Is the Instituto Panamericano De Geografia E Historia (an organ of the Organization of American States) exempt from Texas sales tax on its purchases because of the OAS treaty?

Plain-English summary

This letter responds to an inquiry about the Texas sales tax treatment of sales to the Instituto Panamericano De Geografia E Historia (Pan American Institute of Geography and History), an organization created as an organ of the Organization of American States (OAS).

The Comptroller's answer is direct: the Instituto is not exempted from Texas sales tax because of the OAS Treaty. As a point of background, the letter notes that Instituto staff are treated as diplomatic personnel in Mexico, but because of a reservation in the OAS charter, they do not have those same privileges in the United States.

The OAS was created by treaty in 1948. The ratification included a Senate reservation stating that none of the treaty's provisions should be read to enlarge federal power or limit the reserved powers of the states — including, implicitly, state taxing authority. Because of this, the general rule the letter applies is that sales to treaty partners are exempt from Texas tax only if the treaty itself grants a reciprocal exemption — that is, only if the treaty gives the United States (and its sales here) exemption from that country's similar taxes on similar transactions.

Since the OAS treaty does not do that, the Instituto cannot claim a blanket tax exemption on its Texas purchases. Instead, to recoup or avoid tax on purchases of items it exports from the country, the letter states the Instituto must provide documentation in keeping with 34 Tex. Admin. Code Rule 3.323(c). The letter closes by noting that, absent that documentation, tax is due on the Instituto's purchases of paper.

What this means for you

International and diplomatic organizations purchasing in Texas

Being affiliated with or created by an international treaty organization (like the OAS) does not by itself exempt your purchases from Texas sales tax. Exemption requires either (a) express treaty language granting reciprocal tax exemption, or (b) qualifying the purchase as an export under the Comptroller's export-documentation rule.

Businesses selling to international organizations or their affiliated institutes

Don't assume a customer's international or diplomatic-sounding status makes a sale automatically exempt. Unless the customer can show a specific statutory or treaty basis for exemption, or provides proper export documentation, sales tax applies as it would to any other sale.

Accountants and tax professionals advising treaty-affiliated or international organizations

When evaluating a claimed treaty exemption, check whether the specific treaty text grants reciprocal tax relief for similar transactions abroad — a general diplomatic or quasi-governmental character is not sufficient. Where the organization is exporting purchased goods, look instead to the export-documentation path under Rule 3.323(c).

Common questions

Q: Does being created by the Organization of American States automatically exempt an organization from Texas sales tax?
A: No. The Comptroller ruled that the Instituto Panamericano De Geografia E Historia is not exempt from sales tax because of the OAS Treaty.

Q: Under what circumstances are sales to treaty partners exempt from Texas tax?
A: Only if the treaty with the United States grants exemption from that country's own taxes on similar transactions — a reciprocity requirement. The OAS treaty's reservation language preserving state taxing powers means it does not provide that kind of blanket exemption.

Q: How can an organization like the Instituto avoid or recover tax on items it purchases and exports from the country?
A: By providing documentation in keeping with 34 Tex. Admin. Code Rule 3.323(c). Without that documentation, tax is due — in this letter, specifically on the Instituto's purchases of paper.

Q: Are the Instituto's staff treated as diplomats for tax purposes in the United States?
A: The letter notes staff are treated as diplomatic personnel in Mexico, but a reservation in the OAS charter means they do not have those privileges in the United States.

Citations and references

Regulations:

• 34 Tex. Admin. Code Rule 3.323 (export documentation)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9505L1360F13

Original ruling text

May 1, 1995

VIA FAX

Dear **:

Thank you for your recent letter regarding the tax treatment of sales
to the Instituto Panamericano De Geografia E Historia.

The Instituto Panamericano De Geografia E Historia is not exempted
from sales tax because of the OAS Treaty. It must provide documents
in keeping with Rule 3.323(c) in order to recoup or avoid tax on its
purchases of items exported from this country.

According to the documents you submitted, the Instituto Panamericano
De Geografia E Historia was created as an organ of the Organization of
American States (OAS). As a point of interest, the staff of the Instituto
Panamericano De Geografia E Historia are treated as diplomatic
personnel in Mexico, but because of a reservation in the charter do not
have those privileges in the United States.

The OAS was created by treaty in 1948, with the following reservation
language:

"That the Senate give its advice and consent to ratification of the
Charter with the reservation that none of its provisions shall be
considered as enlarging the powers of the Federal Government of
the United States or limiting the powers of the several states of
the Federal Union with respect to any matters recognized under
the Constitution as being within the reserved powers of the
several states . "

Sales to treaty partners are exempt only if the treaty with the United
States grants exemption from their taxes on similar transactions in
their countries. Accordingly, the Instituto Panamericano De Geografia
E Historia must provide documentation in keeping with the enclosed Rule
3.323 or tax is due on their purchases of paper.

This opinion is rendered based on the facts you submitted. Other facts,
though similar, may yield different results.

You may call me toll free at 1-800-531-5441, ext. 3-4680. The direct
line is 512/463-4680. You may also write to Tax Administration, Comptroller
of Public Accounts.

Sincerely,

Al Van Allen
Tax Administration

NOTE: Previous Accession Number 9505304L