Tribal Governments and the Tribal Governments and the Streamlined Sales and Use Tax Streamlined Sales and Use Tax

AgreementAgreementSeptember 20, 2007September 20, 2007

John Dossett, NCAI General CounselJohn Dossett, NCAI General Counsel

Chairman Arlan Melendez, Reno-Sparks Indian ColonyChairman Arlan Melendez, Reno-Sparks Indian Colony

NCAI Tax Subcommittee Co-ChairNCAI Tax Subcommittee Co-Chair

Tribal Government Services

• Education

• Health Care

• Law Enforcement

• Natural Resources Management

• Roads and Transportation

• Range of Services Similar to States

• Tribes Need Tax Revenue

Tribal Government Sales and Use Taxes

• Tribal Governments have authority to collect sales and use taxes on transactions within reservations.

• Tribal motor fuel and tobacco taxes are common.• Nevada tribes started sales taxes in 1980’s.• In 2002, the Navajo Nation implemented a

reservation wide sales tax. Navajo Reservation is the size of West Virginia.

• More tribes are implementing retail sales taxes and participating in tribal-state tax agreements.

• Tribal members make purchases from remote sellers.

Uniform Sourcing Rules Streamlined Sales and Use Tax Agreement

The member states agree to require sellers to source the sale of a product in accordance with the following provisions.

a. When the product is received by the purchaser at a business location of the seller, the sale is sourced to that business location.

b. When the product is not received by the purchaser at a business location of the seller, the sale is sourced to the location where receipt by the purchaser occurs -- the location indicated by instructions for delivery.

Supreme Court Rules for Sales Taxes on Tribal Lands

For products without “reservation generated value”:Tribe may collect tax when product is received by

any purchaser on tribal land. (Colville)State may collect the tax when the product is

received by a non-tribal member on tribal land. Dual Taxation. (Moe, Colville)

State may not collect tax when product is received on tribal land by tribal member – both on-site and remote transactions. (Moe, Chickasaw, Warren Trading Post)

Implications of Tribal Tax Rules for SSUTA

• Difficult to administer tax rules based on membership status within SSUTA geographical tax sourcing rules.

• SSUTA could unlawfully collect taxes on remote sales to tribal members.

• Pourier v. South Dakota Dept. of Revenue (2003) State forced to refund motor fuel tax on sales to tribal members.

• SSUTA and Congressional proposals do not consider collection of tribal sales taxes or problem of dual taxation with non-members.

Solutions?

• Some tribes are interested in having the same opportunities as states to participate in the SSTP and collect tribal taxes.

• Some tribes would like to ensure that existing tax laws are not violated.

• NCAI and NCSL Resolutions support including tribal option to participate in SSTP.

S. 34, the Sales Tax Fairness and Simplification Act (2007)

• Section 5 - option for tribes to participate as Member State in Interstate Agreement

• Limited participation on Governing Board.• Requires tribal-state agreement, but if none in 2

years, tribe can proceed without agreement.• Also has protections for existing tax agreements

and existing tax immunities for tribes who choose not to participate

• Introduced by Senator Mike Enzi of Wyoming. Senator Dorgan has co-sponsored in the past.

U.S. Constitution, Article I, Section 8:

The Congress shall have power … To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;