Beijing organisers later confirmed they had received a letter from Taiwan on Thursday "unilaterally closing the doors on the talks" and another from the International Olympic Committee (IOC) saying the relay would have to go ahead without a stop in Taipei.
Thomas Tsai, president of Taiwan's "Chinese Taipei Olympic Committee", told reporters that Beijing had "belittled" Taiwan throughout the negotiation process and insisted Taiwan could only use the flag and anthem as sanctioned by the IOC.
Jiang Xiaoyu, executive vice president of the Beijing organising committee BOCOG, expressed "deep regret" but said responsibility for the breakdown of negotiations lay entirely with Taiwan.
Tensions over the island's sovereignty are a constant source of acrimony between Taiwan and China, and have affected agreements from trade to sports, especially as independence-minded Taiwan President Chen Shui-bian leverages anti-Beijing sentiment before his term ends in May.
China has claimed self-ruled Taiwan since the end of the Chinese civil war in 1949. It has vowed to bring the democratic island's 23 million people under its rule, by force if necessary.
Jiang said Beijing had negotiated "sincerely and pragmatically" but Taiwan had repeatedly broken its promises and gone back on a written agreement to be included in the torch relay.
"Taiwan authorities went against the Olympic charter and fragrantly made the torch relay a political issue," he added.
"It is a very bad precedent that a member of the IOC refuses to accept the Olympic flame on its territory."
FLAG AND ANTHEM
Tsai said Beijing had insisted that Taiwan follow IOC rules that limit the use of Taiwan's flag and anthem
"I think it's very regrettable to get this result after six months of negotiations," Tsai said.
The IOC rules and the "Chinese Taipei" designation were established to allow Taiwan to remain as a member of the movement when China was readmitted to the fold in the early 1980s.
Beijing's proposed 130-day, 137,000-km route is set to be the longest ever. It will take in five continents and include an attempt to take the flame to the top of Mount Everest.
Jiang said the torch was now likely to go straight from Ho Chi Minh City to Hong Kong on April 30, 2008.
Taiwan first rejected the torch route in April because it linked Taipei to Hong Kong, implying, it said, that Taiwan was part of China.
China did not adjust the route during recent negotiations, Tsai said. But documents from Beijing indicated China was willing to call Taipei a "city outside the borders" rather than a domestic city.
Beijing officials also call Hong Kong and Macau "outside the borders" although they are regions of China, and Jiang reiterated that Taipei had always been included in the 22-city route outside "mainland China".
Taiwan had no plans to boycott the Games, said Jongher Yang, minister of the Taiwan government's National Council on Physical Fitness. "Going to the Games is another matter," Yang told reporters. "It's our right."
Jiang said the delegation from the island would still be welcome next August and afforded the same treatment as any other as long as the IOC rules on flags, symbols and anthems were followed.
Taiwan has taken jabs at Beijing by applying for U.N. membership and asking voters to sound off via a referendum on U.N. membership next year. China, which is recognised by 170 countries compared to Taiwan's meagre 24, has blocked Taiwan's U.N. bids for 15 years straight.
(Additional reporting by Nick Mulvenney in Beijing)
