Does the NATO Status of Forces Agreement exempt foreign (e.g., UK) military personnel stationed in Texas from Texas sales tax on their personal purchases?

Plain-English summary

A UK citizen serving as NATO military personnel stationed in Texas asked the Comptroller to reconsider an earlier ruling that Texas sales tax applies to their taxable purchases made in the state. They pointed to Article X of the NATO Status of Forces Agreement, which exempts "members of a force" from taxation on tangible property whose presence in the receiving state is due solely to their temporary presence there -- arguing that minor items like a telephone might not count as "tangible" in this sense, while furniture and other property eventually exported when they leave should be exempt.

The Comptroller's response confirmed the earlier determination stands: after legal staff reviewed Article X, the Treaty does not exempt foreign military/NATO personnel from Texas Sales, Excise, and Use Tax on taxable tangible personal property they purchase while in Texas. The distinction is between property brought into Texas because of temporary presence (which Article X does address) versus property purchased in Texas during that assignment (which the Treaty does not exempt from state sales tax). A companion April 1997 letter in the same file separately noted the Treaty does prevent Texas from taxing the member's salary and other compensation, but that protection doesn't extend to purchases of taxable items made in-state.

What this means for you

Foreign military and NATO personnel stationed in Texas

Your salary and compensation earned under a NATO Status of Forces assignment can't be taxed by Texas, but your purchases of taxable tangible personal property made while stationed here are subject to Texas sales tax just like any other purchase -- Article X's exemption doesn't reach that.

Retailers selling to foreign military/NATO personnel

There's no special sales tax exemption to apply based on a customer's NATO/foreign-military status alone; collect tax on taxable sales in the ordinary course.

Accountants and tax professionals advising military-affiliated clients

If a client disputes this position, this letter notes the Comptroller's own suggestion: seek an opinion from the client's base legal office, since the underlying issue is treaty interpretation rather than routine state tax policy.

Common questions

Q: Does the NATO Status of Forces Agreement exempt a member's purchases from Texas sales tax?
A: No, per this letter -- Article X does not exempt taxable tangible personal property purchased in Texas by NATO/foreign military personnel.

Q: Does Texas tax a NATO member's salary?
A: No -- per the companion April 1997 letter, the state cannot tax the member's salary or other forms of compensation under the agreement.

Q: Is there a difference between property brought into Texas versus purchased in Texas?
A: Yes, per this letter -- Article X addresses property whose presence in Texas is due to temporary presence (i.e., brought with the member), not property purchased in Texas during the assignment.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9707607L

Original ruling text

July 29, 1997

Dear ***:

This is in response to your request for a reconsideration of Mr. John J.
Fitzgibbon's April 2, 1997, response to you. The issue in question is your
exemption from sales tax as a citizen of the UK and as a member of NATO.

You cite Article X , which states in part:

Members of a force ... shall be exempt from taxation in the receiving State on
... any tangible property the presence of which in the receiving state is due
solely to their temporary presence there.

You interpret this to mean that minor purchases - such as a telephone, do not
qualify as "tangible" whereas an item of furniture most certainly does qualify.
Equally, any significant time of person property which will be exported with
your personal belongings on your eventual departure should also be exempt.

Response: Tangible personal property that you bring into Texas, ("the
receiving state"), is not subject to Texas tax. Our legal staff of this
department has previously reviewed Article X of the NATO Treaty and determined
that the Treaty does not provide an exemption from the Texas Sales, Excise and
Use Tax to members of military personnel who are covered by it and who are
stationed in Texas. Thus, foreign military personnel are not entitled to claim
exemption from Sales Tax on taxable tangible personal property purchased in
Texas.

I have enclosed an edited letter ruling, taxability response and rule that
address the tax responsibilities of military and NATO personnel in Texas.

This opinion is based on the facts presented. Other facts though similar may
provide a different result. I hope this information answers your questions.
If you need additional information, please call me toll-free at 1-800-531-5441,
extension 3-4502. The direct line is 512/463-4502. You may also write to Tax
Policy Division, Comptroller of Public Accounts. My Internet address is:
[email protected].

Sincerely,

Gilbert Zamora
Tax Policy Division

April 2, 1997

Dear ***:

Thank you for your letter on the taxability of purchases made in Texas, while
you are on assignment under a NATO Status of Forces Agreement. Thank you for
the copy of the agreement.

Our interpretation of the agreement is that the state cannot tax your salary
and other forms of compensation. It is our opinion that the agreement does not
exempt your purchases of taxable items that you take possession of in Texas.
If you continue to disagree with this opinion, you should get an opinion from
the base legal office.

This opinion is based upon the facts presented. If there are additional or
different facts, the opinion may change.

You may call me toll free at 1-800-531-5441, extension 50892. The direct line
is 512/475-0892. You may also write to Tax Policy Division, Comptroller of
Public Accounts.

Sincerely,

John J. Fitzgibbons, CPA
Tax Policy Division