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Tax ProgramIn 1982, Congress passed the Foreign Missions Act, 22 U.S.C. 4301-4316, which created a new office in the United States Department of State. This office is called the Office of Foreign Missions or OFM. The purpose of OFM is to serve the foreign diplomatic and consular communities stationed in the United States, and to control their activities. All services are based on the principle of reciprocity. In other words, no privileges are granted to a foreign official here unless United States Embassy and Consular personnel receive the equivalent privileges in that country. OFM responsibilities include the Diplomatic Tax Exemption Program, which provides sales and use, occupancy, food, airline, gas, and utility tax exemptions to eligible foreign officials on assignment in the United States. Tax exemption privileges for foreign diplomats, consular officers, and staff members are generally based on two treaties: the Vienna Convention on Diplomatic Relations and the Vienna Convention on Consular Relations. These treaties have been ratified by the United States and are the supreme law of the land under Article VI of the Constitution. Not all foreign missions and their personnel are entitled to tax exemption, because this privilege is based on reciprocity and not all foreign countries grant such tax exemption to American Embassies and personnel. Why would a foreign country refuse to give an American Embassy a benefit that the Vienna Convention treaties require? The answer is that many foreign countries have a national tax called the Value Added Tax or VAT. This tax - which can be as much as fifteen to thirty percent - is included in the purchase price. Many foreign governments argue that the VAT is an indirect tax and is therefore permitted under the treaties. The State Department does not agree, and OFM links exemption from state and local taxes in the United States to exemption from the VAT in foreign countries. For this reason, some foreign missions and diplomats have no, or restricted, tax exemption privileges in the United States. Those foreign officials who are entitled to tax exemptions are issued a Tax Exemption Card by OFM. For identification purposes, the individual's name, photograph, mission employed by, expiration date, and protocol identification number are provided on the card. There are two different types of Tax Exemption Cards: Personal and Official/Mission. Each card will have one of two different levels of sales and use tax exemption. (The Tax Exemption Card does not allow its holder to purchase gas or utilities free of tax.) The level and kind of exemption are designed to match the levels of exemption encountered by American Embassies in foreign countries. The level of tax exemption is indicated by the color of the card and the written explanation in the colored box. The cards with a blue stripe exempt the bearer from all state and local taxes nationwide. The cards with a yellow stripe require the bearer to purchase a minimum amount of goods or services before the bearer is entitled to tax exemption. The requirements may range from a specified purchase amount or could exempt certain sectors from exemption, with the most common exclusion being hotel taxes. When a cardholder presents a yellow card, with a minimum purchase requirement, the total of all items purchased in a single transaction must equal or exceed the minimum purchase level. For example, if a foreign official has a card with a minimum purchase requirement of $150, he or she would be required to pay the sales or use tax on a bill of $145. However, the same individual would be exempt from all taxes on a bill of $160. Also, if two foreign officials are traveling together but they have separate rooms and separate bills, they cannot combine the bills under one total in order to qualify for tax exemption. The Personal Tax Exemption Card is used at the point of sale for exemption from state and local sales, restaurant, lodging, and similar taxes normally charged to a customer. The Personal Card bears the photograph and identification of a duly accredited consulate, embassy, or eligible international organization employee who is entitled to the tax exemption privileges as stated on the card. This card is only for the personal use of the bearer whose picture appears on the front of the card. The Mission Tax Exemption Card is used for official purchases of a foreign consulate or embassy. The Mission Card bears the photograph and identification of a consulate, embassy, or international organization employee who has been allowed official purchasing privileges for that office. This card is for official purchases only. All purchases must be made in the name of the mission and paid for by mission check or credit card (not cash or personal check). For example, the purchasing agent might use the card to buy office supplies or to book twenty hotel rooms for a visiting official delegation from that foreign country, providing the reservation is in the name of the Mission and the bill is paid for by a mission check or credit card. The Mission Tax Exemption Card is not transferable, and not to be used for personal purchases. (There are instances where a mission tax exemption cardholder would not have access to a personal tax exemption card.) Questions concerning bookkeeping requirements should be directed to the appropriate City or State Department of Revenue. Any questions regarding the eligibility of diplomatic or consular officers for sales and use tax exemption should be directed to the Office of Foreign Missions: Office of Foreign Missions DS/OFM Office of Foreign Missions Office of Foreign Missions Office of Foreign Missions Office of Foreign Missions Office of Foreign Missions Office of Foreign Missions
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