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When do federal employees get exemptions from state accommodations tax?

  • Sep 9, 2017 | MyLodgeTax

Lodging taxes follow most travelers wherever they go in the United States. However, travelers on U.S. government business may get a break, as some states exempt federal employees from paying state taxes on accommodations.

If you’re renting a property out to a federal employee, how do you know if a traveler should get an exemption from state sales tax?

Federal employees must meet certain conditions to qualify for an exemption. First, they’ll need to have government identification and be on official government-related business travel. Different states have varying requirements for proof of this, and in some states, federal employees may also have to fill out official forms to get the exemption.

Federal employees also need to pay for their accommodations with a government travel credit card. There are two different categories of federal government travel credit cards.

  • Centrally Billed Account (CBA) cards are managed by one person in an organization for several travelers. These are considered direct payments from the government.
  • Individually Billed Account (IBA) travel cards are managed by each traveler individually and are not considered direct government payment.

Accommodations for official government travel paid for by CBA cards are exempt from state taxes in the vast majority of states, with a few exceptions: Arizona, Hawaii, Illinois, and New Mexico.

On the other hand, federal employees are less likely to qualify for an exemption when they use an IBA card to pay. Accommodations paid for with IBA cards are only exempt from state taxes in the following states: Delaware, Florida, Kansas, Louisiana, Massachusetts, New York, Oregon, Pennsylvania, Texas, Washington, and Wisconsin.

Keep in mind that even if your state offers a tax exemption for accommodations paid for with an IBA card, individual properties can choose not to participate.

IBA lodging purchases are NOT exempt from state taxes in the following states: Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, District of Columbia, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Michigan, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Rhode island, South Carolina, South Dakota, Tennessee, Utah, Virginia, West Virginia, and Wyoming.

There are three states that have no statewide taxes that apply to accommodations in the first place — Alaska, California, and Missouri — so no exemption is needed or possible in those states.

These rules only apply to statewide taxes. Individual municipalities in any of these states may also levy taxes on accommodations, and their rules for federal employee exemptions may be different than the state’s. It’s important to check with your local tax jurisdiction and understand the rules for exemption from local accommodation taxes.

Lodging tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
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