If your company is contracted to do a project for the US Government does the company pay sales tax on the materials they order for the contract, or are they exempt because the US Government, who is the end user, is exempt?


While you are correct that the federal government is exempt from sales tax, contractors working for the government are not exempt, even when what you purchase is for the work you are doing for the government. There may be exceptions in some states owing to particular kinds of purchases (you must check with the appropriate state – see State Tax Agencies on TAPN for contact information).

But the general rule, settled by the Supreme Court in U.S. vs. New Mexico, allows sales tax to be charged to federal contractors. Materials the contractor buys are subject to tax. Materials that the government buys directly are not.

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