Homeowners in our area received FEMA disaster grants to repair their homes, and some are trying to buy materials tax-free by using their FEMA claim number as proof of a government exemption. Are these purchases actually exempt?

Plain-English summary

Following a disaster, individual homeowners had received grants from the Federal Emergency Management Administration (FEMA) to repair their homes. Some homeowners tried to buy repair materials tax-free at retail, presenting their FEMA-assigned claim number as if it entitled them to a government sales tax exemption. A retailer asked the Comptroller whether these purchases were actually exempt.

The answer: no, they're taxable. Texas sales tax law exempts purchases of taxable items sold to or bought by the United States Government and its agencies and instrumentalities — but that exemption depends on who the actual purchaser is. Here, FEMA is not the purchaser in these transactions; the individual homeowner is. The fact that the money funding the purchase originated from a federal grant doesn't change who's legally buying the materials, so the exemption doesn't apply.

The Comptroller went further and confirmed this directly with FEMA: the Assistant Regional Director for FEMA's District 6 confirmed that federal law does not provide any exemption from state sales tax for an individual using grant funds to make a purchase, and another FEMA District 6 official confirmed that a federal grant is issued in the individual's own name — reinforcing that it's the individual, not the federal government, who is the purchaser.

What this means for you

Retailers and building material suppliers in disaster-affected areas

Don't accept a customer's FEMA claim number, case number, or grant documentation as proof of a sales tax exemption — a homeowner spending FEMA grant money is still the purchaser and still owes Texas sales tax on the materials, just like any other retail purchase.

Homeowners receiving FEMA or other federal disaster-relief grants

Your grant money doesn't come with an automatic Texas sales tax exemption when you spend it on repair materials — you're the purchaser, not the federal government, so ordinary sales tax applies to your purchases.

Accountants and tax professionals advising disaster-relief recipients or retailers

The controlling principle is straightforward: the government exemption follows who is legally the purchaser, not the ultimate source of the purchase funds. A federal grant doesn't convert an individual's own purchase into a tax-exempt government purchase.

Common questions

Q: Can a homeowner use their FEMA claim number to buy repair materials tax-free?
A: No — the homeowner, not FEMA, is the purchaser, so the purchase is taxable regardless of the funding source.

Q: Does the source of the money (a federal grant) matter for the exemption?
A: No — Texas's government purchaser exemption depends on who is legally making the purchase, not where the money came from.

Q: Did FEMA confirm this directly?
A: Yes — FEMA officials confirmed that federal law doesn't exempt an individual using grant funds from state sales tax, and that grants are issued in the individual's own name.

Q: Can I rely on this letter for my own disaster-relief-funded purchase or sale?
A: No. This opinion is based on the facts presented, and if there are additional or different facts, the opinion may change; it can be relied on only by the taxpayer it was issued to.

Citations and references

No specific Tax Code section or Comptroller rule number is cited in this letter; the Comptroller applies the general principle that the government purchaser exemption depends on who is legally the purchaser, without quoting a statute or rule number in the response.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9902119L

Original ruling text

February 1, 1999

Dear Mr. **:

Thank you for your recent telephone call concerning the taxability of materials
(taxable items) bought by individuals that received grants from the Federal
Emergency Management Administration (FEMA).

You stated that individuals were buying materials to repair their homes and
attempting to claim an exemption from sales tax by using the claim number
assigned to them by FEMA.

The purchases of taxable goods by individuals having federal grants are
taxable. FEMA is not the purchaser in these transactions, the individual
homeowners are. The Texas sales tax law exempts taxable items sold to or bought
by the United States Government and its agencies and instrumentalities. The
fact that the money that is used to make the purchase came from a U.S.
Government agency does not make the purchases exempt.

I spoke with Gary Jones, Assistant Regional Director for FEMA, District 6, on
January 29, 1999. Mr. Jones confirmed that the federal law does not provide
that an individual purchasing materials using grant funds is exempt from sales
tax. Dave Passey of FEMA's District 6 said an individual is issued a federal
grant in the individual's name.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

You may call toll-free 1-800-531-5441, extension 3-4683, if you have any
questions or need more information. My direct line is 512/463-4683. You may
write to Tax Policy Division, Comptroller of Public Accounts, P.O. Box 13528,
Austin, Texas 78711-3285.

Sincerely,

Eddie C. Washington
Tax Policy Division