Common misunderstandings about tax issues in Indian Country
Do Indian people pay taxes?
Individual American Indians and Alaskan Natives and their businesses pay federal income taxes just like every other American. The one exception is when an Indian person receives income directly from a treaty or trust resource such as fish or timber: that income is not federally taxed. States also cannot tax tribal members who live and derive their income on tribal land – just as one state would not seek to impose taxes on an individual who works in another state.
Do tribal governments pay federal taxes?
Like state governments, tribal governments are considered sovereign governments not subject to taxation by the federal government. This is a long-standing federal policy with Constitutional support that prevents interference with the ability to raise revenue for government functions. Like state and local governments, tribal governments use their revenues to provide essential services for their citizens. Unlike state governments, tribal governments are generally not in a position to levy property or income taxes because of the unique nature of land tenure in Indian Country, fragile economies, and jurisdictional restraints. Income from tribal businesses is the only non-federal revenue source for most tribes.
Do tribal governments pay state taxes?
States cannot directly tax a tribal government. The Supreme Court has held that state governments can collect excise taxes on sales to non-members that occur on tribal lands, so long as the incidence of the tax does not fall directly on the tribal government. States and tribes have developed a variety of methods for collecting these taxes where the states choose to do so, including intergovernmental agreements or pre-taxing at the wholesale level.
Source: "An Introduction to Indian Nations In The United States," National Congress of American Indians (NCAI)