611.2131/267: Telegram

The Secretary of State to the Chargé in Colombia (Washington)

2. Your 115, December 31, 11:00 a.m. There is no provision in the agreement of December 15, 1933, which would prevent, without qualification, the collection of municipal sales taxes in the United States on coffee or any other product imported from Colombia and no assurances have been given to the Colombian Government at any time that the, Federal Government of the United States could or would prevent in general the imposition of such taxes under the terms of the agreement or otherwise.

In the course of the negotiations leading to the agreement mentioned, it was fully explained to the Colombian technical experts that the weight of legal authority strongly inclines to the view that, under the constitutional regime in the United States, the Federal Government is without power, whether by treaty or statutory enactment, to prohibit states or municipalities from imposing excise or consumption taxes, including, of course, sales taxes, except with respect to taxes directly affecting interstate or foreign commerce.

Accordingly, it will be noted that the provisions of Article IV of the agreement in question, relating to national treatment and limitations upon the amount of state and municipal taxes in the United States, are limited to excise or consumption taxes which affect interstate or foreign commerce and are or may be subject to statutory control by the Federal Government in the exercise of its constitutional powers.