The Acting Secretary of State to the Ambassador in Chile (Sevier)

No. 8

Sir: Reference is made to the Embassy’s despatch No. 1551, of October 3, 1933, and preceding correspondence concerning the application of the Chilean sales tax to services rendered to and articles purchased by the diplomatic and consular representatives of the United States Government in Chile.

The action of the Chargé d’Affaires in this matter is approved, except as to certain limitations hereinafter discussed. Reference is made to the Department’s telegraphic instruction of July 29, 1933, in which attention was called to the fifth paragraph of the General Instruction of October 24, 1925. It should be noted that while the sales tax referred to in this paragraph was similar to the Chilean sales tax under reference, there are certain differences between the two. The Chilean law authorizes the person or business from whom the tax is collected to pass it on to the consumers. Moreover, there is a difference between a luxury tax on articles like automobiles or jewelry, and a tax on items such as rates for gas, electricity, water, etc., the latter being practically necessities, and the power of the purchaser to negotiate for the price being negligible. There is a further important difference [Page 61] between fixed charges such as the Department is concerned with herein, and bargaining sales.

For your information a copy is enclosed of a circular note mailed to foreign diplomatic missions in the United States on October 12, 1932, and to the Chilean Mission in the United States on October 24, 1932. It is suggested that you should call the attention of the Chilean Foreign Office to this circular instruction [note?], and point out that in view of the liberal attitude of this Government in regard to taxation as it is set forth in this instruction [note?], it would seem that American diplomatic representatives in Chile should be exempted from the application of the Chilean sales tax in so far as it refers to fixed charges.

With respect to the Chargé’s protest against the application of the Chilean sales tax to American consular officers, it would appear that under international law consuls do not necessarily enjoy the same exemptions from taxation as diplomatic representatives. There is no consular convention or treaty dealing with this subject between the United States and Chile. In view of these circumstances and considering that the United States did not apply the exemption from the Federal excise taxes in 1932 to consular officers, as set forth in the above-mentioned circular instruction [note?] to foreign missions, you are requested to limit your protest against payment of the Chilean sales tax to American diplomatic representatives in Chile.

Very truly yours,

For the Acting Secretary of State:
Wilbur J. Carr

The Secretary of State to the Chiefs of Foreign Diplomatic Missions in the United States

The Secretary of State presents his compliments to Their Excellencies and Messieurs the Chiefs of Mission and transmits the following information received from the appropriate authority of this Government concerning their exemption from taxes imposed by the Revenue Act of 1932:

Miscellaneous federal excise taxes are imposed by the Revenue Act of 1932 on telegraph, telephone, radio and cable facilities; admission, dues and initiation fees; transfers of stocks and bonds; conveyances; sales of produce for future delivery; passage tickets; foreign insurance policies; safe deposit boxes; checks; electrical energy and use of boats.

Under the application of the principles of international law exempting from taxation ambassadors, ministers and other duly accredited diplomatic representatives of foreign governments, together with the [Page 62] members of their families living with them and members of their households, including attaches, secretaries, clerks and servants who are not citizens of the United States, all such diplomatic representatives, together with the other personnel above mentioned, are entitled to exemption from the taxes in question.