How do Kansas sales, use, and transient guest taxes apply when a buyer presents a federal diplomatic Tax Exemption Card?

Plain-English summary

The federal Diplomatic Tax Exemption Program exempts eligible foreign missions and officials from state and local sales, use, and occupancy (transient guest/hotel) taxes, based on reciprocal treaty agreements authorized by Article VI of the U.S. Constitution -- so only officials from countries that extend the equivalent exemption to U.S. personnel qualify.

Eligible missions and officials carry a Tax Exemption Card issued by the State Department's Office of Foreign Missions (OFM) (or, for Taiwan's TECRO/TECO personnel, by the American Institute in Taiwan). The card shows the holder's name, photo, mission, expiration date, and protocol number; its color and printed box show the level of exemption (Personal vs. Official/Mission, some with a minimum-purchase requirement or excluding lodging tax).

Key Kansas points:

• The cards are valid nationwide and must be honored by all state and local taxing jurisdictions.
• The cards do NOT exempt Kansas tax on vehicles, gasoline, telephones, and other utilities -- those use separate OFM procedures: a vehicle needs an OFM determination letter sent directly to the seller; gasoline must be bought with a tax-exempt oil-company credit card (cash is taxable) and form DS-99; utilities/telephone need form DS-98.
• Recordkeeping: the retailer must read/honor the card's exemption level, verify the card in OFM's online database, and keep a copy with sales-tax records (plus the OFM letter for a vehicle).

What this means for you

If a customer presents a diplomatic Tax Exemption Card, exempt the qualifying sale, but follow the card exactly -- check the exemption level, watch for a minimum-purchase requirement or a lodging-tax exclusion, verify it in OFM's database, and keep a copy. Do not exempt vehicles, gasoline, or utilities on the card alone; those require the separate OFM paperwork. A Mission card covers only mission purchases paid by mission check or card, not cash or personal check.

Common questions

Q: Which Kansas taxes does a diplomatic card exempt? A: State and local sales, use, and transient guest (hotel/occupancy) taxes, based on reciprocal treaties, subject to the level printed on the card.

Q: Does the card exempt vehicles, gasoline, or utilities? A: No. Those are excluded from the card and use separate OFM procedures: a determination letter for vehicles, a tax-exempt oil-company card and form DS-99 for gasoline, and form DS-98 for utilities.

Q: What must a Kansas retailer keep on file?
A: A copy of the Tax Exemption Card (verified in OFM's database), and for a vehicle sale, the OFM tax-exempt status determination letter as well.

Q: Can a diplomat pay cash on a Mission card?
A: No. A Mission exemption card covers only mission purchases paid by mission check or credit card -- not cash or personal check.

Citations and references

• Article VI of the U.S. Constitution -- treaty basis for the reciprocal diplomatic tax exemption.
• U.S. Department of State, Office of Foreign Missions -- issues the Tax Exemption Cards and administers vehicle (determination letter), gasoline (form DS-99), and utility (form DS-98) exemptions.
• American Institute in Taiwan -- issues equivalent cards to TECRO/TECO personnel.

Subject

Diplomatic Tax Exemption (Revised)

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 04-09

Original ruling text

Notice
Notice Number: 04-09
Tax Type: Kansas Compensating Tax; Kansas Retailers' Sales Tax; Transient Guest Tax
Brief Description: Diplomatic Tax Exemption
Keywords:
Approval Date: 01/08/2015

Body:

Notice
Office of Policy & Research

Notice 04-09
Revised 01/08/2015
Diplomatic Tax Exemption

This notice discusses how Kansas sales, use and transient guest taxes apply when the buyer presents a Kansas retailer with a Tax Exemption Card issued by the Office of Foreign Missions (“OFM”) of the U.S. Department of State.

The Diplomatic Tax Exemption Program.

The Diplomatic Tax Exemption Program provides an exemption from state and local sales and use tax, occupancy (transient guest taxes), and other similar taxes normally charged when the sale is to eligible foreign missions and foreign officials on assignment in the United States. This tax exemption program is based on reciprocal treaty agreements authorized by Article VI of the U.S. Constitution between the United States and certain foreign countries. The United States does not grant a tax exemption to foreign missions and officials here unless United States Embassy and Consular personnel receive the equivalent tax exemption while stationed in that country. Therefore, not all foreign missions and officials are entitled to tax exemption.

Foreign missions and officials that are entitled to a tax exemption are issued a Tax Exemption Card by the Office of Foreign Missions (OFM). Each card contains the individual’s name, photograph, mission employed by, expiration date and protocol identification number. There are two types of Tax Exemption Cards: Personal and Official/Mission. Each card has one of two different levels of sales and use tax exemption. The level of tax exemption is shown by the color of the card and by the written explanation in the colored box. Flyers with samples of the tax exemption cards that explain this in greater detail are available from the Office of Foreign Missions website – http://www.state.gov/documents/organization/235652.pdf

Page 2

Pursuant to U.S. law, the Taipei Economic and Cultural Representative Office in the United States (TECRO), the Taipei Economic and Cultural Offices (TECOs), their designated employees, and their qualifying dependents are also entitled to tax exemptions privileges. Accordingly, the American Institute in Taiwan (AIT) has now issued tax exemptions cards to TECRO, TECOs, and their eligible personnel and dependents that incorporate the same features and design elements as the OFM’s tax exemption cards. Such privileges are authorized by AIT, not the Department of State. Therefore, these cards read “American Institute in Taiwan” on the front and include AIT’s contact information on the reverse.

The diplomatic Tax Exemption Cards are valid nationwide and are required to be honored by all state and local taxing jurisdictions. However, the Tax Exemption Cards are not valid for exemption from Kansas sales or use taxes on vehicles, gasoline, telephones and other utilities. The procedure that must be followed to obtain tax exemption on these purchases is explained in the following sections.

Vehicle Tax Exemption

The OFM enforces the exemption of eligible foreign missions and officials when the mission or official buys or leases a vehicle. The purchaser must first present an OFM or AIT issued Tax Exemption Card. The dealer MUST retain a copy of this card AND contact OFM at (202) 895-3500 ext. 2. OFM then determines the tax-exempt status of the buyer and provides a letter to the seller that states whether or not the buyer is eligible for tax exemption on the sale or lease of the vehicle. Only authorization letters provided directly from OFM to the seller are valid for tax-exemption on a vehicle sale. Additional information is available from the OFM or its web site: www.state.gov/ofm/tax/vehicles/

Gasoline Tax Exemption

A gasoline tax exemption is extended to missions and officials using tax-exempt oil company credit card accounts. Gasoline purchased with cash is not tax exempt. Sales tax exemption cards may not be used to purchase gasoline tax-free. Eligible diplomats must submit a completed oil company credit card application and OFM form DS-99 (Application for Diplomatic Exemption from Taxes on Gasoline) to OFM for processing and approval.

Utility and Telephone Tax Exemption

The Office of Foreign Missions administers the utility tax exemption program. Utility tax exemption (e.g. electricity, natural gas, cellular phones, and telephone) is based on reciprocity. To obtain the exemption, eligible diplomats must submit a completed OFM form DS-98 (Application for Diplomatic Exemption from Taxes on Utilities) to OFM for approval.

Kansas Retailer Record Keeping

Retailers should read and honor the level of exemption printed on the card. Some

Page 3

exemptions have a minimum purchase requirement and some do not allow exemption from hotel or lodging taxes (Kansas Transient Guest Tax). A Mission exemption card, issued to consulate, embassy or international organization employees, is only for mission purchases paid for by mission check or credit card (no cash or personal check). Retailers may use a tax-exempt card database on OFM’s web site to verify that the card is an active diplomatic tax exemption. The database provides a card’s identification number, expiration date and level of exemption.

To document a diplomatic sales tax exemption for your records, you must make a copy of the Tax Exemption Card and keep it with your other sales and use tax records. In the case of a vehicle sale or lease, you must also obtain a tax-exempt status determination letter from the OFM (procedure outlined above) in addition to a copy of the card, and retain both in your sales tax records.

TAXPAYER ASSISTANCE

Additional information about the diplomatic tax exemption program is available from OFM’s web site, https://ofmapps.state.gov/tecv. Any questions regarding the eligibility of diplomatic or consular officers for sales or use tax exemption should be directed to:
Office of Foreign Missions DS/OFM
3507 International Place, NW
Washington, DC 20522-3303
(202) 895-3500 ext. 2
Email: [email protected]

Houston regional office: (713) 272-2865
Email: [email protected]

Additional copies of this notice, forms or publications are available from our web site, www.ksrevenue.org. If you have questions about sales and use tax, please contact:
Taxpayer Assistance Center
Kansas Department of Revenue
915 SW Harrison St., 1st Floor
Topeka, KS 66612-1588
Phone: 785-368-8222
Fax: 785-291-3614

January 2015