Ignacio businesses improperly charging tribal members state tax

Town of Ignacio

Southern Ute tribal members have reported that a number of businesses in the Town of Ignacio have insisted that they had to pay a state or local sales tax in order to buy food, products or services. This is in violation of both state and federal law.

In 1976, the Supreme Court held that a state could not require tribal members to pay a state or local sales tax within the boundaries of their reservation. Colorado made this tax exemption part of state law in 2014 in Colo. Rev. Stat. § 39-26-727. In 2016, the Town of Ignacio inquired of the Colorado Department of Revenue to determine if this Colorado statute applied to a sales tax imposed by the Town. The response from the Department of Revenue was unequivocally, “yes.” Because the Town of Ignacio is within the exterior boundaries of the Southern Ute Indian Reservation, a state or local sales tax could not be imposed on Southern Ute tribal members.

What does this mean for tribal members?  Here are some examples.

If the tribal member is buying a product in Ignacio, the tribal member does not need to pay sales tax. Since the vendor is located within the Southern Ute Indian Reservation, the transaction is exempt from sales tax.  The store owner may ask the tribal member to verify proof of tribal membership by asking the tribal member to show tribal identification.

The tribal member is buying a product from a store outside of the Southern Ute Indian Reservation. Does the tribal member have to pay the sales tax? If the tribal member purchases a product at the store the sales tax has to be paid.  However, if the tribal member presents his or her tribal identification and has the product delivered to a home address on the Reservation, the tribal member does not have to pay the state sales tax.

The tribal member is buying a car from a car dealer outside the Reservation boundaries that will be registered to the member’s address on the Reservation. The sales tax does not have to be paid and the transaction is tax exempt.

The Southern Ute Tribal Council has authorized letters to go to local vendors who have insisted that tribal members pay state or local sales tax, reminding them that the tax does not apply to tribal members.  If any tribal member continues to experience this problem, they are encouraged to discuss it with a member of Tribal Council, the Executive Office or the Legal Department. The Executive Office can be reached at 970-563-0100 ext. 2485 and the Legal Department at 970-563-2141 or by email at jrivera@southernute-nsn.gov.

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