If we agree that there are any circumstances where a company is ethically required to refuse selling it's software to a national government, then we can look at the particulars of any specific instance and decide if we think that's such a case, but we don't need to argue about whether it's appropraite to "to expect that a _federal agency_ will be denied service from a private entity," becuase we've all agreed that there are at least some circumstances where it is.
What is in fact inappropriate is to argue that a company should never be expected to deny service to a government, no matter what they do.
However that is a dicussion that is, at most, tangential to this one.
I think there's a moral component and a practical component. The latter becomes very difficult when taking a stand against a government entity in your home jurisdiction, since the offending government may put you out of business or something.
For example, in Nazi Germany (which I agree is a useful example to reference), a company that refused service to the Nazis would have had its executives murdered and been taken over by the state within a day. (My guess based on my recent read of The Rise and Fall of the Third Reich, but I may be off).
On the other hand, refusing service to North Korea (sanctions aside) is a clearly ethically correct thing and offers little practical risk for companies based in the West.