Online businesses looking to do business on Native American tribal lands in the U.S. should know that sales tax obligations for these sovereign nations and territories resemble those obligations in other areas of the U.S. – but can differ in important ways.
Areas such as the Navajo Nation have tribal sovereignty; for tax purposes, this means their sales tax laws are separate from the states within which they reside. Some native American tribes and nations combine sales tax with that of the appropriate state sales tax. Others have their distinct sales tax but blend tax law with areas around them: The Cherokee Nation, for instance, has a sales tax on “any business enterprise which is located on tribal lands” but exempts sales to Oklahoma public schools.
In California, among other states where there are tribes, sales tax generally applies to sales by off-reservation retailers to Native American purchasers unless the retailer transfers ownership of the merchandise to such a purchaser “in Indian country, delivers the merchandise in Indian country and the Native American purchaser lives in Indian country.”
In Wisconsin, sales of taxable products to a tribal member are not subject to the state sales or use tax if the sales take place on the tribal member’s reservation and the tribal member resides on that reservation. Sales of taxable products to a tribal member that take place off the tribal member’s reservation or are sold to a tribal member who does not reside on his or her tribal reservation are generally subject to Wisconsin sales or use taxes.
Contemporary instruments and products of eCommerce such as credit cards and streamed digital products obviously complicate such location sourcing; expect at least some questions regarding taxable and exempt sales on Native American lands to eventually make their way to courts.
Sales tax debates
One of the largest Native American nations is The Navajo Nation, which in recent years has undergone some changes in sales tax.
The Navajo Nation has a sales tax of 6% for all retail sales within The Navajo Nation. Quarterly sales tax returns are due 45 days after the end of each calendar quarter. Sales tax exemption forms are issued by the Navajo Nation Council, the governing legislative body of the Navajo Nation, not by the Office of the Navajo Tax Commission.
The 6% rate is higher than that of three states where the Nation is: Arizona (5.6%), New Mexico (5.125%) and Utah (4.85%).
The Office of the Navajo Tax Commission now reportedly oversees 5,500 taxpayers and growing, primarily registered businesses within the Nation. In FY24 the Commission collected $140 million in taxes, almost 21% more than projected and what one official attributed largely to “sales tax, non-retail,” primarily construction contracts and professional services.
Tribal sales taxes are just as dynamic as states’. The Nation instituted the 6% rate in 2018, for example. Just two years later the Navajo Tax Commission (NTC) passed two resolutions, one that proposed raising the maximum sales tax rate to 10%. The other resolution, according to the Navajo E-Ship Coalition, would have allowed the NTC “to keep all the revenues it collects from late penalties and also a percentage of other tax revenues.” (“The negative impact on the Navajo economy and small businesses outweighs any benefits to the NTC,” the Coalition claimed.)
The Navajo Nation has also seen a detailed study of the junk food tax it enacted 11 years ago; a 2% tax was levied on foods and beverages with minimal-to-no nutritional value and the 6% tax was removed on water, fruits, and vegetables. Researchers seeking to document health benefits of the tax found that the tax generated more than $7.58 million in gross revenue for the Nation between 2015 and about 2022. (The money flowed back to the 110 local Navajo Nation chapters to develop community wellness projects.)
Residents of the Navajo Nation, all surrounding states and visitors can find more information on this and other Navajo tax law on the Navajo Tax Commission website.
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