December 29, 1989

Mr. Andrew Aberle
City Attorney
P.O. Box 236
Timber Lake, SD 57656

OFFICIAL OPINION NO. 89-39

Exemption of Indians by city sales tax ordinance

Dear Mr. Aberle:

You have requested an opinion on the following factual situation:

FACTS:

On November 24, 1986, the city of Timber Lake adopted an ordinance imposing a municipal sales and service tax of 1% on the gross receipts of all persons engaged in business within the jurisdiction of the city of Timber Lake. For clarification purposes, the city proposed to amend its ordinance by adding a provision exempting enrolled members of the Cheyenne River Sioux Tribe from payment of the tax. The Department of Revenue questions whether the amendment conforms to SDCL ch. 10-52 to permit them to collect the tax.

Concerning these facts, you have asked the following question:

QUESTION:

Can the city of Timber Lake tax enrolled members of the Cheyenne River Sioux Tribe for sales tax?

SDCL ch. 10-52 is known as the Uniform Municipal Non-Ad Valorem Tax Law. It permits municipalities to adopt any non-ad valorem tax, with certain exceptions, not germane to this opinion. If the tax is levied on the sale, use, storage and consumption of items taxed under chapters 10-45 (sales tax) and 10-46 (use tax), such tax must conform in all respects to the State tax on such items with the exception of the rate.

Notwithstanding provisions of federal law and judicial decisions on the subject, in 1974, the South Dakota Legislature by enacting SDCL 10-12A-3 relinquished any jurisdiction it might have had to levy and collect the sales and service tax, as well as the use tax, from Indians within Indian country. Indian country, under the State statutes, means those areas subject to federal and tribal jurisdiction as defined in 18 U.S.C. 1151(a) and (c). Specifically, those sections encompass all land within the limits of any Indian reservation under the jurisdiction of the United States government, notwithstanding the issuance of any patent, and, including rights-of-way running through the reservation and all Indian allotments, the Indian titles to which have not been extinguished, including rights-of-way running through the same.

The Legislature also authorized the State Department of Revenue to enter into tax collection agreements with Indian tribes where the tribe, by appropriate ordinance, enacts a tribal tax and a fixed percentage of the total annual State and tribal tax proceeds from the area of Indian country are remitted to the tribe in lieu of the exact amount of the revenue collected as a result of the imposition of tribal taxes. See SDCL 10-12A-4, 4.1, 5, and 6.

The State sales tax is imposed upon the privilege of engaging in business as a retailer while the use tax is imposed on the use, storage or consumption of tangible property. Thus South Dakota's sales tax is what is commonly known as a "retail occupational sales tax" as opposed to a consumer sales tax. The use tax is imposed on either the retailer or consumer, using, storing or consuming property on which a tax has not been theretofore paid.

By its ordinance, the city of Timber Lake exempts the gross receipts from sales to enrolled members of the Cheyenne River Sioux Tribe from sales tax. Thus it in effect accomplishes the same thing the Legislature did by enacting SDCL 10-12A-3, that is, relinquishment of a claim of jurisdiction over Indians for both sales and use taxes.

The answer to your question is that Timber Lake may not tax the gross receipts of Indian retailers, nor may it tax the gross receipts of non-Indian retailers from sales to Indians.

Respectfully submitted,

ROGER A. TELLINGHUISEN
ATTORNEY GENERAL

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