Federal government employees use government-issued credit cards at our retail stores, and some refuse to fill out the state's Tax Exempt Certificate. Do we have to require the certificate anyway, should we photocopy the card, and what backup documentation do we need for an audit?

Plain-English summary

A retailer had encountered federal government employees using government-issued credit cards in its stores who refused to fill out the state's required Tax Exempt Certificate. Referencing a prior Comptroller ruling (accession number 9404228L) confirming that Texas retailers may treat purchases on these government cards as exempt, the retailer asked exactly what documentation it needed to keep: Must it require the Tax Exempt Certificate anyway? Should it photocopy the card? What backup does it need on file for an audit?

The Comptroller's answer simplifies the paperwork considerably: the copy of the charge slip that the merchant keeps will itself show the statement "U.S. Govt. Tax Exempt." As long as the retained charge slip or invoice reflects that statement, the retailer may treat the purchase as tax exempt — no separate exemption certificate is required. The only time additional documentation is needed is when the charge slip or invoice does NOT show that statement — for example, if the card was electronically scanned rather than manually imprinted. In that situation, the retailer should get an imprint or copy of the card itself as proof of the exemption, to have on hand in case of an audit.

What this means for you

Retailers accepting federal government employee credit cards

You don't need to force government cardholders to fill out a Tax Exempt Certificate — the charge slip's own "U.S. Govt. Tax Exempt" statement is sufficient documentation on its own. Only fall back to imprinting or copying the card itself when your charge slip doesn't carry that statement (e.g., with electronic/scanned transactions).

Retail cashiers and store managers handling government-card purchases

Train staff to check whether the charge slip shows the tax-exempt statement automatically; if it does, that's the complete audit record needed. If not, get a card imprint or copy at the point of sale rather than trying to track it down later.

Accountants and tax professionals advising retail clients on exemption documentation

This letter simplifies the compliance burden for government-card transactions: retailers can rely on the charge slip's built-in tax-exempt language in most cases, reserving the card-imprint/copy requirement for the narrower case where that statement doesn't appear on the transaction record.

Common questions

Q: Do we need a Tax Exempt Certificate from federal employees using government credit cards?
A: No — if your retained charge slip or invoice shows "U.S. Govt. Tax Exempt," that's sufficient documentation on its own.

Q: What if our charge slip doesn't show that statement, like with an electronically scanned card?
A: Get an imprint or copy of the card itself as your proof of the exemption for audit purposes.

Q: What should we keep in our files in case of an audit?
A: Either the charge slip/invoice showing the "U.S. Govt. Tax Exempt" statement, or (if that statement isn't present) an imprint/copy of the card.

Q: Can I rely on this letter for my own retail store's documentation practices?
A: No. This opinion is based on the facts presented, and other facts, though similar, may provide a different result; 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 references a prior ruling (accession number 9404228L) on government credit cards but doesn't quote a statute or rule number in this 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/9901143L

Original ruling text

January 29, 1999

Subject: Government Cards

Dear Ms. **:

This is in response to your request for a ruling.

I was reading Accession Number 9404228L, concerning Government Credit Cards.
It states that Texas retailers may exempt purchases made with these credit
cards. We have had situations where the cards are used in our retail stores
and the person making the purchase refuses to fill out a Tax Exempt Certificate
which is required by the state. My questions are do we need to require them
to fill out a Tax Exempt Certificate? Do we photo copy the card for proof and
a signature? What back up on these purchases do we need in our files for audit
purposes?

Response: The copy of the charge slip maintained by the merchant will show the
statement "U.S. Govt. Tax Exempt." Texas retailers may therefore treat
purchases on the card as tax exempt if the charge slip or invoice retained by
the retailer reflects this statement. No separate exemption certificate is
required. If the charge slip or invoice does not reflect this statement (i.e.,
the card is electronically scanned) an imprint or copy of the of the card
should be obtained as proof of exemption in the event of an audit.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this information answers your questions. If you need additional
information, please
call me toll-free at 1-800-531-5441, extension 3-4502. The direct line is
512/463-4502. You may also write to Tax Policy Division, Comptroller of Public
Accounts. You may also e-mail our tax help section at:

Gilbert Zamora
[email protected]
Tax Policy Division