New State Tax Exemption Policy in Effect

Members of the Sault Ste. Marie Tribe of Chippewa Indians eligible for sales tax exemptions must now request a tax exemption certificate prior to making a purchase, rather than paying sales tax and recovering it after the sale, the tribe announced.

Effective September 1, all enrolled members residing in the tax agreement area, and thus eligible to receive tax refunds under the state-tribe tax agreement, must now request a certificate prior to initiating a significant transaction or purchase that would entitle the tribal member to a Michigan sales tax refund or exemption.

The tax refund policy has changed to an exemption, which has resulted in the replacement of tax form 3996 with tax exemption form 3998.

The refund system previously required tribal members to pay taxes up front, submit a tax form, and then wait several months to receive a refund on the sales tax. Under the new exemption policy, tribal members will no longer be required to pay Michigan sales taxes on tax exempt items at the time of purchase.

This new policy specifically applies to the sales and use tax for purchases of a vehicle, modular/mobile homes, building materials/home improvements, treaty commercial fishing expenses, and taxes paid on tangible personal property acquired within tribal and trust lands for commercial use. All other provisions of the current tax agreement will remain in effect.

Tribal members are still required to submit the 4013 tax form when filing their income taxes if they wish to obtain the annual sales and use tax refund.

The new exemption policy now in effect requires tribal members to obtain and complete a Tribal Certificate of Exemption for Sales and Use Tax (Form 3998) prior to a tax exempt purchase. Following the submission of a completed 3998 form, and as long as the tribal member is qualified to receive a tax exemption, a signed letter of authorization or tax exemption certificate will be issued. The original certificate must then be provided to the seller prior to the purchase, or at the time of purchase. A copy of the certificate must also be retained by the purchaser.

A signed letter of authorization or tax exemption certificate issued by the Tribe waives a tribal member's obligation to provide payment of state sales taxes during the time of the purchase.

When applying, the tribal member must provide the Sault Tribe Tax Office with the seller's contact information, the purchaser's contact information, and specific details of the item to be purchased, all of which is required on the 3998 tax form.

The only way to obtain a 3998 tax form is to contact Candace Blocher from the Sault Tribe Tax Office at (906) 632-6281 or (906) 635-6050.

Tax refunds under the old system are still being processed during this transition period; however, the processing of refunds via the 3996 form will most likely be discontinued and may occur without notice. To avoid any tax refund/ exemption complications or delays, tribal members are instructed to begin using the new tax exemption process immediately by submitting a 3998 form prior to initiating a purchase that qualifies for a tax exemption.

"As long as tribal members call the tribal tax office, use the new form, and process their tax paperwork prior to making a major purchase, eligible tribal members shouldn't encounter any problems," said Tax Office Coordinator Candace Blocher. "According to the new procedure, tribal members must complete the tax paperwork and obtain a tax exemption certificate before paying for the tax exempt item."

For more information regarding the 3998 tax form, or to obtain specific information on tax exemptions related to construction materials, visit the Tribe's Web site at www.saulttribe.com, or visit www.michigan.gov/treasury.