Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › GROSS RECEIPTS TAX RULES › Rule 006.05.06-005-GR-47.1 - EXEMPTIONS FROM TAX - FEDERAL CREDIT CARD PURCHASES

Current through Register Vol. 49, No. 6, June, 2024
A. Sales tax is not due on credit card
				purchases which are direct-billed to and paid for by the federal government.
				Sales tax is due on credit card transactions where the purchases are billed to
				and paid for by federal employees, who are then reimbursed by the federal
				government. The following information is designed to assist you in determining
				whether or not tax applies to transactions paid for with GSA SmartPay®2 charge
				cards.
B. Cards which are always
				direct-billed to the federal government and are therefore exempt from sales or
				lodgings taxes begin with digits 4486, 4614, 4716, 5565, 5568, or
				8699.
C. Prefixes 4486, 4614, 5565,
				and 5568 are issued on cards which are both direct-billed and
				individually-billed. To know the difference you must look at the sixth
				digit.
D. If the sixth digit is 0,
				6, 7, 8, or 9; the card is direct-billed and the transactions are tax-exempt.
				If the sixth digit is 1, 2, 3, or 4; the card is billed to the individual
				federal employee and the transactions are subject to tax. State sales and
				tourism taxes apply only against transactions made with federal Visa or
				MasterCard credit cards which begin with the prefix 4486, 4716, or 5568 and
				have the sixth digit as either 1, 2, 3, or 4.
E. The following are two exceptions to the
				above statements:
1. The Department of
				Interior will use an integrated MasterCard issued by Nations Bank. The same
				card will be used for both direct-billed and individually-billed purchases. The
				bank will sort the purchases during the billing process depending on the
				merchant's code. Purchases for office supplies and other procurements will be
				direct-billed to the federal government and, therefore, tax-exempt. Purchases
				for lodgings and restaurant food will be individually-billed to the federal
				employee and, therefore, taxable. These cards will have the agency's federal
				tax-exempt identification number (14-0001849) on the face of the card.
The account numbers will begin "5568-16." Although it would
				  appear that this number means the card is direct-billed to the federal
				  government and all transactions would be tax-exempt; in fact, lodgings and
				  restaurant charges will be individually billed to the federal employee and the
				  transaction will be taxable.
2. The cards issued to the Bureau of
				Reclamation will be direct-billed for all purchases, including lodgings and
				restaurant charges. Accordingly, cashiers will have to differentiate purchases
				on cards issued to the Department of Interior and purchases on cards issued to
				the Bureau of Reclamation. Purchases for lodgings and restaurant food on cards
				issued to the Department of Interior are taxable. Purchases for lodgings and
				restaurant food on cards issued to the Bureau of Reclamation are tax-exempt.
				This system is expected to be in place for approximately one year beginning in
				1999 at which time all purchases on this integrated card will be direct-billed
				and tax-exempt.