Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Rule 006.05.99-001 - GR 28.1: Gross Receipts Regulation - Exemptions from Tax - Federal Credit Card Purchases

Current through Register Vol. 49, No. 6, June, 2024
Pursuant to his authority under Ark. Code Ann. §
								§
								26-18-301 and
				26-19-108, the
				Director of the Arkansas Finance and Administration promulgates the following
				regulation. This regulation is to be read in conjunction with the previous
				regulations and laws of the Department and tins State.
This regulation is promulgated to clarify that as of November
				30, 1998, the federal government substantially changed its credit card program.
				The I.M.P.A.C. purchase cards, the American Express/Discover travel cards, and
				the Wright Express fleet cards are no longer in use. Instead, the General
				Services Administration (GSA) has entered into a series of contracts with a
				variety of card-issuing banks under a new program named GSA SmartPay. The GSA
				SmartPay program will be in effect for five to ten years.
The majority of these new cards will be direct-billed to the
				federal government and will thus represent tax-exempt purchases for sales and
				tourism tax purposes. However, there will be both a Visa and a MasterCard that
				will be billed to the federal employee (for later reimbursement). Purchases
				with these credit cards will continue to be subject to sales tax.
The Arkansas Gross Receipts Tax Regulations are hereby amended
				to add a new provision to read as follows:
GR
			 28.1 EXEMPTIONS FROM TAX - FEDERAL CREDIT CARD PURCHASES
A. Sales tax is not due on credit card
			 purchases winch 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
			 cards.
B. Cards winch are always
			 direct-billed to the federal government and are therefore exempt from sales or
			 lodgings taxes begin with digits 8699 or 5568.
C. Prefixes 4486, 4716, 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 NationsBank. 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 recognize the Interior
			 Department's federal tax exempt identification number to realize that purchases
			 for lodgings and restaurant food are taxable (nothing on the card will tell the
			 cashier that the card holder is with the Bureau of Reclamation, whose lodgings
			 and restaurant charges are tax-exempt.) This system is expected to be in place
			 for approximately one year at which time all purchases on this integrated card
			 will be direct-billed and tax-exempt.