Can Indian tribes and tribal members buy goods tax-exempt in Utah, and do vendors need to use form TC-721G to document those exempt sales?

Plain-English summary

This 1996 advisory opinion answers a question forwarded by the Commission's Auditing Division on behalf of the Director of the Division of Indian Affairs: do Indian tribes qualify for an exemption from Utah sales tax, and if so, how should vendors document exempt sales to tribal members? The Commission addressed two separate issues.

First, are tribes or tribal members exempt from Utah sales tax? The Commission explained that, absent congressional authorization, a state cannot impose sales tax on a tribe or its members for sales made within Indian country, citing Oklahoma Tax Commission v. Chickasaw Nation. But tribes and their members are not exempt from state tax on sales made outside Indian lands. For sales to the tribe itself, the tribe is treated like any other government sovereign, but Utah's sales tax exemption only covers the federal government and Utah's own state/local government — not another sovereign like a tribe. So a tribe's purchases must be made on Indian lands, or delivered there by common carrier, to qualify; when that's true, the tribe does not need to use form TC-721 (proof of delivery via freight bill, bill of lading, or invoice is enough). For sales to individual tribal members, the exemption is narrower: it applies only if (1) the sale occurs on tribal lands, and (2) the purchaser is an enrolled tribal member living on the reservation where the purchase is made, as shown by a tribal card. Sales on Indian lands to non-tribal members, and sales to tribal members off Indian lands, do not qualify.

Second, should exempt sales to tribal members be documented on form TC-721G? Normally, a sales tax exemption must be documented on some exemption certificate kept in the vendor's permanent sales tax records. The Commission recognized that requiring a certificate for every transaction would be unduly cumbersome for vendors operating on tribal land who primarily sell to tribal members, so it pointed to the record-keeping approach it had already laid out in Tax Bulletin 234: for exempt sales over $100, the vendor must record the purchaser's tribal member card number (on the receipt, invoice, or elsewhere tying the card number to the transaction); for exempt sales of $100 or less, the vendor must verify eligibility but doesn't need to record the card number. Based on that policy, the Commission concluded that tribal members making qualifying purchases on tribal lands do not need to complete an exemption certificate at all — vendors instead just need to document exempt sales over $100 (and all non-exempt sales) under the Tax Bulletin 234 approach.

What this means for you

Tribal members purchasing on the reservation

If you are an enrolled tribal member and you buy goods on tribal lands where you live (shown by your tribal card), the sale is exempt from Utah sales tax and you don't need to fill out an exemption certificate like TC-721G. If you buy off the reservation, or buy on a different reservation than the one where you're enrolled and living, this ruling does not extend the exemption to you.

Retailers on or near a reservation

You don't need tribal-member customers to complete an exemption certificate for qualifying sales. Instead, per Tax Bulletin 234's approach as described in this ruling, you must record the purchaser's tribal card number on the receipt, invoice, or in your records for any exempt sale over $100; for exempt sales of $100 or less, you still need to verify eligibility but don't have to log the card number. You must also keep records of all non-exempt sales. If you sell to the tribe itself (not an individual member), keep proof of delivery to Indian lands — a freight bill, bill of lading, or invoice — rather than a TC-721 form.

Accountants and tax professionals

This ruling draws a clear line between sales to the tribe as a government entity (no exemption certificate needed, just proof of delivery to Indian lands) and sales to individual tribal members (exempt only on-reservation, to a resident enrolled member, evidenced by a tribal card, with Tax Bulletin 234's dollar-threshold record-keeping in place of a certificate). Note that Utah's general sales tax exemption for government entities does not extend to tribes as "other sovereign entities" — the exemption for tribal transactions instead rests on the federal constraint on state taxation of transactions within Indian country, not on a state government-exemption category.

Common questions

Q: Does a tribal member need to fill out form TC-721G to buy tax-exempt on the reservation?
A: No. The Commission concluded that tribal members making qualifying purchases on tribal lands do not need to complete an exemption certificate; the vendor instead follows Tax Bulletin 234's record-keeping rules.

Q: What has to be true for a sale to a tribal member to be exempt?
A: Two things: the sale must occur on tribal lands, and the purchaser must be an enrolled tribal member living on the reservation where the purchase is made, as shown by a tribal card.

Q: Are sales to tribal members off the reservation exempt?
A: No. The ruling states sales outside of Indian lands to tribal members are not entitled to the exemption.

Q: How does a sale to the tribe itself (not an individual member) get documented?
A: The tribe doesn't need to use form TC-721. The vendor can provide proof of delivery to the reservation — a freight bill, bill of lading, or invoice — as long as the purchase was made on Indian lands or delivered there by common carrier.

Q: What records does a vendor need to keep for exempt sales to tribal members?
A: Per the record-keeping requirements the ruling describes from Tax Bulletin 234: for exempt sales over $100, record the purchaser's tribal member card number tied to that transaction; for exempt sales of $100 or less, verify eligibility but the card number doesn't need to be recorded.

Q: Can I rely on this ruling for my own situation?
A: Not as binding precedent. A Utah private letter/advisory opinion binds the Commission only for the taxpayer and facts it was issued to. This is also one of the Commission's older rulings (1996), so the underlying statutes and rules may have since been renumbered or amended — verify current law before relying on it.

Citations and references

Cases:

• Oklahoma Tax Commission v. Chickasaw Nation, 515 US 2214 (1995) — cited for the rule that, absent congressional authorization, a state may not impose sales tax on a tribe or its members for sales made within Indian country.

Commission guidance:

• Tax Bulletin 234 — the Commission's record-keeping requirements for vendors operating on tribal lands (the $100 threshold for recording a tribal member's card number).

Forms referenced:

• TC-721 — general sales tax exemption certificate (not required for tribe-to-vendor sales where delivery to Indian lands is documented another way).
• TC-721G — the government-entity sales tax exemption certificate the ruling was asked about; the ruling concludes it is not required for exempt sales to tribal members.

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original page: https://files.tax.utah.gov/tax/commission/ruling/96-047.htm

Original ruling text

96-047

Response
March 8, 1996

Request

From:
XXXXX

Re
Sales tax exemption for Indian tribes

Date:
January 5, 1996

I
am sending to you herewith a request from the Director of the Division of Indian
Affairs for advice on whether Indian tribes qualify for an exemption from the
payment of sales tax. Undoubtedly you have considered this issue and have
either an opinion or a regulation dealing with the subject. If you will advise me of the answer to this
inquiry I will be happy to pass it on to XXXXX.

Thanks

Craig
Sandberg

Auditing
Division

RE:
Advisory Opinion - Use of TC-721G by tribal members

Dear
Craig,

We
have reviewed your request for a response to a question raised by XXXXX of the
Division of Indian Affairs. XXXXX
memorandum to XXXXX touches on two issues: (1) are Indian tribes or tribal
members exempt from sales tax as government entities? and, (2) should the
tribes use a form TC-721G to document exempt sales? We address each issue in turn.

1.
Are tribes or tribal members exempt from Utah's sales tax?

Absent
congressional authorization, a state may not impose sales tax on a tribe or its
members for sales made within Indian country, but Indian tribes and their
members are not immune from state taxes imposed on sales outside of Indian
lands. See, e.g., Oklahoma Tax
Commission v. Chickasaw Nation, 515 US 2214 (1995).

a.
Sales to the tribe: For sales tax purposes, a federally recognized tribe
is treated like any other government sovereign. However, Utah sales tax law only provides a sales tax exemption
to the federal government and to the state government and its political
subdivision. The sales tax exemption
does not apply to government entities of another state or to other sovereign
entities. Therefore, to take advantage of the sales tax exemption, purchases by
the Tribe must be made on Indian lands or purchased for delivery to Indian
lands by way of common carrier. It is
not necessary for the tribe to use the TC-721.
The vendor may provide proof of delivery to the reservation with a
freight bill, bill of lading or invoice.

b.
Sales to tribal members: A sales tax is a transaction tax imposed on the
purchaser. Under the rule stated above,
the state may not impose a sales tax on a transaction which occurs on tribal
land if the purchaser is a tribal member.
Therefore, the sales tax exemption available to tribes and tribal
members is narrower than the exemption available to government entities. A sale to a tribe or tribal member qualifies
for exemption if:

(1)
the sale occurs on tribal lands; and

(2)
the purchaser is an enrolled tribal member living on the reservation where the
purchase is made (as evidenced by the tribal card).

Sales
on Indian lands to non-tribal members and sales outside of Indian lands to
tribal members are not entitled to the exemption.

2.
Should exempt sales to tribal members be documented on Tax Commission form
TC-721G exemption certificate?

Generally,
any sales tax exemption must be documented on some form of exemption
certificate and that documentation must be kept With the vendor's permanent
sales tax records. However, the
Commission recognizes that this system of documentation is unduly cumbersome to
vendors operating on tribal land and primarily making tax exempt sales to
tribal members. In Tax Bulletin 234
(copy attached), the Commission outlined the record keeping requirements for
vendors on tribal lands. To Summarize
the record keeping requirements outlined in the Commission's tax bulletins:

1. For exempt sales in an amount greater than
   $100, the vendor must record the purchaser's tribal member card number on the
   receipt or invoice or in some other manner that ties that member's number to
   the exempt transaction.

2. For exempt sales in an amount of $100 or
   less, the vendor must verify the purchaser's eligibility for the exemption, but
   the vendor need not record the purchaser's member card number in his or her tax
   records.

On
the basis of this policy, tribal members making qualifying purchases on tribal
lands need not complete an exemption certificate. Vendors are required to document exempt sales in amounts of more
than $100 dollars and all non-exempt sales.

Please
let us know if you have additional questions.

For
the Commission,

Alice
Shearer

Commissioner