September 29, 2020
Re: Ruling Request: Retail Sales and Use Tax
This is in response to your letter submitted on behalf of ***** (the “Tribe”) requesting a ruling on the application of the Virginia retail sales and use tax to purchases made by the Tribe.
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 the Virginia retail sales and use tax on purchases made for use in its administrative operations.
In Public Document (P.D.) 20-113 (6/30/2020), the Department found that there was no legal basis to grant sales and use tax exemptions for an Indian Tribe’s purchases occurring off a reservation for use on the reservation. The Department reasoned that 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”. 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 Code of Virginia does not provide for any such exemption, nor do the regulations appear to 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 exemptions are restricted to activities occurring on the reservation.
The Department has the power to interpret and enforce the laws of the Commonwealth governing taxes under 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 consistent with P.D. 20-113, I find that there is no basis for the Department to grant an exemption from the retail sales and use tax for purchases made off the reservation by the Tribe.
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 *****.
Craig M. Burns