Work on an Indian reservation
In short
Contracting on a reservation for a tribe or an affiliated Indian is exempt, and the exemption reaches the contract rather than only the materials. Who the work is for decides it.
In full
A.R.S. § 42-5122 exempts from the taxes imposed by chapter 5 the gross proceeds of sales or gross income from six categories, four of which a contractor meets.
Two reach contracting directly. Paragraph (3) exempts contracting activities performed on an Indian reservation by the Indian tribe, a tribally owned business, a tribal entity or an affiliated Indian. Paragraph (4) exempts contracting activities performed **for** the tribe, a tribal entity or an affiliated Indian on the reservation by a nonaffiliated Indian or non-Indian contractor — which is the ordinary case for an outside contractor taking reservation work.
Two reach the surrounding transactions. Paragraph (2) exempts business activities performed on the reservation by a nonaffiliated Indian or non-Indian vendor for the tribe or an affiliated Indian. Paragraph (5) exempts retail sales of tangible personal property to them where the sale takes place on the reservation, and deems a sale to take place there where the property is ordered from and delivered on the reservation.
What distinguishes this from most contracting exemptions is reach. It exempts the contract itself, not merely the materials, so a Modification project for a tribe on the reservation produces no prime contracting tax on the contract amount.
The materials side is covered separately, and only for MRRA. A.R.S. § 42-5061(A)(58) deducts from the retail base, and § 42-5159(A)(55) exempts from use tax, tangible personal property incorporated or fabricated into a project described in § 42-5075(P) — an MRRA project — located within the exterior boundaries of a reservation where the project's owner, as § 42-5075 defines owner, is an Indian tribe or an affiliated Indian.
Three conditions carry the whole thing, and all three are about who and where rather than what the work is. The work is on the reservation. The party it is performed for is the tribe, a tribal entity or an affiliated Indian. And for the materials provisions, that party is the owner of the project.
Change any one and the exemption is not established. Work on reservation land for a non-Indian lessee is not within paragraph (4) on its face, because the party contracted for is not one the paragraph names.
Form 5000M lists contracting on a reservation among the grounds on which an unlicensed contractor may buy materials exempt.
| Provision | Reaches | Condition |
|---|---|---|
| § 42-5122(3) | Contracting by the tribe or an affiliated Indian | Performed on the reservation |
| § 42-5122(4) | Contracting by an outside contractor | Performed on the reservation, for the tribe or an affiliated Indian |
| § 42-5122(2) | A vendor's business activities | Performed on the reservation, for the tribe or an affiliated Indian |
| § 42-5122(5) | Retail sales of tangible personal property | Ordered from and delivered on the reservation |
| § 42-5061(A)(58) | Materials, retail side | Incorporated into an MRRA project on the reservation whose owner is the tribe or an affiliated Indian |
| § 42-5159(A)(55) | Materials, use tax side | Same condition as (A)(58) |
A.R.S. § 42-5122(1)–(6); A.R.S. § 42-5061(A)(58); A.R.S. § 42-5159(A)(55); A.R.S. § 42-5075(P); Arizona Form 5000M