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DOCUMENTING EXEMPT TRANSACTIONS

This section provides information to sellers and purchasers regarding the correct type of documentation to support claimed exempt sales. This documentation should be provided by the purchaser and maintained in the seller’s records as proof of the exempt sale. For more information on records that are suitable for sales and use tax purposes, please see Regulation 1628, Transportation Charges, Regulation 1667, Exemption Certificates, and Regulation 1698, Records.

Transfer of title (ownership) in Indian country

How tax applies to a particular sale or purchase by an Indian depends on whether ownership of the item being sold or purchased transfers to the Indian purchaser in Indian country.

Sale by retailer located in Indian country

Ownership of an item being sold transfers in Indian country when an “on-reservation” retailer does both of the following:

  • Negotiates the sale in Indian country; and

  • Hands over or delivers the item in Indian country to an Indian or to an agent of the Indian.

Sale by retailer not located in Indian country

Retailers located outside Indian country may sell to Indian buyers who request delivery in Indian country. For a sale to qualify as a transfer of title (ownership) in Indian country, both of the following conditions must apply:

  • The contract of sale or other sales agreement cannot transfer ownership of the item to the buyer before the

item is delivered in Indian country; and

  • The buyer or the buyer’s representative cannot take possession of the item before delivery in Indian country.

In addition, the retailer generally must deliver the product:

  • 1.

    Using the retailer’s vehicle; or

  • 2.

    By mail, common carrier (for example, UPS, FedEx), or contract carrier (a shipping, trucking, or transport company), when both of the following requirements are met:

    • The contract of sale or sales invoice includes a statement specifically requiring delivery in Indian country (for example, F.O.B. name of Indian reservation) and providing that title passes upon delivery in Indian country; and

    • The goods are in fact delivered in Indian country.

When delivery does not take place as described here, ownership of the item being sold or purchased generally transfers to the buyer outside Indian country because the retailer’s obligations with respect to physical delivery are usually completed outside Indian country.

Generally, when property is delivered by common or contract carrier, the transfer of title and the shift of risk of loss may occur at different locations unless the contract of sale contains a title clause indicating title transfers to the Indian purchaser in Indian country coupled with an F.O.B. destination statement. Inclusion of the F.O.B. destination statement usually dictates that the risk of loss shifts at the destination because risk of loss typically follows pos- session of the property and shifts upon delivery of the property, unless otherwise provided in the contract of sale. Under California commercial law, however, shifting the risk of loss is not equivalent to transferring title. Again, in the absence of specific title provisions and F.O.B. destination statements, title generally passes when the retailer’s obligations with respect to the physical delivery of goods are completed (that is, at the time and place of shipment).

Please note: This is a general description of transfer of ownership in Indian country. Other sections of this publica- tion describe the specific rules that apply to certain types of sales and leases.

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SALES TO AMERICAN INDIANS AND SALES IN INDIAN COUNTRY

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APRIL 2014

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