Prime contractor working directly for tribal members in Indian Country
Retail sales tax: Retail sales tax does not apply to the construction charges of a prime contractor to a tribe or enrolled member when the construction is performed in Indian country. In the case of construction that is performed both in and outside Indian country, only the portion of the contract that relates to work done in Indian country is excluded from tax. The work done for a tribe or Indian outside of Indian country, for example road work that extends outside of Indian country, is subject to retail sales tax.
Business and occupation (B&O) tax: B&O tax does not apply to the construction charges of a prime contractor to a tribe or enrolled member when the construction is performed in Indian country.
Reseller permits: Reseller permits are issued to businesses that make wholesale purchases, including qualified contractors. The Department will issue permits based on specific criteria. A prime contractor may use a reseller permit to purchase materials and subcontractor labor for construction in Indian Country for tribal members. These are considered to be purchases for resale. Many Indian businesses (resellers) are eligible to obtain a reseller permit even if they are not otherwise required to be registered to collect and pay tax to the Department. Contractors must apply yearly for a reseller permit. Applications are available online. For more information, please see Reseller Permits.
Buyers exemption certificate: Prime contractors working directly for the Tribe are not required to pay sales tax on construction supplies and rentals if delivery is made to the prime contractor in Indian Country and such items will be used exclusively in performing construction in Indian Country. See Tax Exemption for Sales to Tribes (pdf).
Use tax: Prime contractors do not owe use tax on the materials permanently installed or affixed to real estate in Indian Country when the construction is performed for the tribe or an enrolled member. Prime contractors working directly with a Tribe do not owe use tax on materials and/or services (e.g., equipment rentals) fully consumed in performance of such construction.
Example: A business building a home for a non-tribal member can purchase subcontractor services and materials to be incorporated into the home at wholesale. Similarly, a business building a home for a tribal member in Indian country can also purchase these services and materials at wholesale.
Subcontractor working for prime contractor in Indian Country
Subcontractors working in Indian Country are generally taxed as if the construction occurred outside of Indian Country. In other words, subcontractors are not afforded any favorable tax treatment by virtue of performing work for a prime contractor who is performing work for an Indian or Indian Tribe.
Retail sales tax: Retail sales tax does not apply if the subcontractor obtains a reseller permit from the prime contractor. This is true even though the prime contractor is not required to collect sales tax from the enrolled member.
Business and occupation tax: Subcontractors are subject to B&O tax on their income from the performance of construction in Indian Country. If they obtain a resale certificate or a reseller permit from the prime contractor, wholesaling B&O tax applies. Otherwise, retailing B&O tax applies.
Reseller Permits: Effective January 1, 2010, the resale certificate was replaced with a reseller permit issued by the Department of Revenue. Subcontractors may use a reseller permit to purchase materials and subcontractors for construction in Indian Country. Reseller permits are issued to businesses that make wholesale purchases, including Indian businesses not otherwise required to be registered with the Department. The Department will issue permits based on specific criteria. Contractors must apply yearly for a reseller permit. Applications are available online. For more information, please see Reseller Permits.
Use Tax: Subcontractors do not owe use tax on materials they install in Indian Country. Subcontractors owe use tax on items and services consumed in Indian Country.
Construction in Indian Country for non-enrolled persons
Construction performed for non-enrolled persons is treated like construction that occurs outside of Indian Country.
Documenting tax-exempt transactions recordkeeping
Contractors providing construction services to tribal members on Indian lands must verify the tax-exempt status of the tribal members by reviewing the buyers' identification and by obtaining a completed Buyer's Retail Sales Tax Exemption Certificate (pdf) from the buyer. For examples of acceptable identification, see Recordkeeping and Tax Collection section.