Under longstanding principles of federal Indian law, a state’s power to tax tribes or tribal members in Indian Country is very limited. Two years ago, Colorado law incorporated the federal law sales tax exemption into Colorado state law (C.R.S. § 39-26-727). Under federal law and the 2014 Colorado state law, on-Reservation sales to Southern Ute and Ute Mountain Ute tribal members are exempt from State and local sales tax. Under the State law, “Reservation” means either the Southern Ute Indian Reservation or the Reservation of the Ute Mountain Ute Tribe and includes the Town of Ignacio.
It seems that tribal members may have either not always known of the exemption or not always claimed the exemption when making purchases from Town of Ignacio vendors and Town vendors have either not always known of or been willing to honor the exemption. The Tribe has been busy reaching out to Ignacio businesses to ensure that they are honoring the exemption. Ignacio businesses must comply with Colorado Department of Revenue recordkeeping requirements including a requirement to document exempt sales.
Recently, the Department of Revenue suggested that having tribal members present their tribal identification cards and sign a Statement of Exemption from Colorado Sales and Use Tax will be sufficient for its recordkeeping purposes. The Tribe supports those suggestions as a workable method for tribal members to claim the sales tax exemption and for local businesses to document the sales.
The Tribe is asking for tribal members’ assistance on this issue. Remember that this exemption applies only to state and local sales tax. It is not an exemption from tribal sales tax.
When claiming exemption from state and local sales and use taxes on the Reservation, tribal members should be prepared to:
- Let the vendor know that you wish to claim the exemption;
- Show your tribal identification card;
- If asked to do so, fill out and sign a Statement of Exemption from Colorado Sales and Use Tax or similar form.
By taking these steps, tribal members can claim the exemption and help make compliance with the law easier on local businesses, which will likely result in higher rates of compliance.