from the left is 0, 5, 6 (except as noted below), 7, 8, or 9.
- Purchases made with GSA cards with the first six digits 5568-16 that also have the agency identification number 14-0001849 are, however, exempt only if the property bought is office supplies or other related tangible goods.
- All other purchases made with GSA cards with the first six digits 5568-16 that also have the agency identification number 14-0001849 are taxable unless:
- The purchaser is entitled to an exemption from the room occupancy excise under section IV., below; or
- The purchaser presents an identification card from the Bureau of Reclamation. All purchases made with a GSA card with the first six digits 5568-16 that also have the agency identification number 14-0001849 are then exempt.
c. Procedures
When seeking an exemption, an authorized federal employee or agent must present the appropriate GSA card with additional personal identification at the time of purchase. If the credit card system authorizes the sale, the vendor will charge no tax, but will otherwise treat the purchase as an ordinary credit card transaction. The words "United States Government Tax Exempt" should be imprinted on the vendor's copy of the sales receipt, which the vendor must retain for purposes of audit and verification. See 830 CMR 62C.25.1(4). No other substantiation is required for the Massachusetts sales tax exemption to apply to a United States Government purchase. The Department will continue to accept Forms ST-2 or ST-5 (or other appropriate government authorization) for United States Government purchases by federal employees or agents, but those forms are not required with an appropriate GSA card.
d. Examples
Example 1. An employee of the United States Government travels to Massachusetts to attend a workshop at the direction of her employer. She purchases lunch between the morning and afternoon sessions of the workshop using a government bankcard. The first four digits of the card are 4716 and the sixth digit is 8. The United States government is billed directly for the meal, and the meal is tax exempt.
Example 2. Same facts, except that the sixth digit of the card is 4. The employee will be reimbursed for the meal by the government and the sale of the meal is taxable.
Example 3. An employee of the United States Government purchases a meal with a bankcard with the first six digits 5568-16 that also has the agency identification number 14-0001849. The sale of the meal is taxable, as only office equipment and related supplies are exempt when purchased with this card.
Example 4. An employee of the federal government holds a workshop for other government employees and arranges the rental of three cars for the employees during their stay in Massachusetts. The employee pays for the package with a card the first six digits of which are 5568 90. As the sixth digit is 0, this transaction is billed directly to the federal government and the transaction is tax exempt.
Example 5. Corporation is a nonprofit public corporation created by act of Congress that is treated as an agency of the federal government for tax purposes. Corporation is given a general exemption from state excises and federal income taxes under federal statute, although it is subject to property taxes. Corporation is a participant in the SmartPay program. All of its GSA cards begin with the digits 4486 and have "0" as the sixth digit. All purchases made with these cards are billed to the Corporation. Because the Corporation is treated as an agency of the federal government with respect to purchases, and because the credit of the Corporation is bound by the purchase, all purchases made with the GSA card on behalf of the Corporation are exempt.
IV. Exemption Issues Specific to the Room Occupancy Excise
a. General Rule for Government Employees and Agents
A transfer of occupancy is exempt from the room occupancy excise under G.L. c. 64G if a federal employee or agent, acting within the scope of his or her official duties as an employee or agent of an agency or military branch of the federal government, stays in a hotel, motel or other place of public accommodation. For the purposes of determining whether the exemption applies, the Department will accept the documentation set out in section V.a., below. As an exception to the general rule cited in section II, the exemption for room occupancy is available whether the federal government pays directly for the room, or the employee pays for the room and is later reimbursed.
Example: An employee of a federal agency attends a conference in Massachusetts in her capacity as an employee and purchases lodging and meals using a GSA card that begins with 4716 and has the sixth digit 4. This bill is paid by the employee and reimbursed by the federal government. Because the employee is attending the conference in her capacity as an employee, the room occupancy is exempt. Because the employee is reimbursed, her meals are taxable.
b. Special Rule for Military Employees
Section 12 of chapter 64G provides a specific exemption for military employees. To claim the exemption the occupant must be: (1) an employee of the United States military; and, (2) traveling on official United States military orders that include the date of the hotel, lodging house, or motel occupancy.
A "military employee" is an employee, as defined in Section 3401(c) of the Internal Revenue Code, as amended and in effect for the applicable period, who is employed by any branch of the United States Armed Forces, or their respective reserve components, as enumerated in 10 U.S.C. § 10101 (a)(1)-(7). The term "Armed Forces" means the United States Army, Navy, Marine Corps, Air Force, and Coast Guard. See 10 U.S.C. § 101(a)(4). For purposes of this Directive, employees of the National Guard, and its reserve components, as defined in 10 U.S.C. § 101(c) are also eligible for this exemption. The term "traveling on official United States military orders" means traveling under the express written authority of and pursuant to the specific written orders of a duly authorized representative of one of the United States Armed Forces or National Guard.
V. Substantiation Requirements for Room Occupancy Excise Exemptions
a. Substantiation Required for Federal Employees or Agents
To substantiate a claim for exemption under G.L. c. 64G where the federal employee occupying the room is paying the bill in cash or with a non-GSA approved credit card, the employee/occupant must provide the operator of a hotel, lodging house, or motel with:
- some form of evidence indicating that the occupant is an employee or agent of the federal government; and,
- proof that the occupant is traveling at the direction of the federal government during the period of occupancy.
Evidence that the occupant is an employee or agent of the federal government may include an official identification card issued by the appropriate branch of government. Evidence that the occupant is traveling at the direction of the federal government may include an affidavit, letter, or other attestation on official stationery, signed by an authorized government official of the appropriate governmental office, agency or branch of the military, indicating that the employee is traveling at the direction of the government during the period of occupancy. The hotel must retain copies of the substantiating documents.
b. Substantiation Required for Military Employees
To substantiate a claim for exemption under G.L. c. 64G, § 12, the occupant must provide the operator of a hotel, lodging house, or motel with proof of identification as a military employee, such as an official identification card issued by the Armed Forces or the National Guard, and either of the following:
- a copy of the actual military orders, or
- an affidavit, letter, or other attestation on official stationery, signed by an authorized official of the Armed Forces or National Guard indicating that the occupant is traveling under United States military orders during the period of occupancy.
Again, the hotel must retain copies of the substantiating documents.
/s/Alan LeBovidge
Alan LeBovidge
Commissioner of Revenue
AL:LEM:dt
August 8, 2003
DD 03-7