In What States Are Federal Employees Exempt From Hotel Tax?

Whether a federal employee owes hotel tax on official travel comes down to the payment method, not the badge. The states where federal employees are exempt from hotel tax fall into three groups: every state with a sales tax exempts lodging paid through a Centrally Billed Account; a short list of states also exempts stays paid with an Individually Billed Account travel card; and five states charge no statewide sales tax on lodging in the first place.

Why the Card in Your Wallet Decides the Answer

Federal travel runs on two kinds of GSA SmartPay accounts, and the exemption follows the account type.

A Centrally Billed Account (CBA) is billed directly to your agency. The government pays the hotel, so the law treats the charge as a direct federal purchase. Because the federal government is generally immune from state taxation, CBA lodging should be exempt from state sales tax in every state that imposes one.¹

An Individually Billed Account (IBA) is billed to you. You pay the bank and seek reimbursement from your agency. Because the hotel’s transaction is with you rather than the government, states are not required to honor the federal exemption, and most do not.²

Paying with a personal credit card eliminates any exemption, even on official orders.² Before reading the state lists below, confirm which type of account you’re carrying. Your travel office or card program coordinator can tell you.

States That Exempt IBA Lodging

Only six states voluntarily extend their state sales tax exemption to IBA transactions:

Florida
Louisiana
New York
Pennsylvania
Texas
Wisconsin

Each sets its own documentation requirements, so check the GSA SmartPay page for the specific state before you travel.³ In every other state that taxes lodging, an IBA cardholder pays the sales tax out of pocket and submits it on the travel voucher.

Even in these six states, the exemption applies only to the state sales tax. County and city lodging taxes usually still apply, and some municipalities run their own separate exemption processes.²

CBA Coverage Across the States

If your lodging is paid through a CBA, state sales tax should drop off the bill in every state that charges one.¹ Two states deserve a closer look, because the tax they impose on hotel rooms isn’t a sales tax.

Arizona. The state’s transaction privilege tax is levied on the merchant’s privilege of doing business rather than on the sale itself. A hotel using a CBA can request an exemption, but it is not required to process one. If the hotel declines, Arizona law allows the tax to be passed through to the guest.⁴ Ask before booking.

Hawaii. CBA transactions may be exempt from Hawaii’s general excise tax, but that exemption is not guaranteed. IBA transactions are not exempt from either the general excise tax or the transient accommodations tax.⁵

Watch the folio at checkout anywhere you stay on a CBA. Any line labeled something other than “sales tax” may be a separate levy the hotel can legally charge.

States With No Statewide Sales Tax on Lodging

Five states impose no statewide sales tax at all, so the CBA-versus-IBA question is moot at the state level:

Alaska
Delaware
Montana
New Hampshire
Oregon

That doesn’t mean the stay will be tax-free. Alaska has no state sales tax, but local governments can impose their own lodging taxes, and many tourist-heavy cities do. Montana charges a 4% lodging facility use tax that applies regardless of how you pay. Delaware and Oregon have no statewide taxes on accommodations, though some Oregon localities impose a transient lodging tax. New Hampshire has no state or local sales tax and no statewide lodging tax.

California is a related case. The state has no statewide lodging tax, but virtually every city and county charges a transient occupancy tax, and the rates can be steep in urban areas.⁶ Because these are local rather than state sales taxes, the federal CBA exemption typically doesn’t cover them.

What the Exemption Never Covers

The federal exemption, even at its broadest, reaches state sales tax only. Legal precedent does not require states to exempt any other category of tax unless they voluntarily do so.² A typical hotel folio will show several tax lines, and the exemption may remove only one of them:

Local occupancy and lodging taxes set by counties and cities, often 2% to over 7%, generally do not recognize federal exemptions.
Tourism and convention taxes earmarked for convention centers or destination marketing are almost never covered.
Resort and destination fees are treated as part of the taxable room charge rather than as taxes, so the exemption doesn’t remove the fee itself.
Meals, minibar charges, and other incidentals are outside the lodging exemption.²

Long-Term Stays: A Separate Path to Zero Tax

Federal employees on extended TDY assignments can qualify for an exemption that has nothing to do with government status. Most states stop collecting lodging or occupancy taxes once a guest stays beyond a set number of consecutive days, on the theory that the guest has become a resident rather than a transient.

The threshold varies. A majority of states set it at 30 consecutive days, including Arizona, Colorado, Illinois, Indiana, Kentucky, Michigan, Ohio, Pennsylvania, Texas, and Washington. Georgia and Connecticut use 90 days. Florida, Hawaii, and Alabama use 180 days. Maine uses 28 consecutive days.

These exemptions apply to everyone, not just federal travelers, and they stack separately from the government payment exemption. On a 60-day TDY in a state with a 30-day threshold, the transient occupancy tax drops off starting on day 31 regardless of your card type. Some states require a written lease or formal agreement to trigger the exemption, so ask the hotel about their process early.

Claiming the Exemption at Check-In

Showing a federal ID at the front desk is not enough. At a minimum, you need to be on official travel and pay with your government travel charge card. Many states also require a completed state-specific exemption form. Texas uses Form 12-302, Pennsylvania uses REV-1220, and others have their own. Some forms require only your signature; others need a supervisor’s signature before the trip.⁷

The standard federal exemption form, SF-1094, cannot be used for lodging purchased by employees in travel status.⁸ You need the state form.

As the cardholder, you are responsible for working with the hotel to meet each state’s requirements.³ Present your government travel card, federal ID, and the completed state form together at check-in. FedRooms and DoD Preferred properties usually have the forms on hand; smaller or independent hotels may not, so carry your own copies.

When a Hotel Refuses

Hotels sometimes refuse to process the exemption, especially where the rules are ambiguous or the staff haven’t seen a government card before. GSA’s guidance: refer them to the GSA SmartPay website or the state’s taxation authority. If the vendor still won’t budge, pay the tax and reclaim it after the trip.⁹

Reclamation involves three practical steps:

Keep all receipts. GSA recommends holding copies for 75 months (six years and three months) to verify the taxes assessed.
Record the hotel name, location, dates, and the specific dollar amount of taxes charged.
Notify your agency’s card program coordinator, who initiates the reclamation process; the procedure varies by agency.

The process works but takes time. A few minutes of preparation before the trip — downloading the right form and calling ahead to confirm the hotel honors government exemptions — saves weeks of paperwork later.⁹

1
GSA SmartPay. Recognizing GSA SmartPay Cards/Accounts
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GSA SmartPay. Frequently Asked Questions
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General Services Administration. Tax Information by State
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GSA SmartPay. Arizona Tax Information
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GSA SmartPay. Hawaii Tax Information
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National Conference of State Legislatures. State Lodging Taxes
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Defense Travel Management Office. Save on Lodging Taxes in Exempt Locations
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General Services Administration. United States Tax Exemption Form
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U.S. General Services Administration. SmartTax Customer Guide – State Taxes When You Travel