June 30, 2020
Re: Ruling Request: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of the ***** (the “Tribe”), in which you request a ruling on the application of the Virginia retail sales and use tax to purchases made by the Tribe. I apologize for the delay in responding to your correspondence.
FACTS
The Tribe is a federally recognized Indian tribe with a reservation located in Virginia. The Tribe requests a ruling on whether the Tribe, as an entity separate from its members, is exempt from Virginia retail sales and use tax, and further, that those selling to the Tribe are not required to collect and remit any amount of such tax to the Department.
DETERMINATION
The Tribe asserts that the 1677 Treaty of Middle Plantation (the “Treaty”) between Virginia and the Tribe is still valid and binding between the Tribe and the Commonwealth. The Tribe contends that the Treaty confirmed the Tribe’s title to their reservation lands without “fee, gratuity or reward”, and, in the years that followed, opinions by Virginia’s Attorney General’s opined this equated to an exemption from taxation. According to the Tribe, the Treaty exacts an annual tax on the Indians and that, as wards of the Commonwealth, Virginia can impose no other tax on Indians in Virginia without legislation from the General Assembly. The Tribe goes on to state that the opinions of the Attorney General demonstrate an intent to confer this exemption from taxation not only on individual tribal members, but also on the Tribe as an entity separate from its members. Thus, the Tribe reasons that purchases made by the Tribe for use on the reservation are exempt from the retail sales and use tax, regardless of where the purchase occurs.
In Alliance to Save the Mattaponi v Commonwealth, 270 Va. 423, 621 S.E.2d 78 (2005), the Supreme Court of Virginia affirmed the holding of the lower courts finding that the Treaty was governed by Virginia law. The Supreme Court went on to state that the lower courts implicitly held the Treaty to be valid and enforceable as Virginia law. Because the parties had not assigned cross-error to that holding, the Supreme Court determined that it was not required to decide the issue of whether the Treaty is valid and enforceable Virginia law. See Alliance to Save the Mattaponi v Commonwealth, 270 Va. 423, 621 S.E.2d 78 (2005). Therefore, while the Treaty was recognized as the law of that case, it was not found to be enforceable as Virginia law.
Upon review of the terms of the Treaty, it appears that the basis for the claimed tax exemption rests in the language of Article II, which states:
"That thereupon the said Indian Kings and Queens and their Subjects, shall hold their Lands, and have the same Confirmed to them and their Posterity, by Patent under the Seal of His Majesties Colony, without any Fee, Gratuity or Reward for the same, in such sort, and in as free and firm manner as others His Majesties Subjects have and enjoy their Lands and Possessions, paying yearly for and in lieu of a Quit Rent, or Acknowledgement for the same, onely Three Indian Arrows."
The treaty specifically exempts the Tribe from yearly payment of “Quick Rent”. In the Department’s opinion, the Treaty provides for a waiver of an annual tax for the occupation of the Tribe on their reservation. The Department has a longstanding and established policy that the retail sales and use tax is a transactional tax. See Public Document (P.D.) 18-65 (5/2/2018). An annual tax, such as income tax or property tax, is separate and distinct from a transactional tax, such as the retail sales and use tax. Therefore, in the Department’s opinion, the terms of the Treaty do not apply to the retail sales and use tax.
Additionally, a number of Opinions of the Virginia Attorney General have interpreted this Article to provide exemptions to state and local taxation, under certain circumstances. In 1917 Op. Va. Att’y Gen. 160, the Attorney General opined that members of the Tribe were exempt from state and local taxes, so long as they follow up their pursuits upon the reservation. In 1956-1957 Op. Va. Att’y Gen. 183-185, the Attorney General found that tribal members who maintained homes on the reservation were not subject to the license tax required by localities on motor vehicles, so long as the motor vehicles were garaged on the reservation. In, 1969-1970 Op. Va. Att’y Gen. 277-278, personal property owned by a deceased member of the tribe, which was located on the reservation, was not subject to probate tax, whereas property located off the reservation was. Finally, in 1970-1971 Op. Va. Att’y Gen. 277, sales made by members of the tribe to other members of the tribe, which occurred on the reservation, were not subject to retail sales and use taxes. While there has been no opinion expressed by the Virginia Attorney General as to whether the Tribe, as an entity separate from its members, is exempt from the retail sales and use tax, it is, however, clear that the exemption is limited to situations occurring on the reservation.
Exemptions from the Virginia retail sales and use tax are a matter of statute. When interpreting sales and use tax exemptions, the Department applies the rule of strict construction as adopted by the courts and as required by the Virginia Constitution. Upon review of the Code of Virginia, neither the Tribe, nor its individual members, are provided an exemption from the retail sales and use tax. However, Title 23 of the Virginia Administrative Code (VAC) 10-210-750 provides that the retail sales and use tax “does not apply to sales made by Indians to Indians on their reservation,” thereby incorporating the findings of the Attorney General in 1970-1971 Op. Va. Att’y Gen. 277. It goes on to explain, “sales by outsiders to Indians, sales by Indians to outsiders, and all sales made off the reservation are subject to the sales tax,” further reinforcing the Department’s opinion that such exemptions are restricted to activities occurring on the reservation.
The Treaty has not been found to be valid and enforceable as the law of the Commonwealth, and it does not clearly address whether the Tribe was to be exempt from transactional taxes. The Code of Virginia does not provide for any such exemption, nor does the regulation extend the exemption to transactions occurring off the reservation. While it is not clear whether the retail sales and use exemption in Title 23 VAC 10-210-750 extends to the Tribe, as an entity separate from its members, it is clear that such exemption would be restricted to activities occurring on the reservation.
The Tax Commissioner has the power to interpret and enforce the laws of the Commonwealth governing taxes in accordance with Virginia Code § 58.1-203. That power, however, does not extend to creating exemptions that do not exist under the laws of the Commonwealth. After careful review and consideration, I find that there is no basis to grant an exemption from the Virginia retail sales and use tax for purchases made off the reservation by the Tribe for use on the reservation.
The Code of Virginia section, regulation, and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s web site. If you have any questions regarding this ruling, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/2229.A