Technical Information Release

Technical Information Release TIR 88-9: Sales Tax Treatment of Purchases with U.S. Government Bankcards

Date: 08/29/1988
Referenced Sources: Massachusetts General Laws

Sales and Use Tax

The U.S. Department of Commerce has announced a new program for administering U.S. Government purchases by federal employees. The U.S. Department of Commerce provides an official "U.S. Government Bankcard," issued through the Mastercard system, to federal employees who are authorized to make certain government purchases on the credit of the United States. Federal employees can use the U.S. Government Bankcard only for U.S. Government purchases of goods within an authorized spending limit, and not for travel, meals, entertainment or for personal purchases. The Massachusetts Department of Revenue has agreed to participate in the U.S. Government Bankcard program. The purpose of this Technical Information Release is to explain the Department of Revenue procedures for administering the new U.S. Government Bankcard program.

Sales to the United States or its agencies are exempt from Massachusetts sales tax. G.L. c. 64H, s. 6(d). Generally, in order to be eligible for the exemption, a sale must be directly to the United States or to a U.S. agency. If the credit of the U.S. Government is bound by a purchase made by a federal employee, the employee is an agent of the U.S. Government and the sale is exempt from Massachusetts sales tax. The Department of Revenue will accept the U.S. Government Bankcard as evidence that a particular sale is exempt under G.L. c. 64H, s. 6(d).

The new procedures are as follows. In order for a purchase to be exempt from Massachusetts sales tax, an authorized federal employee must present to the vendor the U.S. Government Bankcard with an additional personal identification at the time of purchase. If the Mastercard system authorizes the sale, the vendor will charge no sales tax, but will otherwise treat the purchase as an ordinary credit card transaction. The words "U.S. Government Tax Exempt" will be imprinted on the vendor's copy of the sales receipt. The vendor must retain this receipt for the vendor's records. See 830 CMR 62C.25.1(4). No other substantiation is required for the Massachusetts sales tax exemption to apply to a U.S. Government purchase of goods.

The Department of Revenue will continue to accept Forms ST-2 and ST 5 for U.S. Government purchases of goods by federal employees, but those forms are not required with the U.S. Government Bankcard. The U.S. Department of Commerce anticipates that all federal agencies will be participating in the program by the end of fiscal year 1990.

If you have any questions about the new Department of Revenue procedures, you may call or write:

Massachusetts Department of Revenue
Determinations Bureau - Room 303
100 Cambridge Street
Boston, MA 02204

Telephone (617) 727-0135


Stephen W. Kidder
Commissioner of Revenue

TIR 88-9

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