California: Sales Tax Exemptions and Tribal Governments
- Nov 12, 2012 | Gail Cole
The California State Board of Equalization has released a special notice regarding sales and use tax exemptions for federally recognized Indian tribes without reservations or with reservations that have only limited services.
In some states, only tribal governments have the right to collect sales tax on transactions that involve a member of a tribe and take place on tribal lands. State and federal governments may collect sales tax on transactions that involved tribal members only if those transactions take place off tribal lands. This is true in Wisconsin.
In California, "there is no general exemption from the sales tax for sales to Indians." However, similar to Wisconsin, sales tax does not apply if the following three conditions are met:
- You transfer ownership of the merchandise to an Indian purchaser in Indian country;
- You deliver the merchandise in Indian country; and
- The Indian purchaser lives in Indian country.
If a purchase of tangible personal property is by an "Indian not residing in Indian country … the retailer must collect use tax, even though the transaction may be exempt from sales tax." This is because the property is presumed to be for use outside of Indian country.
Sales tax does not apply to sales of tangible personal property that take place in Indian country between an Indian and an Indian retailer, if the following three conditions are met:
- The sales are negotiated at places of business located in Indian county;
- The Indian purchaser resides in Indian country; and
- The property is delivered to the purchaser in Indian country.
This is also true when the retailer is a non-Indian, so long as the three above conditions are met.
Sales tax generally does not apply to sales made by Indian retailers to both Indians and non-Indians who do not reside in Indian country so long as those sales are "negotiated … in Indian country" and "the property is delivered to the purchaser in Indian country." Use tax, however, generally does apply to these transactions.
But what happens when a federally recognized tribe doesn't have land to call its own, or has land but lacks "buildings or essential utility services"? According to Regulation 1616, Federal Areas, some transactions may qualify for an exemption of California sales and use tax.
The special notice released by the California DOE specifies that in order to qualify for this exemption, all of the following criteria must be met:
- "The sale is made to or the purchase is made by the tribal government of an Indian tribe that is officially recognized by the United States.
- The Indian tribe does not have a reservation or the principal place where the tribe’s government meets to conduct tribal business cannot be its Indian tribe’s reservation because the reservation does not have a building or lacks one or more utility services, such as power or water, or lacks mail service.
- The property is purchased for use in tribal self-governance.
- The property is delivered and title to the property is transferred to the tribal government at the principal place where the tribal government meets to conduct tribal business.
- The property is used in tribal self-governance more than it is used for other purposes within the first 12 months following delivery."
When seeking an exemption, tribal governments must provide vendors with a valid exemption certificate, BOE-146-TSG. Retailers are advised to verify the exemption status of tribal governments by visiting www.boe.ca.gov.