Exemption Certificate Use By Government Employees

While government employees may use the exemption certificate to make purchases of goods for the government unit, there is an important exception. The sales and use tax law does not expressly exempt sales to a government employee who, for example, rents a hotel room or purchases a meal and pays for it with cash, personal check or personal credit card. Those employees are required to pay the Maryland sales and use tax to the vendor.

The tax is due on those transactions even though the employee may have documentation provided by the government agency that the purchaser is a government employee or may be reimbursed by the government for those expenses.

Federal government credit card charges for all purchases other than travel are billed directly to the federal government and are exempt from the sales tax.

Travel charges

Travel charges, such as airfare, lodging accommodations, rental cars, meals, etc., may be billed directly to the federal government or to the cardholder. Merchants must make a determination based on the sixth digit of the account number.

The card is billed directly to the federal government and the transactions are exempt from the tax if the sixth digit is one of the following numbers:

• 0
• 6
• 7
• 8
• 9

The card is billed to the cardholder and the transactions are taxable if the sixth digit is one of the following numbers:

• 1
• 2
• 3
• 4