K.,
If your daughter is already in the middle of a tantrum, it's too late for time out. If you can sense when she's heading towards a tantrum, that would be a better time for a "time out." And as others have said, it's not as a punishment, but rather as a way to de-escalate whatever is going on and help her to calm down. Kids aren't born knowing how to calm themselves, so this is probably something that you'll need to help her with. If she has a favorite doll or stuffed animal, maybe offer it to her to cuddle, talk her through taking several deep breaths, close her eyes and listen to calming music, etc. At another time (when she's not upset), you can talk to her about these calming strategies, see which ones she likes, and practice them.
As others have also suggested, it can help to identify what (you think) she's feeling at the time she is getting upset. The more she can connect the feeling that she's experience with the name of that emotion, the more likely she'll be in the future to be able to use words to express that feeling (instead of having a tantrum).
When she does have a tantrum, don't bother trying to get her to time out. Just make sure she's in a safe place, not hurting herself or anyone else, and tell her in a calm voice that you understand she's upset and you can talk with her when she's done crying. My daughter tends to have a push-pull attitude when she has a tantrum, "Leave me alone! Don't go away!" So you may not want to walk away even if your daughter tells you to. ;)
One of the best things you can do for your daughter and yourself is to see if you can figure out when and/or why these tantrums are happening and prevent them from happening in the first place. Is it when she's tired or hungry? during transition times? even if there isn't a pattern, do you have some clues that she's heading towards a tantrum? if so, then do whatever you can to head it off: offer her a snack if you think she's hungry, give her a minute of snuggle time if you think she's jealous of her sister, whatever might address the feeling that underlies the tantrum.
Remember, as others have said, time out is really supposed to be a break to de-escalate a situation, but it doesn't work for everyone (and often isn't used in the way it's intended). So don't feel you have to use time out because others do or it sounds like it should work. Try to pay attention to cues as to how your daughter is feeling -- the more attuned you are to her feelings and you reflect them back to her, the more attuned to her own emotions she will become. And that is a great thing for a child's emotional development. Good luck.
A.