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

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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

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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