REVENUE ADMINISTRATIVE BULLETIN 1989-28

Approved: April 12, 1989

CIGARETTE SALES TO TRIBAL MEMBERS OF AUTHORIZED INDIAN COMMUNITIES

RAB-89-28. The purpose of this Bulletin is to clarify the cigarette tax applicability to Indian communities. The State of Michigan has agreements with the various tribal communities concerning cigarette tax on cigarette sales made at tribal stores. The agreements contain a formula for establishing a tax exempt purchase ceiling. The tribal communities are allowed to purchase cigarettes from licensed wholesalers tax-free up to this purchase ceiling.

Purchase Ceiling Formula

The formula for the purchase ceiling is comprised of the following factors:

1. Number of tribal members,
2. Per capita consumption of cigarettes in Michigan (packs), and
3. The percentage of cigarettes purchased off the reservation by tribal members.

The computation (1 x 2 minus 3) equals the tax-exempt purchase ceiling. Tribal store purchases in excess of this ceiling are subject to cigarette tax, with deficiencies determined on an annual basis by performance of a Department of Treasury audit.

Filing Requirements

Licensed wholesalers will prepare Schedule 1, “Cigarettes Sold to Authorized Indian Communities for Distribution” and distribute copies as follows:

1. The original filed with the wholesaler’s cigarette tax return,
2. The first copy retained by the wholesaler for their records,
3. The second copy retained by the tribal council,
4. The third copy mailed by the tribal council to the Michigan Department of Treasury, Cigarette Tax Division.