Is the North American Development Bank (NADBank), created under NAFTA, exempt from Texas sales, excise, use, and hotel occupancy tax?

Plain-English summary

The Comptroller's office wrote to confirm the tax status of the North American Development Bank (NADBank), an institution created under NAFTA, after reviewing information the taxpayer provided about the bank. The letter concludes that NADBank meets the requirements for exemption from the Texas limited sales, excise, and use tax, as well as the hotel occupancy tax, because it is an entity exempted from tax by federal law. Since Texas does not issue "tax exemption numbers," no exemption number is assigned to NADBank.

Instead of paying sales tax on taxable items related to its purpose (as long as those items are not used for an individual's personal benefit), NADBank may issue a sales tax exemption certificate to sellers. The letter notes that this certificate may be reproduced in any quantity. The Comptroller's office also flagged that if NADBank enters into any construction or remodeling contracts for a building, the taxability of related purchases should be discussed with the Sales Tax Policy section.

For hotel stays, a NADBank representative traveling on official business may issue a hotel occupancy tax exemption certificate instead of paying the state and local portions of that tax. Because the standard hotel occupancy tax exemption certificate doesn't include a category that specifically covers NADBank, the letter recommends giving the hotel a copy of the letter itself as backup documentation.

What this means for you

NADBank and its representatives

NADBank can claim exemption from Texas sales, excise, and use tax on taxable purchases connected to its purpose (other than items benefiting an individual personally) by presenting a sales tax exemption certificate to vendors — no exemption number is needed since Texas doesn't issue them. Traveling representatives can similarly avoid state and local hotel occupancy tax by presenting a hotel occupancy tax exemption certificate, and should carry a copy of this letter to give hotel staff since no existing certificate category names NADBank specifically.

Businesses selling to NADBank or hosting its representatives

Sellers and hotels dealing with NADBank should expect exemption certificates in lieu of tax payment on qualifying purchases and lodging, and may reasonably ask for a copy of this letter as supporting documentation given the absence of a NADBank-specific certificate category.

Accountants and tax professionals advising international organizations

This letter illustrates how the Comptroller treats international financial institutions created under treaties like NAFTA: exemption from tax under federal law does not come with a Texas-issued exemption number, and taxpayers instead rely on standard exemption certificates plus, where needed, a copy of the Comptroller's confirmation letter.

Common questions

Q: Is NADBank exempt from Texas sales, excise, and use tax?
A: Yes. The Comptroller confirmed that NADBank meets the requirements for exemption from these taxes as an entity exempted from tax by federal law.

Q: Does NADBank have a Texas tax exemption number?
A: No. Texas does not issue "tax exemption numbers," so none is assigned to NADBank.

Q: How does NADBank claim its sales tax exemption on purchases?
A: By issuing a sales tax exemption certificate to the seller instead of paying tax, for taxable items related to its purpose that are not used for an individual's personal benefit.

Q: Is NADBank exempt from hotel occupancy tax?
A: Yes, for representatives traveling on official NADBank business. They may issue a hotel occupancy tax exemption certificate instead of paying the state and local portions of the tax, and should also provide the hotel with a copy of this letter since no certificate category specifically covers NADBank.

Citations and references

No specific statutes or administrative rules are cited in the text of this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9501820L

Original ruling text

January 23, 1995

Dear **:

Thank you for the information you and ** provided regarding the North
American Development Bank (NADBank).

I am pleased to report that NADBank meets the requirements for exemption from
the Texas limited sales, excise and use tax and the hotel occupancy tax as an
entity exempted from tax by federal law. Because "tax exemption numbers" do not
exist, no exemption number is assigned.

NADBank may issue a sales tax exemption certificate instead of paying the sales
tax on taxable items that relate to its purpose and that are not used for the
personal benefit of an individual. The enclosed sales tax exemption certificate
may be reproduced in any quantity.

If you have questions regarding the taxability of any items purchased or if
NADBank enters into any contracts for the construction or remodeling of a
building, Al Van Allen of our Sales Tax Policy section will be happy to assist
you. He may be reached at the toll free number listed below and his extension
is 3-4680. His regular number is 512/463-4680.

Additionally, a representative traveling on official business for NADBank may
issue a hotel occupancy tax exemption certificate instead of paying the state
and local portions of the hotel occupancy tax. Because the enclosed hotel
occupancy tax exemption certificate does not have a category of exemption that
would cover NADBank, I recommend that you also provide the hotel with a copy of
this letter.

If I can be of further assistance, please call me toll free at 1-800-531-5441,
ext. 3-4622. The regular number is 512/463-4622.

Sincerely,

Stefanie B. Medack
Exempt Organizations Section