Subject: Diplomatic Tax Exemption Program
Tax: Sales & Use Tax
Statute: G.S. 105-164.13(17)
Issued By: Sales and Use Tax Division
Date: November 9, 1998
This Directive sets out the sales and use tax exemption privileges granted under the federal Diplomatic Tax Exemption Program. The information in this Directive is currently in effect.
The federal Diplomatic Tax Exemption Program grants sales and use tax exemption privileges to certain foreign officials on assignment in the United States. The foreign officials included in the Program are foreign diplomats, consular officers, and staff members who are on assignment to an embassy, a consulate, or another organization such as the United Nations. The exemption privileges stem from international treaties and are based on the principle of reciprocity. Therefore, the privileges for officials from different countries vary depending on how officials of the United States are treated in each of the foreign countries.
The federal Office of Foreign Missions, which administers the Program, issues a Tax Exemption Card to each foreign official who is entitled to sales and use tax exemption privileges. For identification purposes, the official's name, photograph, and limited personal information appear on the card. The Office of Foreign Missions issues two types of Tax Exemption Cards--Personal and Mission. Neither card applies to taxes on telephones or other utilities or gasoline.
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 the customer. The card is only for the personal use of the official 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 an embassy or consulate employee who is the official purchasing agent for that organization. This card is for official purchases only and is not valid for personal purchases.
Either type of Tax Exemption Card can have different levels of sales and use tax exemption. Each card that is issued has a color stripe to indicate the extent of the exemption and has an explanation of the exemption on the card. A card with a blue stripe confers an exemption from all eligible sales and use taxes, including hotel room taxes. A card with a yellow stripe confers a limited exemption; the exemption does not apply to the items listed on the card or to purchases made that do not equal or exceed a stated threshold.
Three other color-striped cards are in use but will be phased out by January 1, 2002. They are a green-striped card, a red-striped card, and a red/green-striped card. A card with a green stripe exempts the card holder from all sales and use taxes except hotel room taxes. A card with a red stripe confers an exemption from all sales and use taxes, including hotel room taxes, if the amount of items purchased in the same transaction equals or exceeds the minimum threshold as stated on the card. A card with a red/green stripe exempts the card holder from all sales and use taxes, except hotel room taxes, if the amount of items purchased in the same transaction, other than the rental of a hotel room, equals or exceeds the minimum threshold stated on the card.
For the cards that require a minimum threshold, no tax is due on the amount below the threshold once the threshold is reached. Thus, if a foreign official has a card with a minimum purchase requirement of $150 and purchases $130 of items in the same transaction, tax is due. If the same official purchases $160 of items in the same transaction, no tax is due on any of the purchases.
The holder of a Tax Exemption Card is entitled to exemption from sales and use tax to the extent noted on the card. A vendor who makes an exempt sale to the holder of a Tax Exemption Card should retain a copy of the card along with the invoice in the vendor's records as documentation to support the exemption. A vendor who cannot get a copy of the card must record the name, address, date of sale, Department of State Tax Exemption Number shown on the card, and expiration date of the card in the vendor's records and on the customer's invoice.
A vendor must collect tax from diplomatic missions and their personnel unless the purchaser presents a Personal or Mission Tax Exemption Card. A Personal or Mission Tax Exemption Card may not be accepted by a vendor if any of the following applies:
- The amount of the purchase is less than any minimum level of exemption stated on the card.
- The card has expired.
- The individual purchaser or the person who purchases on behalf of the mission is not the person whose photograph appears on the card.
- The individual or mission making the purchase is not also the payer of record.
Attached is a document which contains examples of the various tax exemption cards and information about the Diplomatic Tax Exemption Program.
If you have questions about this Directive, you may call the Office Services Division, Taxpayer Assistance Section of the North Carolina Department of Revenue at (919) 733-3661. You may also write to the Division at P.O. Box 25000, Raleigh, N.C. 27602. Any questions regarding the eligibility of foreign diplomatic, consular, or other officials for sales and use tax exemption should be directed to the Office of Foreign Missions at (202) 895-3563. The mailing address is M/OFM, 3507 International Place, N.W., Washington, D.C. 20008-3034.