Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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305.0000 INDIANS

Annotation 305.0009

305.0009 Material Sales—No Sovereign Immunity for Non-Indian Contractor. An Indian tribe enters into a contract with a non-Indian construction contractor to perform a construction contract on the tribe's reservation. In order to avoid the otherwise applicable sales or use tax on the purchase of the materials, the contract purportedly appoints the construction contractor to act as the tribe's agent for purposes of purchasing materials that will be incorporated into the tribe's real property. The construction contractor thereupon arranges for the acquisition of the materials from vendors who deliver the property to the reservation, with title passing to the contractor on the reservation.

The relationship between the tribe and the construction contractor is that of non-agent independent contractor. Therefore, the construction company is not an agent of the tribe. Even if the tribe's appointment of the construction contractor as its agent were effective, the tribe cannot exercise its sovereign immunity from sales and use tax liability through an agent. (See U.S. v. New Mexico (1982) 455 U.S. 720, 736.) Accordingly, the vendor's sale of materials to a non-Indian contractor on an Indian reservation is subject to tax. 3/27/02.