If a hotel guest's room charges are billed directly to the federal government (including via a GSA SmartPay travel card), does the hotel need to charge Missouri state and local sales and use tax on that stay?

Plain-English summary

The Missouri Department of Revenue ruled that a hotel operator does not have to charge state or local sales and use tax on lodging charges when the room is paid for directly by the United States government. This holds true whether the federal government pays through a direct billing arrangement or through a GSA SmartPay travel card, and the hotel can rely on the card itself as proof the exemption applies.

The Applicant runs hotels in Missouri that regularly host individuals and groups traveling on official federal government business. Many of these guests pay using GSA SmartPay, a program where the card is set up so the federal government -- not the traveler -- is billed directly for the lodging.

The Department's reasoning rests on Section 144.030.1, RSMo, which exempts from Missouri sales tax "any retail sale which the state of Missouri is prohibited from taxing pursuant to the Constitution or laws of the United States." Because the U.S. Constitution bars states from taxing sales made directly to the federal government, lodging billed directly to the government is exempt. The Department then looked at how GSA SmartPay actually works: for centrally billed accounts, GSA's own materials state that the "agency is invoiced for purchases" and "payments are made directly to the contractor or banks by the federal government," and that "all GSA SmartPay Purchase cards/accounts are Centrally Billed Accounts ("CBAs") and should be exempt from state sales tax." Since the federal government -- not the individual traveler -- is the one actually paying, the same constitutional exemption applies to GSA SmartPay travel card charges. The Department further confirmed that simply presenting the GSA SmartPay Purchase Card at check-in is sufficient documentation for the hotel to treat the stay as exempt, without needing additional proof.

What this means for you

Hotel and lodging operators

If your property hosts federal government travelers, you can treat the room charge as exempt from Missouri state and local sales and use tax whenever the government is directly billed -- whether that's a direct billing arrangement or a GSA SmartPay travel (centrally billed) card. Seeing the GSA SmartPay Purchase Card itself is enough documentation; you don't need to separately verify the billing mechanism for each stay.

Front-desk and billing staff

When a guest presents a GSA SmartPay travel card, confirm it is being used for a centrally billed government stay (as opposed to an individually billed travel card, which functions more like a personal card reimbursed by the traveler). This ruling addresses centrally billed GSA SmartPay purchase/travel cards where the government itself is invoiced directly.

Accountants and tax professionals

This ruling illustrates how Missouri's constitutional-supremacy exemption in Section 144.030.1, RSMo applies to modern federal payment methods like GSA SmartPay. The key fact pattern is that the government -- not the traveler -- is the one actually paying, which triggers the exemption for sales the state is constitutionally barred from taxing. If you advise hospitality clients, this ruling is a useful reference point for how the Department treats centrally billed federal payment cards, though it is only binding on the specific Applicant.

Common questions

Q: Does a hotel need to charge Missouri sales tax when a federal government traveler pays with a GSA SmartPay card?
A: No, according to this ruling -- as long as the card is a centrally billed account where the government itself is invoiced and pays directly, the lodging charge is exempt from Missouri state and local sales and use tax.

Q: What proof does a hotel need to treat the stay as exempt?
A: The ruling states that providing (i.e., presenting) the GSA SmartPay Purchase Card is itself sufficient to show that Missouri state and local sales and use taxes do not apply to the lodging.

Q: Why is federal-government-paid lodging exempt in the first place?
A: Section 144.030.1, RSMo exempts retail sales that Missouri is prohibited from taxing under the U.S. Constitution or federal law. Sales made directly to the federal government fall into that category, and the Department found that GSA SmartPay centrally billed cards function as direct federal government payment for this purpose.

Q: Does this ruling apply to my hotel or my situation?
A: Not automatically. This is a Missouri letter ruling that, by its own terms, is binding on the Department only with respect to the Applicant who requested it, only for three years from its date, and only as long as the facts don't change and the underlying law isn't changed by the legislature or courts. No other taxpayer can rely on it directly. It shows how the Department reasons about GSA SmartPay and federal-government lodging, but if your facts differ (for example, an individually billed card paid by the traveler and later reimbursed), the answer could be different.

Q: Does this exemption cover both state and local sales tax?
A: Yes -- the ruling addresses both Missouri state and local sales and use tax, concluding the lodging charges are exempt from both when paid directly by the U.S. government.

Citations and references

Statutes and regulations:

• Section 536.021.10, RSMo (authority and procedure for the Director of Revenue to issue binding letter rulings)
• 12 CSR 10-1.020 (regulation governing letter ruling requests)
• Section 144.020.1, RSMo (imposes sales tax on sellers engaged in retail sales of tangible personal property or taxable services in Missouri)
• Section 144.030.1, RSMo (exempts retail sales that Missouri is prohibited from taxing under the U.S. Constitution or federal law, among other exemptions)

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8400

Original ruling text

Dear Applicant:

This is a letter ruling issued by the Director of Revenue under Section 36.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated April 17, 2026.

The facts presented in your letter ruling request are summarized as follows:

Applicant operates hotels in Missouri and regularly provides lodging to individuals and groups traveling on official federal government business. Many of these individuals and groups pay using GSA SmartPay. These cards are set up so that the federal government is directly billed for the visitors’ lodgings.

ISSUE 1 :

Are Applicant’s lodging charges exempt from Missouri state and local sales and use tax when payment is made directly by the United States government?

RESPONSE 1 :

Yes. Applicant’s lodging charges are exempt from Missouri state and local sales and use tax when payment is made directly by the United States government.

Section 144.020.1, RSMo, provides “A tax is hereby levied and imposed […] upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state.”

Section 144.030.1, RSMo, provides:

There is hereby specifically exempted [. . .] from the computation of [sales] tax levied, assessed, or payable [. . .] such retail sales as may be made in commerce between this state and any other state of the United States, or [. . .] any retail sale which the state of Missouri is prohibited from taxing pursuant to the Constitution or laws of the United States of America, and such retail sales of tangible personal property which the general assembly of the state of Missouri is prohibited from taxing or further taxing by the constitution of this state.

Therefore, the lodging charges are exempt from Missouri states sales tax when payment is made directly by the United States government.

ISSUE 2 :

Are Applicant’s lodging charges exempt from Missouri state and local sales and use tax when payment is made using GSA SmartPay Travel Cards ?

RESPONSE 2 :

Yes. Applicant’s lodging charges are exempt from Missouri state and local sales and use tax when payment is made using GSA SmartPay Travel Cards.

GSA’s website provides that for centrally billed account cards, the “[a]gency is invoiced for purchases” and “payments are made directly to the contractor or banks by the federal government.” Further, “[a]ll GSA SmartPay Purchase cards/accounts are Centrally Billed Accounts (“CBA”s) and should be exempt from state sales tax.” Therefore, lodging charges are exempt from Missouri sales tax when payment is made using GSA SmartPay Travel Cards.

ISSUE 3 :

Is providing the GSA SmartPay Purchase Card sufficient to show that Missouri state and local sales and use taxes do not apply to the lodging?

RESPONSE 3 :

Yes. Providing the GSA SmartPay Purchase Card is sufficient to show that Missouri state and local sales and use taxes do not apply to the lodging.  See Response 2.

This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals.  If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change.  For this reason, the interpretation set forth above should be reviewed on a regular basis.  Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

Should additional information be needed, please contact Legal Counsel Justin Dussold, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.

Sincerely,

Trish Vincent