Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2017

Sales and Use Tax Annotations

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190.0000 CONSTRUCTION CONTRACTORS—Regulation 1521

Annotation 190.0825


190.0825 Sale of Materials to Construction Contractor for Indian Tribe. An Indian tribe designates a construction contractor to be its agent for purchases necessary to acquire tangible personal property for a construction contract to be performed on the Indian reservation. The subcontractors and vendors are required to bill the Indian tribe, care of the prime contractor/purported agent. The contract requires the subcontractors and vendors to ship all the materials purchased for the construction project directly to the Indian tribe's reservation. Final delivery of the materials will occur on the reservation and title to the materials will pass to the Indian tribe prior to any use by the contractor.

The Restatement Second of Agency, section 14 N, describes the above relationship between the Indian tribe and the purported agent as one of a "non-agent independent contractor." A person who contracts to accomplish something for another or to deliver something to another, but who is not acting as a fiduciary for the other, is a non-agent contractor. Even if the relationship was considered to be a true agent relationship, the decision of U.S. v. New Mexico (1982) 455 U.S. 720, 736 prevents the Indian tribe from exercising its sovereign immunity from sales and use tax liability through an agent. (Sales and Use Tax Annotation 305.0009.)

Therefore, the subcontractors and vendors may not accept an exemption certificate signed by the purported agent for materials purchased for use in the construction project, because the materials are not sold to the Indian tribe directly. Should the purported agent nevertheless provide an exemption certificate to the subcontractors and vendors, the good faith requirement of Regulation 1667(b)(1) would not be met and the certificate would not relieve the subcontractor or vendor for liability for sales tax resulting from the sale of the materials to the purported agent. 5/8/03. (2004–1).