Natives / First Nations & IFTA

1. Natives / First Nations & IFTA

2. Exempt Status of Natives /First Nations TAX Department of Finance Revenue and Taxation Division

3. The United States of America Sovereignty of Indian Reservations from state authority upheld as a basic tenet of US Code of law. I.e. all lands or interests in land acquired by the United States for an Indian or Indian tribe is sovereign from state tax unless there is clear congressional authorization to the contrary. Legal Origins Department of Finance Revenue and Taxation Division

4. Canada Exempt status of Natives protected under Section 87 of Canada’s Indian Act. This legislation is applied based upon the interpretation of the Supreme Court of Canada which is as follows: All goods either purchased on reserve land or delivered to reserve land are exempt from tax (federal and provincial) Legal Origins Department of Finance Revenue and Taxation Division

5. Implications for Taxing Authorities: • State Level • Provincial Level Department of Finance Revenue and Taxation Division

6. State Level • States have no authority to impose tax on Indians/Tribal members • In addition, lands placed in trust by the Bureau of Indian Affairs fall outside state jurisdiction • Tribal members are taking advantage of exempt status through increased commercial activity (retail) Continued… Department of Finance Revenue and Taxation Division

7. State Level • Commercial establishments are under no legal obligation to collect taxes from Tribal members • There is a legal obligation to collect from non-Tribal members – the reality, many are not • Exceptions: Tax collection agreements, tax compacts, treaties, etc. Department of Finance Revenue and Taxation Division

8. Provincial Level • Obligation to ensure that Natives receive the exemption • Administrative arrangements vary from province to province • Sales to non-Natives must include all applicable taxes Department of Finance Revenue and Taxation Division

9. Natives and IFTA • R820 under Article VIII states that: All motor fuel acquired that is normally subject to consumption tax is taxable unless proof to the contrary is provided by the licencee. The licencee must report all fuel placed in the supply tank of a qualified motor vehicle as taxable on the IFTA tax return. Continued…. Department of Finance Revenue and Taxation Division

10. Natives and IFTA • Background: U.S. Experience Canadian Experience Department of Finance Revenue and Taxation Division

11. Background –U.S. Experience • Proliferation of commercial establishments on reserves and/or trust lands • Large fuel stops for traveling public • Ability to manipulate prices • Misleading non-tribal purchasers …Continued Department of Finance Revenue and Taxation Division

12. Background - U.S. Experience • Truckers are purchasing fuel from Native operated outlets • Often, truckers may not be aware that they are purchasing tax exempt fuel • Claim tax paid purchases on returns • Base jurisdictions process the returns • Funds are transmitted on the assumption that all purchases made in the jurisdictions of travel were taxed at the respective rates Department of Finance Revenue and Taxation Division

13. Jurisdictions Revenue Losses Tribal based retailers Example: Idaho case Incorrect distribution of revenues on IFTA returns Example:High intra-state (reserve) purchases with low intra-state travel results in a net transfer of funds Inability to correct the IFTA loss outside of the audit process Truckers May be subject to large assessments upon audit What Are the Issues? Department of Finance Revenue and Taxation Division

14. Background – Canadian Experience • Increased involvement in the retailing of fuel through gas bars, truck stops, etc. by Native Bands • Exempt sales by Natives are restricted to Native peoples • Loss of tax revenue due to exempt sales to non-Native truckers is not a problem Department of Finance Revenue and Taxation Division

15. Potential Problem An independent Native trucker (1 truck) buys the fuel for his qualified vehicle on a reserve (NB) where he is eligible for exemption. The Native then travels into Maine where he consumes the fuel purchased tax exempt. …Continued Department of Finance Revenue and Taxation Division

16. Potential Problem Upon filing the return, the Native may do one of two things: 1. Report all travel as exempt on basis of exempt status, or 2. Report all travel as tax paid to avoid any further questioning …Continued Department of Finance Revenue and Taxation Division

17. Potential Problem If the Native reports all travel as exempt on basis of exempt status: NB would be obligated to recognize the exemption for NB consumption, but would have to decide an action for the travel in Maine. NB would be obligated as per terms of the agreement to transfer the funds to Maine to account for the consumption, which would result in a net loss to NB. Would there be any grounds upon which to recover this from the Native? …Continued Department of Finance Revenue and Taxation Division

18. Potential Problem If the Native reports all travel as tax paid to avoid any further questioning: NB would process the return in the standard manner and make the necessary transfers, which would create a revenue loss for NB. This could only be detected in the event that the Native was audited. Department of Finance Revenue and Taxation Division

19. Thank You Questions and /or Final Comments