CRS SUMMARIZES STATE LAWS EXEMPTING U.S. PURCHASES FROM STATE SALES AND USE TAXES.
95-1130A
- AuthorsRipy, Thomas B.Gurevitz, Mark
- Institutional AuthorsCongressional Research Service
- Subject Area/Tax Topics
- Index Termsexemptionssales taxuse taxstate taxation
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 96-3987 (18 original pages)
- Tax Analysts Electronic Citation96 TNT 28-56
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.
- AuthorsRipy, Thomas B.Gurevitz, Mark
- Institutional AuthorsCongressional Research Service
- Subject Area/Tax Topics
- Index Termsexemptionssales taxuse taxstate taxation
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 96-3987 (18 original pages)
- Tax Analysts Electronic Citation96 TNT 28-56