As of November 30, 2008, the federal government updated its credit card program.  The General Services Administration (GSA) has entered into a series of contracts with a variety of card-issuing banks under the program named GSA SmartPay® 2.  Samples of the new card designs are available at www.gsa.gov/gsasmartpay.  The following information is provided to assist Alabama vendors in determining whether or not tax applies to transactions paid by GSA SmartPay® 2 cards.      

The GSA SmartPay® 2 program provides four business lines (card types):  Purchase, Travel, Fleet, and Integrated (includes fleet, travel and/or purchase functionality and offers a single card for all purchases.)  These cards/accounts can be Centrally Billed Accounts (CBAs) or Individually Billed Accounts (IBAs). 

Centrally Billed Accounts (CBAs) are charge card accounts in which all charges are billed directly to the federal government and paid directly by the federal government to the issuing bank.  (Sales tax is not due on credit card purchases which are centrally billed to and paid by the federal government.  Lodgings tax is not due on charges for lodgings which are centrally billed to and paid by the federal government.) 

Individually Billed Accounts (IBAs) are charge card accounts in which charges are paid directly by the cardholder/federal employee to the issuing bank; the federal employee is then reimbursed by the government.  (Sales tax and lodgings tax are due on credit card transactions where the purchases or charges for lodgings are billed to and paid by federal employees, who are then reimbursed by the federal government.)        

• Purchase Cards are for purchasing general supplies and services.  All federal government GSA SmartPay® 2 Purchase cards are centrally billed.  Therefore, transactions paid for with this card are tax-exempt. 
• Fleet Cards are for purchasing fuel and supplies for government vehicles.  All federal government GSA SmartPay® 2 Fleet cards are centrally billed. Purchases of tangible personal property paid for with this card are exempt from sales taxes. However, purchases of fuel paid for by this card are not exempt from state fuel excise taxes.
• Travel Cards are for paying travel expenses related to official government travel (airline, hotel, meals, incidentals).  Federal government GSA SmartPay® 2 Travel cards may be centrally billed or individually billed.  The Travel card uses the 6th digit of the account number to identify whether the account is a Centrally Billed Account or an Individually Billed Account.  If the sixth digit is 1, 2, 3, or 4, the transactions against the Travel card are individually billed to the federal employee, and, therefore, the transactions are subject to applicable taxes.  See the chart below.   
• Integrated Cards – Two or more business lines (card types) whose processes are integrated into one card.    
• All Fleet and Purchase type transactions on a GSA SmartPay® 2 integrated card are centrally billed. Purchases of tangible personal property paid for with this card are exempt from sales taxes. However, purchases of fuel paid for by this card are not exempt from state fuel excise taxes. 
• Travel functionality on a GSA SmartPay® 2 integrated card may be centrally billed or individually billed.  The numbering structure for Integrated Cards to differentiate between centrally and/or individually billed transactions will be specific to each agency/ organization using the integrated card.  This information will be provided on the GSA SmartPay® website (www.gsa.gov/gsasmartpay) as it becomes available. 

Department of the Interior: With the exception of the purchase of meals and incidental travel expenses which are individually billed and subject to sales tax, transactions paid for with the Department of the Interior's integrated card are centrally billed and exempt from sales and lodgings tax. Purchases of fuel paid for by this card are not exempt from state fuel excise taxes.

The Department of the Interior GSA SmartPay 2 charge cards can be identified by their unique prefixes and account numbers, government-designed artwork, and wording that indicates that the card is for official transactions for the U. S. Government.  The Department of the Interior Integrated Card account numbers begin with 5568 26.

TOPIC:  INTERNET TAX FREEDOM ACT

This notice is intended to provide taxpayers and the general public with information concerning the application of Alabama utility tax to Internet access.

The Internet Tax Freedom Act Amendments Act of 2007 prohibits multiple and discriminatory taxes on electronic commerce including Internet access.  This act, which became Public Law 110-108, amends the Internet Tax Freedom Act to:  (1) extend the moratorium on state taxation of Internet access and electronic commerce and the exemption from such moratorium for states with previously enacted Internet tax laws preserving the grandfather provisions to protect revenues in those states and local governments that currently collect those taxes until November 1, 2011; (2) restrict the authority of certain states claiming an exemption from the moratorium under the Internet Tax Nondiscrimination Act of 2004 to impose Internet access taxes after November 1, 2011; (3) expand the definition of “Internet access” to include related communication services such as e-mails and instant messaging; (4) redefine “telecommunications” to include unregulated non-utility telecommunications such as cable service; and (5) allow a specific exception to the moratorium for certain state business taxes enacted between June 20, 2005, and November 1, 2007, that do not tax Internet access.

The Internet Tax Freedom Act of 1998 enacted a moratorium on the imposition of state and local taxes on Internet access.  It was extended by the Internet Tax Nondiscrimination Act and this act, extends it again through November 1, 2014.

According to the new federal legislation, the definition of “Internet access” includes:

Sections 40-21-80 and 40-21-100, Code of Alabama 1975, exempt Internet access charges from utility gross receipts tax and the utility service use tax as enacted by Alabama Act 98-654 in 1998.

The new law amends the definition of Internet access to make clear that a product or service which is delivered by the Internet is not necessarily tax free.  The new definition ensures that the state and local tax base is not eroded as more services are delivered by the Internet.  When an Internet service provider bundles content, information and services that might otherwise be taxable with Internet access, the new language eliminates the interpretation that the entire bundle is tax exempt.
Section 40-21-82, Code of Alabama 1975, allows providers of telephone services to combine or bundle taxable and nontaxable services on one invoice and charge the customer tax on the taxable charges.

The legislation specifically prohibits taxation of e-mail and instant messaging services that are provided independently or not packaged with Internet access.  Telecommunications services such as telephone services, cellular services, paging services and facsimile services that are not used to provide access to the Internet are subject to tax.

Section 40-21-82, Code of Alabama 1975, levies a privilege or license tax against every utility furnishing telegraph or telephone services in the State of Alabama. The amount of the tax is determined by the application of rates against gross sales or gross receipts from the furnishing of such services in the State of Alabama.  Alabama code provides no exemption or exclusion for telephone services provided by the Internet.

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TOPIC:  RECENTLY AMENDED OR REPEALED OR NEWLY PROMULGATED SALES & USE TAX RULES

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