Recent Sales and Use Tax Developments
Native Americans. As of the date of this publication, all motor
vehicle sales to American Indian Tribe members are subject to sales tax, and
sales to the Tribal Government may be taxable or nontaxable depending on how
the motor vehicle will be used. If the vehicle is used for a Tribal
Governmental function, such as fire or police service, the vehicle is exempt
from sales tax.
UPDATE
On April 1, 2003, the law and the procedures for sales tax
on sales of motor vehicles to Native Americans were revised. Since that
time, four Native American tribes have implemented agreements with the
state, which allow tax-exempt motor vehicle sales to residential tribal
members. Recently, two other tribes implemented agreements with the state,
which allow tax-exempt motor vehicle sales to residential tribal members.
The two tribes are:
- Little River Band of Ottawa Indians
- Pokegon Band of Potawatomi Indians
These two tribes, in addition to Bay Mills
Indian Community, Hannahville Indian Community, Sault Ste. Marie Tribe of
Chippewa Indians and Little Traverse Bay Bands of Odawa are the only tribes,
which have authorized tribal members to purchase tax-exempt motor vehicles
for tribal member use.
In order to complete a tax-exempt sale to residential tribal
members, the dealership must collect and retain copies of the following from
the tribal member:
- Form 3998 (Tribal Certificate of Exemption for Sales and Use Tax)
- A letter of authority from the State of Michigan, which authorizes the tribal member to use the Tribal Certificate of Exemption
If a residential tribal member can not provide the letter of authority, or if the tribe is not listed on Form 3998, the dealership must charge sales tax on the sale of the motor vehicle.