American Indian Communities in Minnesota - Taxation

American Indian Communities in Minnesota
Taxation



Are American Indians required to pay federal income and excise taxes?

In general, American Indians pay federal income tax on earnings from personal services or investments whether earned on or off the reservation with the exception that income directly derived from allotted trust land such as agricultural production, rents or mineral extraction is not taxable. American Indians pay federal excise taxes.

Are American Indians required to pay state income, sales and excise taxes?

An American Indian tribal member is not required to pay state income taxes on income earned on the reservation of the tribe in which the Indian is enrolled. Similarly, sales transactions occurring on the reservation between tribal members or between tribal members and the tribal government are not subject to state sales or excise taxes. Certain excise taxes such as the tax on liquor and cigarettes are collected by the state from the wholesale distributor. In these instances, the state refunds the amount of tax collected to the Indian tribal government on a per capita basis. Income earned by an American Indian off the reservation is subject to state income tax. Sales transactions to American Indians made off the reservation are subject to the applicable sales and excise taxes.

Are American Indians required to pay local property taxes?

Property taxes cannot be imposed on land held in federal trust status for an Indian tribe or an individual Indian. Land for which a fee patent has been issued to a tribe or an individual Indian is subject to local property tax.

In June 1998, the U.S. Supreme Court ruled, in a case involving Cass County, Minnesota, that local governments were authorized to levy property taxes on reservation land that had been made alienable by Congress even after that land was repurchased by the tribe.

Can American Indian tribal governments impose taxes?

Tribal governments have the power to impose taxes on activities occurring within their jurisdiction on the reservation including the power to tax income, sales transactions, property ownership and mineral extraction activity.

Can the state tax the income of non-Indians earned on the reservation, and apply sales and excise taxes to sales made to non-Indians on the reservation?

The state can tax the income of non-Indians earned on the reservation. Sales transactions made to non-Indians on the reservation are taxable under the state sales and excise taxes. Because Indian tribes are immune from lawsuits and most of the other collection mechanisms which might be used by the state to enforce tax collections on the reservation, the state has entered into agreements which share the collection of sales and excise taxes collected on reservation sales to non-Indians with the American Indian tribal governments.

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