Are purchases made by federal employees using a government I.M.P.A.C. (GSA SmartPay) Visa credit card exempt from Texas sales and use tax?

Plain-English summary

The U.S. Department of Agriculture asked the Comptroller whether purchases made by federal employees using a Government Visa credit card (I.M.P.A.C.) are exempt from Texas sales and use tax.

The Comptroller confirmed the purchases are exempt if three conditions are all met: the card states on its face "UNITED STATES OF AMERICA I.M.P.A.C. FOR OFFICIAL USE ONLY -- U.S. GOVT TAX EXEMPT"; the cardholder is authorized only to make purchases for official government purposes; and the purchases are paid for directly by the U.S. Government. The letter also clarifies that the federal tax identification number printed on the card doesn't affect a Texas retailer's willingness to accept the card or change the government's tax-exempt status.

What this means for you

Texas retailers accepting government credit cards

You can accept an I.M.P.A.C. (or similarly labeled GSA SmartPay-era) government card as tax-exempt if it carries the specific "FOR OFFICIAL USE ONLY -- U.S. GOVT TAX EXEMPT" language on its face -- the federal tax ID number on the card doesn't change that.

Federal agencies and employees using government purchase cards in Texas

Purchases are exempt only when all three conditions hold: the card's face bears the tax-exempt official-use language, the cardholder is restricted to official purchases, and the government pays directly. A personal card, or a card without that specific labeling, would not automatically qualify.

Common questions

Q: Are purchases by federal employees using a government credit card automatically tax-exempt in Texas?
A: Only if the card is marked "FOR OFFICIAL USE ONLY -- U.S. GOVT TAX EXEMPT," the purchases are for official government purposes, and the government pays directly, per this letter.

Q: Does the federal tax ID number printed on the card matter to a retailer's ability to honor the exemption?
A: No -- per this letter, it doesn't affect the retailer's ability to accept the card or the government's tax-exempt status.

Citations and references

This letter does not cite a specific Tax Code section or rule number -- it describes the Comptroller's card-based exemption criteria directly.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9701235L

Original ruling text

January 28, 1997

Project Manager
Policy Analysis and Coordination Center
United States Department of Agriculture
1400 Independence Avenue SW
Washington, D.C. 20250-9300

Dear **:

Thank you for your letter of January 7, 1997, concerning the taxability of
purchases of taxable items made by federal government employees using a
Government Visa credit card (I.M.P.A.C.).

Purchases made by employees using credit cards will be exempt from Texas state
and local sales and use taxes if:

the credit cards state on their face "UNITED STATES OF AMERICA I.M.P.A.C.
FOR OFFICIAL USE ONLY - U.S. GOVT TAX EXEMPT";

the cardholders are authorized only to make purchases for official government
purposes; and

the purchases are paid for directly by the U.S. Government.

The federal tax number on the credit card will not affect Texas retailers'
ability to accept the credit card or the U.S. Government's exempt status.

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

You may call me toll free 1-800-531-5441, extension 3-4683. The direct line is
512/463-4683. You may also write to Tax Policy Division, Comptroller of Public
Accounts.

Sincerely,
Eddie C. Washington
Tax Policy Division