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CRS SUMMARIZES STATE LAWS EXEMPTING U.S. PURCHASES FROM STATE SALES AND USE TAXES.

NOV. 15, 1995

95-1130A

DATED NOV. 15, 1995
DOCUMENT ATTRIBUTES
  • Authors
    Ripy, Thomas B.
    Gurevitz, Mark
  • Institutional Authors
    Congressional Research Service
  • Subject Area/Tax Topics
  • Index Terms
    exemptions
    sales tax
    use tax
    state taxation
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 96-3987 (18 original pages)
  • Tax Analysts Electronic Citation
    96 TNT 28-56
Citations: 95-1130A

                       CRS REPORT FOR CONGRESS

 

 

                      COMPILATION OF STATE LAWS

 

                    PERTAINING TO EXEMPTIONS FROM

 

                    STATE SALES AND USE TAXES FOR

 

                   PURCHASES BY THE UNITED STATES

 

 

                           Thomas B. Ripy

 

                        Legislative Attorney

 

 

                            Mark Gurevitz

 

                        Paralegal Specialist

 

                        American Law Division

 

 

                          November 15, 1995

 

 

                          TABLE OF CONTENTS

 

 

INTRODUCTION

 

 

COMPILATION OF STATE LAWS PERTAINING TO EXEMPTIONS FROM STATE SALES

 

AND USE TAXES FOR PURCHASES BY THE UNITED STATES

 

 

     ALABAMA

 

          Alabama Code

 

 

     ARIZONA

 

          Arizona Revised Statutes Annotated

 

 

     ARKANSAS

 

          Arkansas Statutes Annotated

 

 

     CALIFORNIA

 

          West California Code

 

 

     COLORADO

 

          Colorado Revised Statutes

 

 

     CONNECTICUT

 

          Connecticut General Statutes Annotated

 

 

     DISTRICT OF COLUMBIA

 

          District of Columbia Code

 

 

     FLORIDA

 

          Florida Statutes Annotated

 

 

     GEORGIA

 

          Georgia Code Annotated

 

 

     HAWAII

 

          Hawaii Revised Statutes

 

 

     IDAHO

 

          Idaho Code

 

 

     ILLINOIS

 

          Smith-Hurd, Illinois Annotated Statutes

 

 

     INDIANA

 

          Burns Indiana Code Annotated

 

 

     IOWA

 

          Iowa Code Annotated

 

 

     KANSAS

 

          Kansas Statutes Annotated

 

 

     KENTUCKY

 

          Kentucky Revised Statutes

 

 

     LOUISIANA

 

          No statute

 

 

     MAINE

 

          Maine Revised Statutes Annotated

 

 

     MARYLAND

 

          Maryland Annotated Code

 

 

     MASSACHUSETTS

 

          Massachusetts General Laws

 

 

     MICHIGAN

 

          Michigan Compiled Statutes

 

 

     MINNESOTA

 

          Minnesota Statutes

 

 

     MISSISSIPPI

 

          Mississippi Code

 

 

     MISSOURI

 

          Missouri Revised Statutes

 

 

     NEBRASKA

 

          Nebraska Revised Statutes

 

 

     NEVADA

 

          Nevada Revised Statutes

 

 

     NEW JERSEY

 

          New Jersey Revised Statutes

 

 

     NEW MEXICO

 

          New Mexico Statutes Annotated

 

 

     NEW YORK

 

          McKinneys New York Consolidated Law

 

 

     NORTH CAROLINA

 

          North Carolina General Statutes

 

 

     NORTH DAKOTA

 

          North Dakota Century Code

 

 

     OHIO

 

          Page's Ohio Revised Code Annotated

 

 

     OKLAHOMA

 

          Oklahoma Statutes

 

 

     PENNSYLVANIA

 

          Purdon's Pennsylvania Statutes Annotated

 

 

     RHODE ISLAND

 

          Rhode Island General Laws

 

 

     SOUTH CAROLINA

 

          South Carolina Code Annotated

 

 

     SOUTH DAKOTA

 

          South Dakota Codified Laws

 

 

     TENNESSEE

 

          Tennessee Code Annotated

 

 

     TEXAS

 

          Vernon's Texas Code Annotated

 

 

     UTAH

 

          Utah Code Annotated

 

 

     VERMONT

 

          Vermont Statutes Annotated

 

 

     VIRGINIA

 

          Virginia Code

 

 

     WASHINGTON

 

          Washington Revised Code

 

 

     WEST VIRGINIA

 

          West Virginia Code

 

 

     WISCONSIN

 

          Wisconsin Code

 

 

     WYOMING

 

          Wyoming Statutes

 

 

SUMMARY

[1] This report compiles and summarizes the provisions in state statutes that contain an exemption from state sales and use taxes for purchases by the Federal Government. Briefly, state statutes have addressed this in a variety of ways. In some cases there is simply a provision that exempts purchases that are not taxable under the Constitution and laws of the United States. Another common statutory provision is one specifically exempting sales to the Federal Government and its agents and instrumentalities from the sales and use taxes. The precise wording of these provisions may vary, but one fairly common provision of this sort applies to the Federal Government, its unincorporated agencies and instrumentalities and incorporated agencies wholly owned by the United States or owned by a corporation wholly owned by the United States. This phraseology eliminates questions about the application of the exemption to institutions like the privately owned national banks.

[2] In many states, both these types of statutes exist. In some cases, the statutes may impose requirements to claim the exemption, e.g., a certificate of exemption. It should also be noted that these provisions may not apply where an individual makes the purchase and is reimbursed by the Federal Government. Our effort has been confined to surveying the state statutes, providing a brief overview of the constitutional limit on State taxing power that comes into play when the state attempts to apply its sales and use taxes to Federal Government purchases.

[3] One constitutional limit on state taxing power is the Supremacy Clause of the Constitution. Found in Article VI, clause 2, it provides:

          Clause 2. This Constitution, and the Laws which shall be

 

     made in Pursuance thereof; and all treaties made, or which shall

 

     be made, under Authority of the United States, shall be the

 

     supreme Law of the Land; and the Judges in every State shall be

 

     bound thereby; anything 1n the Constitution or Laws of any State

 

     to the Contrary notwithstanding.

 

 

INTRODUCTION

[4] This report compiles and summarizes the provisions in state statutes that contain an exemption from state sales and use taxes for purchases by the Federal Government. Briefly, state statutes have addressed this in a variety of ways. In some cases there is simply a provision that exempts purchases that are not taxable under the Constitution and laws of the United States. Another common statutory provision is one specifically exempting sales to the Federal Government and its agents and instrumentalities from the sales and use taxes. The precise wording of these provisions may vary, but one fairly common provision of this sort applies to the Federal Government, its unincorporated agencies and instrumentalities and incorporated agencies wholly owned by the United States or owned by a corporation wholly owned by the United States. This phraseology eliminates questions about the application of the exemption to institutions like the privately owned national banks.

[5] In many states both these types of statutes exist. In some cases the statutes may impose requirements to claim the exemption, e.g., a certificate of exemption. It should also be noted that these provisions may not apply where an individual makes the purchase and is reimbursed by the Federal Government. Our effort has been confined to surveying the state statutes, providing a brief overview of the constitutional limit on State taxing power that comes into play when the state attempts to apply its sales and use taxes to Federal Government purchases.

[6] One constitutional limit on state taxing power is the Supremacy Clause of the Constitution. Found in Article VI, clause 2, it provides:

          Clause 2. This Constitution, and the Laws which shall be

 

     made in Pursuance thereof; and all treaties made, or which shall

 

     be made, under Authority of the United States, shall be the

 

     supreme Law of the Land; and the Judges in every State shall be

 

     bound thereby; anything in the Constitution or Laws of any State

 

     to the Contrary notwithstanding.

 

 

In 1819, in McCulloch v. Maryland, 17 U.S. 316, the Supreme Court applied this clause in striking down a state tax applicable to the operations of a national bank. While the reach of federal immunity from state taxation has been narrowed in the modern era, it still serves as a limit on the application of state taxes to federal institutions and activities.

[7] The scope of its present application is perhaps best capsulized in the Supreme Court's opinion in United States v. New Mexico, 455 U.S. 720, 735 (1982), where the Court said that to the extent immunity was based on the activity taxed the case law limited the application of immunity to those situations where "the levy falls directly on the United States itself, or on an agency or instrumentality so closely connected to the Government that the two cannot realistically be viewed as separate entities, at least insofar as the activity being taxed is concerned." In this case the legal incidence of the tax fell on a government contractor and the Court refused to accept the view that immunity should apply because the economic incidence of the tax fell on the federal government. It did sound a cautionary note, however saying that state taxes which applied to federal contractors in a manner that discriminated against the federal government or substantially interfered with its activities would be constitutionally invalid. Id. at 735, n.11.

ALABAMA

 

 

Alabama Code

 

 

     Section 40-23-4(a)(17): Sales Tax.

 

 

     Sales non-taxable by Federal law and constitutional

 

     restrictions.

 

 

     Section 40-23-62(2): Use Tax.

 

 

     Non-taxable under Federal law and constitutional restrictions.

 

 

ARIZONA

 

 

Arizona Revised Statutes Annotated

 

 

     Section 42-1310.01(k)(L)

 

 

     Arizona imposes a transaction privilege (sales) tax. The tax is

 

     imposed upon the seller and applies to sales to the federal

 

     government; but there is a reduction in the tax base of retail

 

     sellers of 50% of the income received from sales made directly

 

     to the United States government, its departments, or agencies.

 

     There are also special provisions exempting certain sales to and

 

     by manufacturers, modifiers, assemblers, or repairers for sales

 

     to them of components for use in products sold directly to the

 

     United States and sales by them directly to the United States

 

     section 42-1310.01(k)(L).

 

 

     Section 42-1409: Use Tax

 

 

     (3) Tangible personal property, the storage, use or consumption

 

         of which the Constitution or laws of the United States

 

         prohibit this state from taxing.

 

 

ARKANSAS

 

 

Arkansas Statutes Annotated

 

 

     Section 26-52-401

 

 

     (5) Sales to the United States

 

 

     (16) Sales non-taxable by United States Constitution or law.

 

 

CALIFORNIA

 

 

West California Code

 

 

     Section 6352. Revenue and Taxation

 

 

     Sales non-taxable under the United States Constitution.

 

 

     Section 6381. Revenue and Taxation

 

 

     Sales to the United States; its unincorporated agencies and

 

     instrumentalities; any corporation wholly owned by the United

 

     States, including incorporated agencies and instrumentalities.

 

 

COLORADO

 

 

Colorado Revised Statutes

 

 

     Section 39-26-114(1)(a)(I): Sales Tax.

 

 

     To the United States government in its governmental capacity.

 

 

     Section 39-26-203(1)(e): Use Tax.

 

 

     To the United States government in its governmental capacity.

 

 

CONNECTICUT

 

 

Connecticut General Statutes Annotated

 

 

     Section 12-412(1)

 

 

     Sales of tangible personal property or services to the United

 

     States.

 

 

     Section 12-412(2)

 

 

     Sales prohibited from taxation under the laws or Constitution of

 

     the United States.

 

 

DISTRICT OF COLUMBIA

 

 

District of Columbia Code

 

 

     Section 47-2005

 

 

     Sales to the United States or any instrumentality thereof except

 

     sales to national banks and federal savings and loans.

 

 

     Materials and services sold to printing clerks of the Majority

 

     and Minority rooms of the House for use in operating such rooms

 

     and such sales made by such clerks in connection with the

 

     operation of such rooms.

 

 

     Sales of food, drink, or beverages, and other goods to persons

 

     for use in operating majority or minority cloakrooms of the

 

     House and such sales made by such persons in connection with the

 

     operation of such cloakrooms.

 

 

FLORIDA

 

 

Florida Statutes Annotated

 

 

     Section 212.06

 

 

     Sales the state is prohibited from taxing under the United

 

     States Constitution or laws.

 

 

     Section 212.08(6)

 

 

     Sales to the United States government when payment is made

 

     directly by the government entity. This exemption shall not

 

     inure to any transaction when made by a government employee when

 

     that employee is subsequently reimbursed by the government.

 

 

GEORGIA

 

 

Georgia Code Annotated

 

 

     Section 48-8-3(1)

 

 

     Sales to the Federal government when paid for directly to the

 

     seller by warrant on appropriated government funds.

 

 

HAWAII

 

 

Hawaii Revised Statutes

 

 

     Section 237-22

 

 

     Sales, under the Constitution and laws of the United States, the

 

     state is prohibited from taxing.

 

 

     Section 237-25

 

 

     Sales to the United States (including agencies and

 

     instrumentalities, but not national banks), including

 

     intoxicating liquor, cigarettes, tobacco products, and other

 

     tangible personal property. However, sales through vending

 

     machines are not exempt.

 

 

IDAHO

 

 

Idaho Code

 

 

     Section 63-3622A

 

 

     Sales and services which Idaho is prohibited from taxing under

 

     the Federal Constitution.

 

 

ILLINOIS

 

 

Smith-Hurd, Illinois Annotated Statutes

 

 

     Chapter 35, Section 105/3-5(4)

 

 

     Purchases by a governmental body. The statute requires "an

 

     active exemption identification number issued by the

 

     Department." (Illinois Department of Revenue).

 

 

INDIANA

 

 

Burns Indiana Code Annotated

 

 

     Section 6-2.1-3-2

 

 

     Gross income from sales to the United States government is

 

     exempt to the extent prohibited by the Constitution of the

 

     United States.

 

 

     Sales to the United States government is exempt from gross

 

     income tax under the Constitution of the United States.

 

 

     Section 6-2.5-5-24

 

 

     Sales which the state is prohibited from taxing under the

 

     Constitution or laws of the United States.

 

 

IOWA

 

 

Iowa Code Annotated

 

 

     Section 422.45(1)

 

 

     Sales in which the state is prohibited from taxing under the

 

     Constitution or laws of the United States.

 

 

KANSAS

 

 

Kansas Statutes Annotated

 

 

     Section 48-201

 

 

     Sales of merchandise to any instrumentality of the United States

 

     Armed Forces for resale to members of the Armed Forces.

 

 

KENTUCKY

 

 

Kentucky Revised Statutes

 

 

     Section 139.470(1)

 

 

     Sales exempt under the laws or Constitution of the United

 

     States.

 

 

LOUISIANA

 

 

No statute.

 

 

     No statutory provision found.

 

 

MAINE

 

 

Maine Revised Statutes Annotated

 

 

     Section 36:1760

 

 

     (1) Sales which this state is prohibited from taxing under the

 

         laws or Constitution of the United States.

 

 

     (2) Sales to the United States. This exemption shall not apply

 

         where title is held or taken as security for any financing

 

         arrangement.

 

 

MARYLAND

 

 

Maryland Annotated Code

 

 

     Tax General 11-101(c)

 

 

     Sales to the United States government are exempt by reason of

 

     the fact that the United States government is not a taxable

 

     "person".

 

 

MASSACHUSETTS

 

 

Massachusetts General Laws

 

 

     Section 64H section 6

 

 

     (a) Sales Massachusetts is prohibited from taxing under the

 

         Federal Constitution or laws.

 

 

     (d) Sales to the United States.

 

 

MICHIGAN

 

 

Michigan Compiled Statutes

 

 

     Section 205.94(h)

 

 

     Sales to the United States, its agencies, and instrumentalities.

 

 

MINNESOTA

 

 

Minnesota Statutes

 

 

     Section 297A.25

 

 

     (4) Sales which may not be taxed under the United States

 

         Constitution or laws.

 

 

    (11) All sales to the United States, its agencies, and

 

         instrumentalities.

 

 

MISSISSIPPI

 

 

Mississippi Code

 

 

     Section 27-65-105

 

 

     Sales to the United States, when sold to and billed directly to

 

     and paid by the United States.

 

 

MISSOURI

 

 

Missouri Revised Statutes

 

 

     Section 144.030(1)

 

 

     Where prohibited by the Constitution or laws of the United

 

     States.

 

 

NEBRASKA

 

 

Nebraska Revised Statutes

 

 

     Section 77-2704(a)

 

 

     Sales which the state is prohibited from taxing under the United

 

     States Constitution or laws.

 

 

NEVADA

 

 

Nevada Revised Statutes

 

 

     Section 372.265

 

 

     Sales or use which the state is prohibited from taxing under

 

     Federal Constitution or law.

 

 

     Section 372.325

 

 

     Sales to the United States, its unincorporated agencies, and

 

     instrumentalities.

 

 

NEW JERSEY

 

 

New Jersey Revised Statutes

 

 

     Section 54:32B-8.10

 

 

     Sales non-taxable under the United States Constitution.

 

 

     Section 54:32B-9(a)(2)

 

 

     United States (and its agencies and instrumentalities) where it

 

     is the purchaser, user, or consumer.

 

 

NEW MEXICO

 

 

New Mexico Statutes Annotated

 

 

     Section 7-9-13

 

 

     Sales to the United States or any agency or instrumentality

 

     thereof.

 

 

NEW YORK

 

 

McKinneys New York Consolidated Law

 

 

     Taxation Section 1116(2)

 

 

     United States and any of its agencies and instrumentalities,

 

     insofar as it is immune from taxation where it is the purchaser,

 

     user, or consumer.

 

 

NORTH CAROLINA

 

 

North Carolina General Statutes

 

 

     Section 105-164.13(17)

 

 

     Sales a state cannot tax under the Constitution or laws of the

 

     United States.

 

 

NORTH DAKOTA

 

 

North Dakota Century Code

 

 

     Section 57-39.2-04

 

 

     1. Sales not taxable under the United States Constitution.

 

 

     6. Sales otherwise taxable under this Chapter made to the United

 

        States. The governmental unit exempted by this subsection

 

        must be issued a certification of exemption by the

 

        Commissioner and be presented to each retailer wherever this

 

        exemption is claimed.

 

 

OHIO

 

 

Page's Ohio Revised Code Annotated

 

 

     Section 5739.02

 

 

     B(10) Sales not within the taxing power of this state under the

 

     Constitution of the United States.

 

 

OKLAHOMA

 

 

Oklahoma Statutes

 

 

     Title 68, Section 1356, Subsection 1

 

 

     Sales to the United States.

 

 

PENNSYLVANIA

 

 

Purdon's Pennsylvania Statutes Annotated

 

 

     Title 72 Section 7204

 

 

     (12) Sales at retail to or use by the United States.

 

 

RHODE ISLAND

 

 

Rhode Island General Laws

 

 

     Section 44-18-30

 

 

     Property which this state is prohibited from taxing under the

 

     Constitution of the United States.

 

 

     Section 44-18-31

 

 

     Sales to the United States, its agencies, and instrumentalities.

 

 

SOUTH CAROLINA

 

 

South Carolina Code Annotated

 

 

     Section 12-36-2120

 

 

     Sales non-taxable by Federal laws or Constitutional

 

     restrictions.

 

 

SOUTH DAKOTA

 

 

South Dakota Codified Laws

 

 

     Section 10-45-9

 

 

     Sales on which the tax is prohibited by the Constitution or laws

 

     of the United States.

 

 

     Section 10-45-10

 

 

     Sales of tangible personal property and the sale, furnishing, or

 

     service of electrical energy, natural or artificial gas, and

 

     communication service to the United States.

 

 

     Section 10-45.14-6

 

 

     Meals sold to inpatients of hospitals if paid for by the United

 

     States.

 

 

     Section 10-46-7

 

 

     Use tax where prohibited by the Constitution or laws of the

 

     United States.

 

 

TENNESSEE

 

 

Tennessee Code Annotated

 

 

     Section 67-6-308

 

 

     Direct sales or leases of tangible personal property or services

 

     to the United States or any agency thereof created by Congress.

 

 

TEXAS

 

 

Vernon's Texas Code Annotated

 

 

     Tax Code 151.307

 

 

     Sales which the state is prohibited from taxing under the United

 

     States Constitution or laws.

 

 

     Tax Code 151.309

 

 

     Taxable items sold, leased or rented to or stored, used, or

 

     consumed by:

 

 

     (1) United States.

 

 

     (2) An unincorporated instrumentality of the United States.

 

 

     (3) A corporation that is an agency or instrumentality of the

 

         United States and wholly owned by the United States or by a

 

         corporation wholly owned by the United States.

 

 

UTAH

 

 

Utah Code Annotated

 

 

     Section 59-12-104

 

 

     Sales and uses non-taxable by the Constitution of the United

 

     States.

 

 

VERMONT

 

 

Vermont Statutes Annotated

 

 

     Section T.32 section 9741

 

 

     Sales not within the taxing power of Vermont under the United

 

     States Constitution.

 

 

     Section T.32 section 9743

 

 

     Any sales, service, or amusements charged by or to the following

 

     is not subject to sale and use tax:

 

 

     (2) United States of America, its agencies and

 

         instrumentalities, insofar as it is immune from taxation

 

         when it is the purchaser, user, or consumer, or when it

 

         sells services or property of a kind not ordinarily sold by

 

         private persons.

 

 

VIRGINIA

 

 

Virginia Code

 

 

     Section 58.1-609.1

 

 

     (4) Tangible personal property for use or consumption by the

 

         United States. This exclusion shall not apply to sales and

 

         leases to privately owned financial and other privately

 

         owned corporations chartered by the United States.

 

 

WASHINGTON

 

 

Washington Revised Code

 

 

     Section 82.08.0254: Retail Sales Tax.

 

 

     Non-taxable sales under the United States Constitution or laws.

 

 

     Section 82.12.0255: Use tax.

 

 

     Non-taxable sales under the United States Constitution or laws.

 

 

WEST VIRGINIA

 

 

West Virginia Code

 

 

     Section 11-15-9(C)

 

 

     Sales made to the United States.

 

 

WISCONSIN

 

 

Wisconsin Code

 

 

     Section 77.54

 

 

     (1) Sales, use, or consumption of tangible personal property or

 

         services which the state is prohibited from taxing under the

 

         Constitution or laws of the United States.

 

 

     Section 77.55

 

 

     (1)(a) Sales to the United States, its unincorporated agencies

 

            and instrumentalities;

 

 

        (b) Sales to incorporated agencies or instrumentalities

 

            wholly owned by the United States or by a corporation

 

            wholly owned by the United States.

 

 

WYOMING

 

 

Wyoming Statutes

 

 

     Section 39-6-405

 

 

     (a)(xv) Sales the state is prohibited from taxing by the laws or

 

             Constitution of the United States.
DOCUMENT ATTRIBUTES
  • Authors
    Ripy, Thomas B.
    Gurevitz, Mark
  • Institutional Authors
    Congressional Research Service
  • Subject Area/Tax Topics
  • Index Terms
    exemptions
    sales tax
    use tax
    state taxation
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 96-3987 (18 original pages)
  • Tax Analysts Electronic Citation
    96 TNT 28-56
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