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Introduction to the Tax Agreement between the Sault Tribe and State of Michigan
On December 20, 2002, the Tribe and the State of Michigan signed a tax agreement, which represents a great achievement for our Tribe and its members. The agreement offers significant tax relief to many tribal members living in our historic treaty area. It establishes tax benefits well beyond those previously enjoyed and is broader in scope than any similar agreement in other states.
It is important for tribal members to develop a clear understanding of the tax agreement. The Membership Guide to Tax Benefits & Obligations will ensure tribal members are getting full tax savings under the agreement. In addition, this guide will help to ensure that tribal members fully comply with their responsibilities under the agreement and understand the rights of the State. Compliance is important for the agreement to remain in effect into the future.
This document is designed to explain the agreement fully and accurately. It describes the tax exemptions available to tribal members and certain tribal entities under the agreement. It also explains the rules that must be followed and the possible penalties if the rules are violated.
Tax Agreement Areas
This groundbreaking agreement contains benefits for tribal members well beyond those previously enjoyed, and is broader in scope than any similar agreement in other states. For historical reasons our Tribe has limited trust land consisting of merely 1,776 acres located within our seven county historic treaty area in the Upper Peninsula of Michigan. Only 1,000 or so tribal members live on our trust land. In the past, only these tribal members benefited from limited exemptions from certain state taxes. For example, tribal members who live on our trust land have not paid the state income tax for wages earned on our trust land.
Our main goal during the tax negotiations was to extend exemptions from certain state taxes beyond our limited trust land to benefit more tribal members. The state agreed to this concept. After nearly three years of intense negotiations, the Sault Tribe negotiated a significant broadening of tax exemptions which concentrated on our treaty areas with the highest population of tribal members. We are no longer tied simply to trust land, but to much larger "Agreement Areas" consisting of nearly 10 survey townships and over 215,000 acres, spread throughout our historic treaty area and Eastern Upper Peninsula.
Our Tribe has the largest total Agreement Area of any Michigan Indian tribe, and we were able to include the largest number of tribal members within our Agreement Areas. In addition, of all the Michigan Indian tribes, we were successful in extending our Agreement Areas to include the largest percentage of tribal members who do not live on our trust land.
Though we tried to include as many tribal members as possible, the state confined our agreement to treaty land in the Upper Peninsula and used the following criteria to determine the areas to be included within our Agreement Area: (1) whether our Tribe owned land in the are; (2) whether a significant population of tribal members lived in the area; (3) whether our Tribe has housing in the area. Applying these factors, we were able to include within the Agreement Areas large concentrations of tribal members living within our historic treaty area.
Tribal members who reside within our Agreement Areas will benefit from state tax savings, including certain exemptions from the state income tax, sales tax, use tax, single business tax, motor fuels tax and tobacco products tax. In addition, tribal members who do not live within our Agreement Areas will continue to benefit from tax exemptions from the motor fuels tax and tobacco products tax on purchases from our Midjim Stores and Kewadin Casinos.
Please review the Agreement Area maps to determine whether your principal place of residence is located within the tax agreement areas.
Tax Agreement Highlights
Those members living in the agreement area receive state tax discounts on many purchases. The agreement applies to the Michigan sales tax, which is six percent of a retail price; use tax, which is six percent of a purchase price; income tax, which is four percent of adjusted gross income; motor fuel tax, 19 cents per gallon of gas and 15 cents per gallon of diesel; cigarette tax of $1.25 per pack; and the single business tax, which is 1.9 percent of the applicable tax base. Those members who do not live in the agreement area, are not eligible to receive sales tax discounts nor the income tax refund, however, they are obligated to receive a gas & diesel tax and cigarette tax discounts. Members must submit forms along with other appropriate documents and information to file for tax exemptions for certain large purchases such as personal vehicles, homes, home improvement materials and so on.
The agreement does not create an exemption from property taxes. Members are responsible for complying with the agreement and encouraged to contact our tribe’s authorities with any questions about any of its provisions. Please review the Membership Guide to Tax Benefits & Obligations for complete details. Gas, Diesel, and Cigarette Tax Discounts Gas, diesel, and cigarette tax discounts are available for tribal members at certain retail stores located in the agreement area. Fuel and cigarette tax discounts are realized at the time of purchase. (See list below) Tribal-Owned Stores Offering Gas and Cigarette Tax Discounts MidJim Convenience Store – Sault Ste. Marie
2205 Shunk
Sault Ste. Marie, MI MidJim Convenience Store II – St. Ignace
3045 Mackinac Trail
St. Ignace, MI Non-Tribal Gas Stations Offering Gas Tax Discounts Only Newberry BP Express Mart
13975 M-28
Newberry, MI Freedom Value Center
501 W. Washington Street
Marquette, MI Manistique Oil Company
216 Deer Street
Manistique, MI Carnes BP
2300 Ludington Street
Escanaba, MI Kinross BP Local Express
4440 Tone Road
Kincheloe, MI Munising BP
E 7921 State Highway M-28
Wetmore, MI Cedar Pantry
159 W. M-134
Cedarville, MI Tribal-Owned Stores Offering Cigarette Tax Discounts All Kewadin Casino Gift Shops
Eligibility Requirements
You must be an enrolled Sault Tribe member and live in the Tax Agreement area.
If you are age 16 or over and want to receive the agreement benefits, you must be registered. You are required to sign the Sault Tribe’s tax agreement registration card to verify your residency in an agreement area and provide two proofs of address.
Before you can submit a request for tax exemption on large purchases, you must first sign and return a registration card to the Sault Tribe tax office to verify your residency in a tax agreement area. This is mandatory for all tribal members. Registration cards were mailed to all members in 2003.
For all other tax-specific eligibility requirements please review the Membership Guide to Tax Benefits & Obligations for complete details.
Change of Address
Please note it is the tribal member's responsibility to notify the tax office if you move out of the agreement area or have a change of address, even if the new address is still in the agreement area. If you move out of the tax agreement area and are still receiving tax agreement exemptions it is illegal and considered tax fraud.
Required Tax Forms
Tax Exemption for Large Purchases: Effective September 1, 2007, all enrolled Sault Tribe members residing in the tax agreement area, and thus eligible to receive tax refunds under the state-tribe tax agreement, must now request a “tax exemption certificate” prior to initiating a significant transaction or purchase that would entitle a 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 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 for 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/vendor 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 Sault Tribe waives a tribal member’s obligation to provide payment of state sales taxes during the time of the purchase. The tribal member must be eligible under the current tax agreement to lawfully receive a letter of authorization or tax exemption certificate.
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.
Tax Office Coordinator Candace Blocher stated, “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. 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 tangible personal property to be affixed to real estate by a contractor (i.e. construction materials) please visit click here or visit: Michigan.Gov Web site
Annual Sales Tax and Use Tax Refund: A 4013 Tax form is required and must be filled out and submitted with your MI-1040 (Michigan Income Tax Form). Even though the 4013 is a completely separate sales tax refund return, it must be filed with the resident tribal members MI-1040. (The 4013 form is mailed directly to the resident tribal member by the Sault Tribe during the tax season. Most tax prepares also have access to this form for e-filing. If you do not get a tax form, please call the Sault Tribe tax office.)
For more information
If you are unsure whether or not you have registered, please call the tax office and Candice Blocher at (906) 632-6281 or toll free at (866) 632-6281, to verify your card is on file. Once registered, members are then required to fill out a state form pertaining to tax agreements and submit it to the state.
The State of Michigan also provides information regarding the Tax Agreement and has a list of Frequently Asked Questions. Please visit the link below for more information: Michigan.Gov Web site
NOTICE: The summary outlined above is for introductory purposes only and is not all inclusive. The Sault Tribe strongly encourages tribal members to view the Membership Guide to Tax Benefits & Obligations in its entirety for tax preparation and planning.
 Membership Guide to Tax Benefits & Obligations (1.7 MB) Tax Agreement Area Maps (746.23 kB) Instructions for Form 3998 (99.56 kB) Extemption Forms Checklist (56.15 kB)
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