Federal gov't is running its own private 'nation'. It's VOLUNTARY, and you signup via a Birth Certificate. And when you joined their corporate nation, you gotta get SSN if you want employment. And that entitles you to protection of federal labor laws, but also makes you liable to obey federal laws (such as drug and gun laws). So you then are an employee in the federal nation, a 'federal employee' for short.
And if you want out, just tell the IRS that you're a non-resident alien (State citizen or inhabitant) and ask them for a form to change status of your SSN into an ITIN. Then you can file W8 form with your employer and mark EXEMPT on line 7 of the W4 form.
BTW, there are about 100 boundary stones around District of Columbia. And on the inside of the stones it says "Jurisdiction of the United States". That's a proof positive that jurisdiction of US is limited to District of Columbia. SOO you now know what is the territorial United States that form W8-BEN talks about.