Did a tribe have to register and collect use tax when it manufactured goods on its reservation and sold them to non-Indians or Indians living off reservation?

Plain-English summary

Mr. P---'s absent September 26, 1994 request described a federally recognized tribe that manufactured personal-use items on its reservation and offered them at retail and wholesale to Indian and non-Indian buyers. The requester believed reservation manufacture and sale required no California sales- or use-tax collection or payment.

California disagreed. A tribe's use-tax collection duty did not depend on whether the goods were purchased or manufactured off the reservation.

When a tribe sold tangible personal property on the reservation to non-Indians or Indians who did not reside on a reservation, it had to register and collect use tax. The same rule applied when the tribe manufactured the property on the reservation.

The source compared out-of-state purchases: a California purchaser using Nevada-bought property in California owes use tax, and a Nevada retailer engaged in business in California must collect it.

California's statutory definition of “in this state” included territory within its exterior boundaries owned by or ceded to the United States.

The source also said California's credit for sales or use tax paid to another state, political subdivision, or the District of Columbia did not extend to tax paid to Indian tribes.

The PDF supplies no underlying request, transaction evidence, registration, collection, credit claim, audit, appeal, or later outcome. The live annotation marks the rule amended in 2004-2 without supplying that record and adds separate 2003 and 2021 notes about reservation meals, food, and beverages.

What this means for you

Tribal manufacturers, retailers, and purchasers

Reservation manufacture did not remove collection duties for non-Indian and nonresident-Indian buyers.

Accountants and tax professionals

Track buyer status and residence, wholesale or retail purpose, registration, collected use tax, purchaser use, and any claimed tax credit.

Common questions

Q: Did on-reservation manufacture eliminate collection duties?

A: No.

Q: From whom did the tribe have to collect?

A: Non-Indians and Indians who did not reside on a reservation.

Q: Did California allow credit for tax paid to a tribe?

A: No, under the source's reading of section 6406.

Citations and references

• California Sales and Use Tax Regulation 1616(d)(3)(A)2 — cited for registration and collection on described reservation sales regardless of reservation manufacture; complete text, definitions, proof rules, versions, amendments, and later history not supplied in the PDF
• California Revenue and Taxation Code sections 6201 and 6203 — cited for the Nevada-purchase comparison and retailer collection; complete text, definitions, versions, exemptions, and later history not supplied
• California Revenue and Taxation Code section 6017 — quoted for California's exterior limits and federal territory within them; complete text, version, application, and later history not supplied
• California Revenue and Taxation Code section 6406 — quoted in part for tax paid to another state, political subdivision, or the District of Columbia and read as excluding tribal tax; complete text, definitions, proof rules, versions, and later history not supplied
• September 26, 1994 Mr. P--- request and stated Regulation 1616 theory — request, supporting authority, tribe and reservation proof, business, products, sales, buyers, delivery, use, invoices, tax records, and transactions not reproduced
• November 15, 1994 Senior Tax Counsel Ronald L. Dick letter — no reply, registration, return, collection, payment, credit claim, audit, assessment, refund claim, appeal, or later outcome supplied; copy sent to one redacted district office
• Official Annotation 305.0300's sale, purchaser, registration, collection, manufacture, November 15, 1994, amended-2004-2, and 2003 and 2021 food-rule notes — annotation omits the request, requester theory, wholesale facts, Nevada comparison, statutory analysis, tribal-tax-credit rule, missing records, later outcome, and reliance status and supplies no 2004-2 record

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 305.0300
• Original supporting opinion: 305.0300 PDF

Original ruling text

305.0300

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
LEGAL DIVISION (MIC:82)
450 N STREET, SACRAMENTO, CALIFORNIA
(PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
TELEPHONE (916) 445-6450
FAX: (916) 323 - 3387

November 15, 1994

Mr. W--- -. P-XXXXX --- Drive, XX-XXX
--- ---, CA XXXXX
Dear Mr. P---:
This is in reply to your September 26, 1994 letter regarding the application of sales tax to charges by an Indian tribe. You asked the following question: “If a Federally Recognized Indian Tribe owns and operates a business for the purpose of manufacturing items of personal use and, as part of this business, offers these items for retail sale as well as wholesale to both Indians and nonIndians alike, would state sales tax apply to the non-Indian purchasers and by what authority?” You note you believe Sales and Use Tax Regulation 1616, Federal Areas, applies only to the sale and use of tangible personal property manufactured and purchased off the reservation and sold at retail on the reservation and to purchases made off the reservation by Indians residing on Indian land. You believe that a tribe may manufacture and sell tangible personal property within the boundaries of a reservation and not collect or pay California sales or use tax. We do not believe an Indian tribe’s liability for collection of use tax on the sale of tangible personal property depends on the tribe’s purchasing the tangible personal property off the reservation. Under Regulation 1616, subdivision (d)(3)(A)2., when an Indian tribe sells tangible personal property on the reservation to non-Indians and Indians who do not reside on the reservation, the tribe is required to register with the State Board of Equalization and collect use tax on the sale of tangible personal property to those purchasers. That is true regardless that the tribe manufactures the property on the reservation.

Mr. W--- -. P---

-2-

November 15, 1994
305.0300

You asked how a California citizen purchasing tangible personal property in the state of Nevada and returning to California without a California tax obligation compares to a California citizen purchasing tangible personal property produced by an Indian tribe and sold within the boundaries of the tribe’s reservation and returning to California. Under Revenue and Taxation Code section 6201, if a person purchases tangible personal property from a Nevada retailer for use in this state and uses the property in this state, the purchaser is responsible for payment of the California use tax. If the Nevada retailer is engaged in business in this state, the Nevada retailer is required to register with this Board and collect the use tax from the purchaser. (Rev. & Tax. Code §6203.) The term “in this state” is defined at Revenue and Taxation Code section 6017: “‘In this State’ or ‘In the State’ means within the exterior limits of the State of California and includes all territory within these limits owned by or ceded to the United States of America.” Under Revenue and Taxation Code section 6406, a purchaser liable for California use tax may take a credit for sales or use tax, or reimbursement thereof, paid to another “state, political subdivision thereof, or the District of Columbia prior to the storage, use or other consumption of that property in this state.” The credit does not apply to sales or use tax paid to foreign countries or to Indian tribes. We hope this answers your questions; however, if you need further information, feel free to write again. Very truly yours,

Ronald L. Dick
Senior Tax Counsel
RLD:plh
cc:

--- District Office – --