When were federal employee credit-card purchases exempt from South Carolina sales tax under RR 99-8?

Plain-English summary

South Carolina Revenue Ruling #99-8 said the federal sales-tax exemption depended on who was billed, not simply whether a federal employee made the purchase for official business.

When the federal government was billed directly, the employee used a card whose charges were billed to the government, or payment was made by government check, the sale was exempt as a sale to the federal government. When the employee was personally billed and later reimbursed, the sale was taxable because the retailer's customer was the employee.

The ruling then applied that principle to the original GSA SmartPay program. Fleet and purchase cards were treated as centrally billed and exempt. Travel cards could be centrally billed and exempt or individually billed and taxable, identified under the historical program by card-number features. Department of the Interior cards and Bureau of Reclamation cards had their own billing rules for lodging and meals.

What this means for you

Retailers, hotels, and restaurants

Official federal use did not automatically make a transaction exempt. The historical test was whether the federal government itself was directly responsible for the charge.

Federal travelers

Later reimbursement did not convert an employee-billed purchase into a direct federal-government sale under the ruling.

Accountants and tax professionals

The direct-billing principle is the important part of this historical ruling. Its card prefixes, issuing banks, legends, and program details should not be used to classify current cards.

Common questions

Q: Was a fleet-card purchase exempt?
A: Under the original program described by RR #99-8, yes, because fleet charges were always billed directly to the federal government.

Q: Were all federal travel-card purchases exempt?
A: No. Centrally billed travel accounts were exempt, while individually billed accounts were taxable even if the employee was reimbursed.

Q: Were purchase-card transactions exempt?
A: Yes under the ruling, because the charges were billed directly to the federal government, subject to the card's permitted merchant uses.

Q: Did a government employee's reimbursement make a personal charge exempt?
A: No. The ruling treated the retailer-to-employee sale as taxable.

Q: Are the card-number tests in RR 99-8 current?
A: No. They describe the original SmartPay program. Later RR #09-1 addressed SmartPay 2, and current program details must be verified.

Citations and references

• S.C. Code Ann. § 12-36-2120(2) — exemption for tangible personal property sold to the federal government
• S.C. Code Ann. § 12-36-2130 — sales and use tax exemptions referenced by the ruling
• SC Revenue Ruling #88-8 — direct-government versus reimbursed-employee purchase distinction
• SC Revenue Ruling #96-7 and Information Letters #88-11, #91-11, and #94-6 — superseded by RR #99-8
• SC Revenue Ruling #09-1 — later SmartPay 2 guidance

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR99-8.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P.O. Box 125, Columbia, South Carolina 29214

SC REVENUE RULING #99-8

SUBJECT:

Federal Employee Credit Cards
(Sales & Use Tax)

EFFECTIVE DATE:

Applies to all periods open under the statute.

SUPERSEDES:

SC Revenue Ruling #96-7
SC Information Letter #88-11
SC Information Letter #91-11
SC Information Letter #94-6

REFERENCES:

S. C. Code Ann. Section 12-36-2120(2) (Supp. 1998)
S. C. Code Ann. Section 12-36-2130
SC Revenue Ruling #88-8

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (Supp. 1998)
SC Revenue Procedure #97-8

SCOPE:

A Revenue Ruling is the Department of Revenue’s official advisory
opinion of how laws administered by the Department are to be applied
to a specific issue or a specific set of facts, and is provided as guidance
for all persons or a particular group. It is valid and remains in effect
until superseded or modified by a change in the statute or regulations
or a subsequent court decision, Revenue Ruling or Revenue Procedure.

Code Section 12-36-2120(2) exempts from the sales and use taxes “tangible personal property
sold to the federal government.”
In the Department’s opinion, in a retail sale transaction where the federal government is billed
directly or a federal employee uses a credit card whereby the federal government is subsequently
billed or the employee pays with a government check, the sale is exempt from tax. Such sale is
between the retailer and the federal government. On the other hand, in a retail sale transaction
where an employee pays and is subsequently reimbursed by the government, the sale is not
exempt. The sale is between the retailer and the employee, as opposed to being between the
retailer and the federal government. See SC Revenue Ruling #88-8.
Effective November 30, 1998, the federal government has substantially changed its credit card
program. The I.M.P.A.C cards, the American Express cards, and the Wright Express fleet cards
are no longer in use.

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The General Services Administration has entered into contracts with certain card-issuing banks.
The new program, named GSA SmartPay, is scheduled to be in effect for 5 to 10 years. The new
cards, and the Department’s opinion how the sales and use taxes apply, are as follows:
I. Fleet cards are used to purchase gasoline and to service government vehicles. They are always
billed directly to the federal government. Therefore, purchases with these cards are exempt from
sales and use taxes.
Fleet cards:

1. Have “For Official Government Fleet Use Only” written on them;
   AND
2. The card’s number begins with:
   a. 8699 (Voyager), or
   b. 5568 (MasterCard).
   II. Travel cards are used to pay for sleeping accommodations (i.e. hotel and motel rooms),
   restaurant meals, auto rentals and common carrier transportation services.
   Travel cards are of two types - those billed directly to the federal government (exempt) and those
   billed to the employee for reimbursement by the federal government (not exempt).
   Travel cards:
3. Have “For Official Government Travel Only” written on them;
4. The card’s number begins with;
   a. 4486 (Visa) or 4716 (Visa), or
   b. 5568 (MasterCard);
   AND
5. If the 6th digit in the card’s number is 0, 6, 7, 8, or 9, purchases with the card are
   exempt. If the 6th digit is not one of the aforementioned digits, purchases with the card
   are not exempt.
   III. Purchase cards are used to pay for items such as computers, office furniture, office supplies,
   services, subscriptions, etc. Charges on these cards are billed directly to the federal government
   and are, therefore, exempt from tax.
   Purchase cards:

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1. Have “For Official U.S. Government Purchases Only” written on them;
AND

2. The card’s number begins with:
   a. 4486 or 4716 (Visa), or
   b. 5568 (MasterCard).
   Note: These are the same beginning numbers that are on travel cards. However, these cards
   cannot be used to pay for sleeping accommodations or restaurant meals.
   When a charge is submitted using a purchase card, the merchant code determines whether the
   card may be used for that particular charge. For example, if someone presents a purchase card to
   a hotel for payment, the charge will not be accepted by the card issuer.
   IV. Department of the Interior MasterCards:
   These cards are MasterCards and have “U.S. Department of the Interior” and “Tax Exempt
   I.D. 140001849” on their face. These cards, which are issued by NationsBank, may be used to
   make all purchases tax-free, except for sleeping accommodations and restaurant food.
   Charges for sleeping accommodations and for restaurant meals with these cards are not exempt
   from tax. Such charges are billed to the employee for subsequent reimbursement by the federal
   government.
   V. Cards of the Bureau of Reclamation:
   Cards issued to the Bureau of Reclamation allow employees to make all purchases tax-free,
   including sleeping accommodations and restaurant meals. Charges on these cards are billed
   directly to the federal government.
   For questions concerning this document, you may call Jerry Knight at (803) 898-5137.
   SOUTH CAROLINA DEPARTMENT OF REVENUE

s/ Elizabeth Carpentier
Elizabeth Carpentier, Director
Columbia, South Carolina
August 9
, 19 99

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