Governments and Sales Tax
This guide explains how Idaho sales tax laws apply to government organizations. It includes how Idaho taxes the sales and purchases by governments.
Governments that are exempt
Sales to all government agencies and their political subdivisions are taxable, with the following exceptions:
- Idaho government entities and political subdivisions are exempt from sales and use tax. They include:
- The State of Idaho, its agencies and its departments
- Any Idaho city, county, township, school district, irrigation district, cemetery district, local improvement district, fire protection district or other taxing jurisdiction
- Certain organizations created through joint-powers agreements established under Idaho laws are exempt from Idaho sales and use taxes.
- All federal government agencies are exempt from Idaho sales and use taxes.
- Qualified foreign diplomats are exempt from Idaho sales and use taxes.
Selling to Idaho or federal governments
To be tax exempt, the sale must be billed to and paid directly by the qualified government agency.
Billed to government
A sale is billed to qualified federal and Idaho government agencies if any of the following applies:
- The government agency has a contract with the seller.
- The seller will bill the government agency for the sale.
- The buyer pays with a qualifying credit card issued to the government agency.
Qualifying credit card
Qualifying credit cards include:
- Federal government – GSA SmartPay cards
- Idaho state government – Visa cards issued by Bank of America labeled "Tax Exempt"
- Idaho local government – Credit card bills the agency pays directly. Charges that an employee is responsible for or reimbursed for don't qualify.
Paid directly by government
A sale is paid directly by a government if the seller receives payment directly from the government agency. These payment types include:
- A check from the government agency
- Electronic payment from the government agency
- Payment of charges on a qualifying credit card the government agency provides
- A government agency's purchase order to the seller (only for cash sales)
Charges to credit cards issued to employees of government agencies don't qualify if the agency will reimburse the employee. In such cases, the seller isn't billing the sale directly to the government because the employee is responsible for paying the credit card company.
Documenting sales to governments
The buyer must properly complete the appropriate exemption certificate and give it to the seller:
Buyers complete Form ST-104HM, Tax Exemption on Lodging Accommodations, for hotel and other lodging purchases when the buyer pays with a qualifying credit card that's both billed to and paid by the government agency.
Buyers complete Form ST-104G, Sales Tax Exemption Claim for Cash Purchases by Government Agencies, for cash purchases.
- The buyer must complete and give the seller a separate Form ST-104G for each cash transaction.
- This form can't be used for a traveling government employee's lodging, meals or private car expenses.
- Other states' governments can't use this form.
Sellers can accept a government purchase order in place of a completed Form ST-104G to prove the sale is both billed to and paid by the government agency.
Buyers should complete Form ST-101, Sales Tax Resale or Exemption Certificate, for most other exempt purchases of goods or services. In section 3, the seller should check the box for "Government Entity (U.S./Idaho)."
Selling to foreign diplomats
The U.S. Diplomatic Tax Exemption Program provides diplomatic tax exemption cards (DTEC) to eligible foreign diplomats, consular officers and staff members. The U.S. Office of Foreign Missions sets the levels of tax exemption, and the levels can vary based on international reciprocity.
DTECs provide a point-of-sale exemption from Idaho sales tax and other similar taxes. Cards contain text on the front and back showing the level of exemption authorized, including degrees of restriction such as a minimum purchase requirement.
"Mission Tax Exemption – Official Purchases Only"
DTECs labeled with this text allow foreign missions to buy items necessary for the mission's operations and functions exempt from sales and other similar taxes. Cardholders must pay for all purchases with a check, credit card or wire transfer in the name of the foreign mission.
"Personal Tax Exemption"
DTECs labeled with this text allow eligible foreign mission members and their dependents to make personal purchases in the United States exempt from sales and other similar taxes. Sellers can only sell tax-exempt to the individual identified and pictured on the card. The cardholder can't transfer or loan the card to any other person, even if that person also is eligible to buy exempt. The cardholder can use any form of payment.
Documenting sales to foreign diplomats
The cardholder must present the card in person at the time of purchase. The seller can verify the card's validity at ofmapps.state.gov/tecv or by calling the federal government's Office of Foreign Missions during business hours.
Sellers should document why they didn't charge tax on a sale to a foreign diplomat by doing any of the following:
- Photocopy the front and back of the tax exemption card.
- Record the diplomat's name, the mission he or she represents, the federal tax exemption number, the card's expiration date and what they sold tax exempt.
- If they sold to someone with a diplomatic tax exemption card labeled as "Mission Tax Exemption – Official Purchases Only," sellers should document the payment type — check, credit card or wire transfer — in the name of the foreign mission.
Sales by governments
Idaho is barred by federal law from requiring federal government agencies to collect Idaho sales tax on their sales.
Idaho state and local governments that make taxable sales must get an Idaho seller's permit and collect and forward tax to the Tax Commission. (See our Retailers guide.) Taxable sales that Idaho state and local governments make include:
- Equipment rentals (e.g., sprayers, the container rental portion of trash pick-up service)
- Gravel, equipment, surplus property, signs
- Maps, books, forms, reports, photocopies and other documents (unless the fee for the document is set by law or the buyer makes a public records request as defined in Idaho Code section 74-102)
- Items sold to prison inmates
- Vending machine sales
- Library cards
- Admission charges (e.g., sporting events, swimming pools, concerts, zoos)
- Fees to use recreation facilities (e.g., parks, gyms)
- Recreation program fees (e.g., baseball, football, basketball)
Note: If instruction is included as part of a recreation fee, the instruction portion of the fee isn't taxable if it's separately stated on the receipt.
Using contractors on governments projects
Many government agencies use contractors to make improvements to real property. Idaho requires contractors to pay tax on materials they use to alter, improve or repair real property in Idaho. This includes materials that contractors use when they work for government agencies.
Government agencies can buy materials for their construction contracts without owing Idaho sales tax. But if the government agency provides those untaxed materials to their contractor, the contractor owes use tax.
Contractors owe tax on the materials they use in a real property project. It doesn't matter whether the contractor buys or makes the materials, or the government agency provides the materials for the project. Because of this, contractor bids should include:
- Use tax on materials the government agency bought tax exempt and gave the contractor to use
- Sales tax on materials the contractor buys for real-property improvement contracts
Contractors should include these taxes in the bid because they're part of their cost. The government agency will reimburse contractors for the taxes they paid when they bill the agency for those taxes.
Exception: Materials donated to a government agency for incorporation into a real property project aren't subject to use tax. This is the only exception.
An Idaho government agency requires its contractor, ABC Contractors, to provide a cost breakdown for materials used. ABC bought $50,000 worth of materials and paid 6% sales tax. ABC should show its cost as $53,000 on the bill.
Contractors can read more about their tax responsibilities in our Contractors Working in Idaho guide.
People selling to government agencies, and government agencies selling to others, must keep records of all sales. Their records must show that they properly collected, reported, and paid or forwarded taxes to Idaho.
Read the "Keeping records" portion of the Retailers guide for more information.
Laws and Rules
- Containers Returnable/Nonreturnable (Sales Tax Rule 084)
- Contractor's Use of Tangible Personal Property (Sales Tax Rule 066)
- Contractors Improving Real Property (Sales Tax Rule 012)
- Exempt Private and Public Organizations (Idaho Code section 63-3622O)
- Exemptions on Purchases by Political Subdivisions, Sales by the State of Idaho, its Departments, Institutions, and All Other Political Subdivisions (Sales Tax Rule 094)
- Foreign Diplomats (Sales Tax Rule 098 and 128)
- Exemptions (Hotel/Motel Rule 016)
- Gas, Water, Electricity Delivered to Customers (Sales Tax Rule 090)
- Imposition and Rate of the Use Tax – Exemptions (Idaho Code section 63-3621; Sales Tax Rule 072)
- Joint Exercise of Powers (Idaho Code section 67-2328)
- Rentals or Leases of Tangible Personal Property (Sales Tax Rule 024)
- Retailer (Idaho Code section 63-3610; Sales Tax Rule 018)
- Sale (Idaho Code section 63-3612)
- Sales Price (Idaho Code section 63-3613; Sales Tax Rule 043)
- Sales Through Vending Machines (Sales Tax Rule 058)