GSA gears for gas tax system| GCN

Federal employees will charge an estimated $100 billion worth of goods and services to
government credit cards over the next 10 years. The General Services Administration wants
to make sure that, in the process, agencies do not pay any state or local taxes on
gasoline charged to its fleet cards.


GSA for the first time this year will use the services of Taxware International Inc. to
automate tax calculations and exemptions for gas purchases made through MasterCard
International of Purchase, N.Y.


“It’s never been done in our industry before,” said Elisa Corridore,
MasterCard vice president for corporate products.


Taxware’s Motor Fuel Tax System, hosted on a secure server at the company’s
headquarters in Salem, Mass., performs the complex calculations. Agencies get net bills
minus state and local taxes. Oil companies receive reimbursement for the taxes from the
jurisdictions that levied them.


Card issuers that bid on fleet card contracts last year under GSA’s SmartPay
program had to offer the tax back-out service. The six SmartPay card contracts, awarded in
February 1998, took effect Nov. 30.


Agencies can select any of the contractors to supply purchase cards, travel cards and
fleet cards; vendors for the first time can combine the functions on a single card.


GSA became the central agency for government fuel cards about 20 years ago, said Bill
Webster, director of GSA fleet management.


Until three years ago, the oil companies themselves had to subtract the taxes from fuel
charges on GSA-issued cards.


“It was a very manual process,” Webster said.


When Wright Express Corp. of South Portland, Maine, won a GSA fleet card contract two
years ago, GSA could do some of the processing electronically, but it was still a closed
system, Webster said. The SmartPay contracts move American Express card as well as
MasterCard and Visa bank card purchases to electronic tax processing.


Taxware’s Bruce R. Reed, vice president of sales and marketing, said there are
6,500 overlapping tax jurisdictions in the United States, all charging different rates on
different kinds of products.


The company’s Sales and Use Tax System subroutine works with leading accounting
software packages and electronic commerce programs. The Motor Fuel Tax System developed
for MasterCard, for example, reverses the process of calculating taxes on a charge.


The charge slip printed at the pump shows the full price of the gas including tax. The
retail merchant receives that amount from the bank. Then the transaction passes up the
chain to the bank that issued the card, which hands it off to Total Systems Inc. of
Columbus, Ga., for all banks that issue GSA fleet cards.


Total Systems transmits the MasterCard fleet card transaction data over a dedicated
line to the Taxware server.


Taxware’s Motor Fuel Tax System itemizes the taxes and each day sends the data to
Total Systems, which relays the bills to federal agencies minus state and local taxes.
Once a month, Taxware transmits batch accounts to the oil companies, detailing the taxes
that have been subtracted from their payments. The oil companies then request
reimbursement from the taxing authorities.


Taxware operates the Motor Fuel Tax System itself rather than giving the software to
Total Systems, because of the need for frequent updates to the master database of tax
laws, rates and points of sale.


MasterCard has set up processing agreements with eight oil companies, which supply
about 70 percent of all fuel purchases on GSA cards.


The GSA fleet card is the first application of the Motor Fuel Tax System. MasterCard
plans to market it to state and local governments and to other tax-exempt organizations
later this year.


About the Author

William Jackson is a Maryland-based freelance writer.

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