Are purchases by persons who claim membership in a tribe that is not federally recognized exempt from Utah sales tax the way purchases by members of a federally recognized, contracting tribe are?

Plain-English summary

A city manager wrote to the Utah State Tax Commission in May 2000 describing a sales-tax collection problem local merchants were having. The state and an (unnamed, federally recognized) tribe had an agreement that, for five years, exempted enrolled tribal members from local sales tax on purchases made within the city — but that agreement had just been discontinued, and the Commission had told merchants to start collecting sales tax on all purchases as of July 1, 2000. The complication: a separate group claiming to be members of another, differently-named tribe was telling merchants that the new collect-tax instruction didn't apply to them, implying they remained exempt. The city manager didn't know this second group's tribal status or where its reservation was, and asked the Commission to clarify merchants' collection obligations.

The Commission's August 2000 response drew a sharp line: the tribe the second group claimed to belong to is not a federally recognized tribe. Because of that, no person asserting tax immunity based on membership in that group has ever been, or is now, entitled to immunity from state and local taxation. Such persons are treated as ordinary Utah citizens subject to the same taxes — including sales tax — as anyone else, unless they separately qualify for some other exemption under Utah law. The Commission then reaffirmed the terms of the state's actual contract with the (federally recognized) tribe referenced in the request: a sale to one of that tribe's members is exempt from sales tax only if two conditions are both met — the purchaser is an enrolled member of that tribe who lives on the reservation, and the purchase transaction itself takes place on the reservation.

What this means for you

Retailers dealing with claimed tribal-exemption purchases

Tribal sales tax exemptions in Utah flow from specific agreements/recognition, not from a customer's self-identification as "tribal." If a customer claims exemption based on membership in a group that isn't a federally recognized tribe with an actual state exemption arrangement, this ruling says that claim doesn't hold up — collect tax as you would from anyone else. For customers claiming membership in a tribe that does have a recognized exemption arrangement, both the enrolled-member-residing-on-reservation test and the on-reservation-transaction test must be satisfied before treating the sale as exempt.

Local governments and city officials fielding merchant questions

This ruling is a useful, citable Commission statement for resolving merchant confusion when a state/tribal exemption agreement lapses or when competing groups claim tribal tax-exempt status — the Commission will look at whether the group is a federally recognized tribe with an actual exemption arrangement, not at self-identification alone.

Common questions

Q: If a group calls itself a tribe, does that make its members sales-tax exempt in Utah?
A: No. This ruling holds that a group asserting tribal status that is not a federally recognized tribe has no basis for a state or local tax exemption; its members are taxed like any other Utah resident.

Q: For a tribe that DOES have a recognized exemption arrangement with Utah, what has to be true for a sale to be exempt?
A: Two things, both required: the purchaser must be an enrolled member of that tribe who lives on the reservation, and the sale transaction itself must take place on the reservation.

Q: Does living near or visiting a reservation make someone tax-exempt?
A: No — this ruling requires actual enrolled tribal membership, reservation residence, and an on-reservation transaction; none of those elements can be skipped.

Citations and references

No statutes, administrative rules, or cases were cited by name in this ruling; the Commission's answer rests on the state's contractual exemption arrangement with the federally recognized tribe and on federal-recognition status generally.

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original page: https://files.tax.utah.gov/tax/commission/ruling/00-023.htm

Original ruling text

00-023

Response August 11, 2000

REQUEST LETTER

May 31, 2000

Dear Mr. Chapman,

As you are aware, at least I
hope you are aware, the state of Utah and the TRIBE Indian Tribe have worked
out an agreement that discontinues the sales tax exemption for purchases made
within CITY City that enrolled TRIBE Tribal members have enjoyed for the past
five years. Hopefully, the business
operators understood your recent bulletin instructing them to commence
collecting sales tax on all purchases as of July 1, 2000.

Another group of Indians
claiming to be of the TRIBE Tribe are now confusing the local merchants by
stating your recent ruling does not apply to them. The implication is that they are still exempt from paying sales
tax. I do not know the status of the
TRIBE Tribe, nor do I know where their reservation is.

It would be beneficial to the
city of CITY and it's merchants for the Tax Commission to render an advisory
opinion regarding the so-called TRIBE Tribe and clearly state the merchants
responsibility regarding the collection of sales tax for other tribal members.

Thank you for your action
regarding these issues. If you need to
communicate, please contact me.

Sincerely,

MANAGER

RESPONSE
LETTER

August
11, 2000

RE: State Taxation of Persons Alleging to be Members of the TRIBE
Tribe

Dear NAME,

You
have asked for guidance regarding the application of sale tax on purchases made
by persons who allege to be members of the TRIBE Tribe. The TRIBE Tribe is not a federally
recognized tribe. Accordingly, no
person asserting tax immunity because of membership in the TRIBE Tribe has ever
been or is now entitled to immunity from state and local taxation. Instead, these persons are considered
citizens of the State of Utah who are subject to the same taxation as any other
citizen, including the sales tax. Thus,
all Utah merchants should apply sales tax on purchases made by a person
alleging membership in the TRIBE Tribe, unless that person qualifies for an
exemption that is available under Utah law.

As
to the contract between the TRIBE Indian Tribe and the State of Utah, this
contract provides that two conditions must be present before any sale to a
TRIBE tribal member is exempt from sales tax.
First, the purchaser must be an enrolled member of the TRIBE Tribe who
lives on the reservation. Second, the
transaction must take place on the reservation.

Please
contact us if you have any other questions.

For
the Commission,

Marc
B. Johnson

Commissioner