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TR 35: Purchasing Cards

Visa and MasterCards which have the words "Purchasing Card" either embossed or silk screened on the face of the card are billed directly to the business rather than the individual whose name appears on the card. Therefore, if the purchase is an exempt purchase for the business entity purchasing the product or service, the use of the Purchasing Card will not void the exemption, since the bill will be paid directly from the funds of the organization.

The City of Boulder uses JP Morgan Chase Mastercard Purchasing Cards for all purchases. All properly authorized purchases are tax exempt when the purchasing card is used for payment. Many other cities and counties use various purchasing cards; and, provided that the words "purchasing card" appear on the card and the purchase is to be used by the government entity in the regular course of business, the purchase is tax exempt.

The State of Colorado uses US Bank Mastercard Procurement cards for non-travel related purchases. The words "Purchasing Card" or "Commercial" are printed on each card. Therefore, payment will be made directly from State funds, which make these transaction tax exempt. For travel related transactions the State uses US Bank Visa. If the card has "State Tax Exempt" followed by the agency's tax exemption number (98 followed by 5 digits) printed on the card, these transaction will be be billed directly to the agency and funds will be paid directly from the agency's funds. Therefore, purchases paid for with these cards are tax exempt. If the US Bank Visa does not have the above notation, and only the employee's name, the employee will be billed and then reimbursed by the agency. Therefore, these transaction are taxable. (See the State of Colorado FYI - "Government Purchases Exemptions" for more information).

The Federal Government's credit card program is called GSA SmartPay. All purchases are divided into three types, Fleet, Travel or Purchasing. Federal agencies have the choice of using either three different cards, one for each type of purchase, or using an integrated card, one card for all purchases. (See the GSA Smart Pay website )

  • Fleet - The cards are Bank of America MasterCards. The fleet card has a picture of two cars on the background. All Fleet card purchases are tax exempt. The purchases are billed directly to the agency and paid directly from agency funds.

  • Travel - The cards will be either VISA or MasterCard. The travel card has a picture of an airplane on the background. Travel cards can be billed either directly to the agency or to the employee. To determine where the purchases are billed, you must look at the 6th digit of the card number. If the 6th digit is 0,6,7,8 or 9, the card purchases are directly billed to the agency and are therefore tax exempt. If the 6th digit is 1,2,3 or 4, the card purchases are billed to the employee and not directly to the agency. Therefore, they are taxable.

  • Purchasing card - The cards will be either VISA or MasterCard. The purchasing card has a picture of the capital without a flag on the background. All purchasing card purchases are tax exempt. The purchases are billed directly to the agency and paid directly from agency funds.

  • Integrated card - The cards will be either VISA or MasterCard. The integrated card has a picture of the capital and a flag on the background. If the purchase is a fleet or purchase card-type transaction, the purchase will be tax exempt. The bank will direct the bill to the agency for all fleet and purchase type transactions based on universal vendor codes. If the transaction is a travel purchase, you must look at the 6th digit of the card number to determine if it will be billed to the agency or the employee. If the 6th digit is 0,6,7,8 or 9, the card purchases are directly billed to the agency and are, therefore, tax exempt. If the 6th digit is 1,2,3 or 4, the card purchases are billed to the employee and not directly to the agency. Therefore, they are taxable.

  • Exceptions to the above: The Department of Interior uses integrated cards and the cards will appear to be directly billed (based on the 6th digit). However, the Department is directly billed for only purchasing and fleet card purchases. The employees are billed for travel purchases. An exception to the exception is the Bureau of Reclamation, which is part of the Department of Interior. All purchases are directly billed to the Bureau, including travel. When presented with an integrated card from the Department of Interior, request to see the employee's ID. If the employee is in the Bureau of Reclamation, the purchase, including travel, is exempt. If the employee is in any other agency within the Department of Interior, travel purchases will be taxable, but purchasing and Fleet purchases will be exempt.

  • GSA SmartPay matrix GSA SmartPay matrix  - this matrix will help guide you through the cards to determine if a transaction is subject to tax.

    Examples:
  • A federal government employee from the Department of Commerce presents a VISA card, with the GSA SmartPay logo on it, for payment of a hotel bill. The VISA card has a picture of an airplane on it. The card is a Travel Card which can be billed either to the employee or the agency. Therefore, the hotel must look at the 6th digit of the card number to determine where it will be billed. The 6th digit is a 3. Therefore, it will be billed to the employee, and the hotel must charge the accommodations tax.

  • A federal government employee from the Department of Defense presents a MasterCard, embossed with the GSA SmartPay logo, for payment of gasoline for their government vehicle. The MasterCard has a picture of two cars on it. The card is a Fleet Card which is always billed directly to the agency and is, therefore, tax exempt.

  • An employee from the City of Grand Junction presents a credit card for payment of a hotel bill. The card has the words "Purchasing Card" printed on the face of it. The words "Purchasing Card" on a VISA or MasterCard proves that it is a direct bill to the City of Grand Junction. Therefore, provided that the hotel stay was for business purposes, the charge would be exempt from accommodations tax.

Last Updated on Wednesday, 11 July 2012 12:16