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Washington: How Tax Applies when the U.S. Government Pays


 Able to purchase items tax-free? Maybe. Maybe not.

The Washington State Department of Revenue has issued a special notice reminding taxpayers that how you pay affects whether or not Washington sales tax applies to the purchase. In short, not all purchases made by federal employees are tax-exempt.

The U.S. government must directly pay for a purchase in order for it to be exempt. Purchases made with the following are exempt:

  • Purchase card embossed with “For Official Government Purchases Only”
    • May not be used for travel
  • Fleet card embossed with “For Official Government Purchases Only”
    • For vehicle fuel and maintenance only
  • Travel card embossed with “For Official Government Travel Only”
    • The sixth digit counting from left must be either 6, 7, 8, 9, or 0
  • Integrated card embossed with “For Official Government Use Only”
    • The sixth digit counting from left must be either 6, 7, 8, 9, or 0

However, purchases made by federal employees with Individually Billed Accounts (IBAs) are subject to sales tax. This is true even if the federal employee will be reimbursed for the purchase by the federal government.

Keep accurate records

Accurate records must be kept on all exempt transactions, including those made with an eligible card. Therefore, in addition to a receipt, the following must be kept:

  • Federal employee’s name
  • Federal government agency’s name
  • Type of agency card (purchase card, fleet card, etc)
  • Expiration date of credit card
  • Name of the credit card company
  • The sixth digit (counting from left) of the card (for Travel or Integrated Cards).

For additional information, please see the DOR special notice.

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Sales 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.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.