Generally, the state may not tax Indians or Indian tribes in Indian country. The term "Indian" includes only those persons, and qualifying spouses, who are enrolled with the tribe upon whose territory the activity takes place and does not include Indians who are members of other tribes.
If the tax falls on an Indian or a tribe, the tax is not imposed if the activity takes place in Indian country or the activity is treaty fishing rights-related activity.
Nontribal sellers of tangible personal property, retail services, and professional services owe the business and occupation (B&O) tax unless certain conditions are met. In some instances, the retail sales tax must also be collected from the tribal member or tribe.
Sales of tangible personal property
Income from sales of tangible personal property to the tribe or to tribal members is not subject to B&O tax if the tangible personal property is delivered to the buyer in Indian country and if:
- The property is located in Indian country at the time of sale; or
- The seller has a branch office, outlet, or place of business in Indian country that is used to receive the order or distribute the property; or
- The sale of the property is solicited by the seller while the seller is in Indian country.
When these conditions are not met, the seller must pay B&O tax on its business activity.
Important! Generally, the sale of tangible personal property sold to an Indian or an Indian tribe is not subject to sales tax when the property is delivered to the member or tribe within Indian country or the sale that takes place within Indian country. The sale is subject to sales tax when delivery occurs outside of Indian country.
Example (delivery within Indian country):
A tribal member purchases furniture from a store outside of Indian Country. The tribal member presents identification to the store owner and requests delivery to the reservation upon which they are a tribal member. In this case, retail sales tax is not due. However, if the tribal member takes possession of the furniture outside of Indian country, sales tax must be collected.
Example (sale within Indian country):
A tribal member purchases items from a store located on the reservation of which they are a tribal member. The transaction is automatically exempt from sales tax and there is no reason to establish "delivery." If the purchaser is known to the store owner as a registered tribal member, no proof is required. If the purchaser is not known to be a tribal member, the store owner must verify proof, such as a tribal membership card.
Providing retail services
The B&O tax and retail sales tax are not imposed if the retail service, such as construction or repair services, is performed for the member or tribe in Indian country.
In the case of a retail service that is performed both on and off 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 tribal member outside of Indian country is subject to the B&O tax and the retail sales tax.
Example: A company performing road work for a tribe or tribal member both inside and outside of Indian country must collect the appropriate tax for work conducted outside of Indian country. Any work performed within the boundaries of Indian country is exempt from sales tax.
Example: A contractor enters into a contract with a tribe to install a sewer line that extends off reservation. Only the income attributable to the installation of the portion of the sewer line off reservation is subject to state tax.
To document a tax exempt sale to an enrolled tribal member, use this form.
Providing other services
Income from the performance of services in Indian country for the tribe or for tribal members is not subject to the B&O or public utility tax. Services performed outside of Indian country are subject to the B&O or public utility tax.
In those instances where services are performed both on and off of Indian country, the activity is subject to state tax to the extent that services are substantially performed outside of Indian country.
Professional services presumption
It will be presumed that a professional service (e.g., accounting, legal, or dental) is substantially performed outside of Indian country if twenty-five percent or more of the time taken to perform the service occurs outside of Indian country. The portion of income subject to state tax is determined by multiplying the gross receipts from the activity by the quotient of time spent outside of Indian country performing the service divided by total time spent performing the service.
Example: An accountant with an office outside of Indian country provides accounting services to a tribal member. The accountant performs some of the work at the office and some work at the business of the tribal member in Indian country. If at least twenty-five percent of the time performing the work is spent outside of Indian country, the services are substantially performed outside of Indian country and therefore a portion is subject to state tax.
The accountant must maintain suitable records to distinguish between taxable and nontaxable income in order to provide for a reasonable approximation of the amount of gross income subject to B&O tax. In this case, suitable records could be a log of the time and location of the services performed for the tribal member by the accountant, his or her employees, and any contractors hired by the accountant.
Tax Rate Lookup Tool
When collection of retail sales tax is applicable, the Department's Tax Rate Lookup Tool can be used to determine the local sales tax rate for a specific location. It automatically searches for and identifies the location code and tax rate when you enter the US Postal Service address. The system also provides a map lookup feature.
If the system indicates a location is not in Indian Country and you believe that it is, you may provide supporting documentation through other means such as a map or official letter from the tribe.
Public utility services presumption
Retail Sales - Tax Tangible Personal Property - Delivery Threshold
Retail sales tax is not imposed on sales to Indians if the tangible personal property is delivered to the member or tribe in Indian country or if the sale takes place in Indian country.