Were sales to American Institute in Taiwan members exempt when they held U.S. State Department tax cards?

Plain-English summary

The Taiwan Relations Act created the American Institute in Taiwan and exempted it from state and local taxes. The U.S. Department of State issued Tax Exemption Cards to Institute members identifying their immunity.

California sales and use tax did not apply to tangible personal property sold to those members to the extent specified on a valid federal card.

Common questions

Did every sale involving a person from Taiwan qualify?

No. The memorandum relied on membership in the American Institute in Taiwan and State Department identification.

What documented the exemption?

A U.S. Department of State Tax Exemption Card.

Citations and references

• 22 U.S.C. §§ 3301, 3305, and 3307 — Taiwan Relations Act provisions discussed in the memorandum
• California Sales and Use Tax Regulation 1619(a) — diplomatic-card exemption rule cited and quoted in part
• Compliance Planning and Evaluation Unit memorandum dated December 16, 1988 asking about retail sales to Taiwan Diplomats — memorandum referenced but not reproduced in the official PDF
• U.S. Department of State Tax Exemption Cards issued to American Institute in Taiwan members — card practice and all-sales-taxes statement described; no actual card, holder identification, issue or expiration date, transaction limit, or authentication record reproduced in the official PDF
• Unidentified State Department identification of Institute members as immune under the Taiwan Relations Act — conclusion supplied without determination, member roster, diplomatic communication, or other supporting record in the official PDF
• Official Annotation 250.0097 restating the statutory history, card practice, and exemption conclusion — current annotation supplies no additional card, holder, transaction, federal-identification, or implementation record
• Possible later card withdrawal, limitation or expiration, member-status change, sale, audit, assessment, refund claim, appeal, or other agency action — no follow-up or final outcome supplied in the official PDF

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/250-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/250-0097.pdf

Original ruling text

State of California

250.0097

Board of Equalization

Memorandum
To:

From:

Subject:

Mr. Al Cade
Compliance Planning and
Evaluation Unit

January 12, 1989

Robert J. Stipe
Legal
Taiwan Diplomats

This is in response to your memorandum of December 16, 1988. You inquire whether the gross receipts from retail sales to Taiwan Diplomats are exempt from tax. In 1979, the President of the United States terminated governmental relations between the United States and the governing authorities of Taiwan. As a result, Congress passed the “Taiwan Relations Act” in order to promote the continuation of commercial, cultural and other relations between the United States and the people of Taiwan (22 U.S.C. 3301). The “Taiwan Relations Act” established a nonprofit corporation called the American Institute in Taiwan, which functions much like a foreign embassy (22 U.S.C. 3305). Further, the Act exempted the Institute from any taxes imposed by any State or local taxing authority (22 U.S.C. 3307). Finally, pursuant to the Act, the United States Department of State issues a “Tax Exemption Card” to members of the institute. This card states that the holder is exempt from all sales taxes. Sales and Use Tax Regulation 1619(a), in pertinent part, provides as follows: “Neither sales nor use tax applies to the sale or use of tangible personal property sold to foreign consular officers, employees, or members of their families, to the extent that such persons have been identified by the U. S. State Department as immune from the tax pursuant to treaties or other diplomatic agreements with the United States. Persons identified as immune from taxation pursuant to treaties or other diplomatic agreements with the United States will be issued a Tax Exemption Card by the U. S. State Department which identifies the bearer as exempt from tax and which specifies the extent of the exemption.” Applying the above, it is our opinion that the sales or use tax does not apply to the sale or use of tangible personal property sold to Taiwan Diplomats holding a “Tax Exemption Card” issued by the United States Department of State, since the State Department has identified these members of the American Institute in Taiwan as immune from state and local taxation pursuant to the Taiwan Relations Act.

RJS:sr