REQUEST
LETTER
01-018
From: COUNTY
COUNTY would like
to ask the Tax Commission to provide a response to the County on the following
two issues that have been brought before the Commission by residents of the
County.
A TRIBE resident, NAME has
leased a car from an out-of-state dealership.
She has come into the assessor’s office to license the vehicle. She was told that since the vehicle’s “owner of record” as shown
on the title and/or the title for application is either the dealership or a finance
company and not herself, that there are property taxes due on the vehicle.
Our instructions
have been that TRIBE residents living on the Utah portion of the TRIBE Nation
are not subject to property tax and sales tax on vehicles. This situation is somewhat different from a
vehicle that is financed by a bank or lending institution in that the “owner of
record” for the vehicle would be the individual buying the vehicle. In a lease, the “owner of record” is someone
other than the individual making the lease payments.
NAME has paid the taxes in issue in order to
license her vehicle. She has indicated
that she has leased a previous vehicle in which she was not required to pay the
taxes. The questions we have for the
Tax Commission is whether or not NAME or others in her situation are exempt
from the taxes based on where she resides or if the taxes are due because of
the “owner of record”?
Some TRIBE residents who are school teachers employed by the
SCHOOL DISTRICT that reside on the reservation and that live in the teacher
housing owned by the District are being told that they are now required to pay
Utah State Income Tax. The questions that have been asked of the
County Commission has been since they reside on the Utah portion of the TRIBE
Nation, are they not exempt from the income tax payment? There have been some questions in the past
as to whether those lands in the TOWN area that were once State School Trust
lands are considered to be on or off the reservation.
We would
appreciate receiving an answer to these questions as soon as possible.
Very Truly,
COUNTY
NAMES
RESPONSE
LETTER
DATE
NAME
RE: Advisory Opinion – Taxation of Tribe Members
Dear NAME,
We have received your request for an advisory opinion concerning
the imposition of several Utah taxes on TRIBE members. The first issue is whether a TRIBE member
must pay sales tax and the annual uniform fee in lieu of ad valorem property
tax on a motor vehicle leased from an out-of-state dealership. The second issue is whether a TRIBE member who resides on the reservation and is
a schoolteacher employed by the (SCHOOL DISTRICT) is subject to Utah income
tax. As part of this second issue, you
ask whether lands in the TOWN area that were once Utah State School Trust lands
are considered part of the reservation for taxation purposes.
A. Purchased Vehicle. The purchaser of a motor vehicle becomes its owner and generally, at registration, owes both sales tax on the sale transaction and the uniform fee in lieu of ad valorem property tax (“uniform fee”) on the property, or vehicle, itself. See Utah Code Ann. §§59-2-405.1; 59-12-103. However, when a Native American tribal member purchases a vehicle, she may be exempt from: 1) the sales or use tax, depending on the nature of the transaction, and 2) the uniform fee, depending on whether the person is an “enrolled” member of the tribe living on the reservation.
Sales and use Tax. For sales and use tax purposes, a Native American is exempt from taxation if: 1) the sale takes place on the reservation or the purchased item is delivered to the reservation by common carrier or the vendor; and 2) the Native American is an enrolled tribal member, as evidence by the member’s federal tribal card, living on the reservation of the tribe on which the sale takes place. To validate a tax-exempt sale over $100 that is made on the reservation, the vendor is required to record the member’s tribal card number. To validate a tax-exempt sale over $100 made off the reservation, the vendor must record the member’s tribal card number and either retain proof of the delivery of the goods to the tribal lands, such as a freight bill or bill of lading, or complete the Tax Bulletin 1b-87 Form (enclosed).
Uniform Fee. Under Section 59-2-405.1, each vehicle owner is required to pay the uniform fee whenever a vehicle is registered, except that Subsection 405.1(2)(b)(iii) provides an exemption from the uniform fee for personal property that is exempt from ad valorem property taxes under federal or Utah state law. Personal property, including vehicles, owned by Native American tribal members who live on the reservation are exempt from property taxes under federal law.[1] Accordingly, whether tribal members are exempt from the uniform fee depends upon their tribal status and where they live, not on the location of the sale. If an enrolled tribal member, as evidenced by the federal tribal card, lives on the reservation and purchases and registers a vehicle, he or she is exempt from the uniform fee when registering that vehicle regardless of where the sale took place.
For these reasons, separate analysis must be employed to determine whether a Native American tribal member is exempt from either the sales tax or the uniform fee usually associated with purchasing a vehicle. Based on the specific circumstances surrounding the sale and the purchaser, a tribal member may owe both the sales tax and the uniform fee, be exempt from both, or owe the sales tax and be exempt from the uniform fee.
B. Leased Vehicle. A person leasing a vehicle is not its owner, which results in different tax consequences when compared to purchasing a vehicle. The sales tax and uniform fee liabilities must still be analyzed separately.
Sales Tax. While sales tax is usually due when registering a purchased vehicle, there may be no sales tax due when a lessee registers a leased vehicle. Instead, sales tax is usually imposed on each individual lease payment and is collected as each payment is made. The lessee should provide, at registration, the Utah sales tax number of the lessor, who is the party responsible for collecting and submitting the appropriate sales tax when the lease payments are made.
To determine if sales tax is due on a Native American tribe member’s lease payments, the same sales tax exemption criteria discussed above concerning a purchased vehicle must be satisfied. First, the vehicle must be leased on the reservation or delivered to the reservation by common carrier. Second, the tribal member must be an enrolled member as evidenced by the federal tribal card who lives on the reservation. Should these exemption requirements be satisfied, the lessor must retain the documentation previously described to validate a tax-exempt lease payment in excess of $100.
However, there may be instances where the out-of-state lessor does not have a Utah sales tax number. In this situation, sales tax is collected at registration on the remaining value of the lease unless the lessee provides evidence that she is exempt from sales tax. Accordingly, should the out-of-state lessor not have a Utah sales tax number, sales tax will be collected from a Native American at the time of registration unless she presents her federal tribal card and provides evidence that the vehicle was either leased on the reservation or delivered to the reservation.
Uniform Fee. Because the lessor is the owner of a leased vehicle, he is liable for the uniform fee imposed on the vehicle at registration. The uniform fee is due even if the vehicle is leased to a person, such as an enrolled tribal member living on the reservation, who would herself be exempt from the uniform fee had she purchased the vehicle. In many instances, however, the lessee may agree to pay the lessor’s uniform fee liability, even though the lessee is an otherwise exempt entity. Even in this situation, the lessor’s liability is not absolved by an otherwise exempt lessee paying the liability. Accordingly, unless the lessor itself is exempt from taxation, the uniform fee on a leased vehicle must be paid at registration, whether or not the lessee would be exempt from the uniform fee had she purchased the vehicle.
In summary, for a leased vehicle owned by a non-exempt lessor, the uniform fee must be paid at the time of registration, even if the lessee of the vehicle is an enrolled member of the TRIBE living on the reservation. As for sales tax, the lessee need only submit the Utah sales tax number of the lessor to register the leased vehicle. Then, the lessor will need to collect and submit sales tax on the lease payments unless the tribe member satisfies the exemption requirements discussed above and the lessor maintains the required exemption evidence. However, if the lessor does not have a Utah sales tax number, sales tax is collected at the time of registration unless the lessee establishes that she is exempt from taxation.
II.
Income Tax Liability of Teachers in the San Juan School
District
Your next issue addresses whether NAME residents who are teachers employed by the School District are subject to Utah’s income tax. You state that these teachers reside on the reservation and live in housing owned by the School District, evidently in the TOWN area.
We understand that the Auditing Division has recently
audited a number of teachers who live and teach in the TOWN area and has already issued Utah income tax
audit deficiencies to some of the teachers.
Utah Admin. Rule 861-1a-34(A)(2) provides that the Commission “shall not
knowingly issue an advisory opinion regarding facts raised pending before the
commission in an audit assessment, refund request, or other agency
action[.]” As the issue you raise is
already pending before the Commission through these audit assessments, it must
be addressed in that context through the appeals process, not through an
advisory opinion. Accordingly, we may
not answer your specific question at this time. Nevertheless, should a member of your constituency have other
specific questions relating to Utah’s taxation of income, please have that
person contact STATE EMPLOYEE, Individual Income Tax Manager, at (PHONE).
Should you have any other questions, please contact us.
For
the Commission,
Marc
B. Johnson
Commissioner
cc: NAME ADDRESS
NAME ADDRESS
MBJ/KC
01-018