March 9, 1999

GSA/FSS/FCXC

ATTN: GSA SmartPay Program

1941 Jefferson Davis Highway, Room 507

Arlington, VA 22202

Dear Ms. Dunn:

The following information concerning government credit card purchases is provided in response to your letter dated February 24, 1999.

As you are aware, Arizona imposes a transaction privilege tax that differs from the sales tax imposed by most states. The Arizona transaction privilege tax is a tax imposed on the privilege of conducting business in the State of Arizona. This tax is levied on the vendor, not the purchaser. The vendor may pass the burden of the tax on to the purchaser; however, the vendor is ultimately liable to Arizona for the tax.

The Arizona tax laws provide for the imposition of transaction privilege tax on the gross income of persons engaged in certain business activities. These business activities are divided into several classifications such as retail, restaurant and prime contracting. Persons engaged in business under the specified classifications are subject to transaction privilege tax on their gross receipts.

The department has issued a new Arizona Transaction Privilege Tax Ruling, TPR 99-1 that addresses transactions with the United States Government and the use of the government credit card. This ruling rescinds and supercedes TPR 95-16, which previously addressed the I.M.P.A.C. card. A copy of TPR 99-1 is enclosed for your reference.

In addition, tax rulings, tax procedures and private taxpayer rulings are available on our website atwww.revenue.state.az.us.

Tax Research & Analysis Section