Key Takeaways

As sovereign governments, tribes set their own sales taxes.
Individuals, in contrast, must generally pay federal income and employment taxes, although statutory and treaty exceptions apply.
Revenue from lands held in trust is not taxed by the U.S. government.

Some forms of taxation can work differently for Native American people because of their unique status within the United States. Federally recognized tribes are sovereign governments and generally are not subject to federal income tax, although federal employment and excise taxes may apply. Individuals are expected to submit the same income taxes as others living in the U.S., but there are exceptions to this general rule.

Land held in trust by the U.S. government for the benefit of Native Americans is exempt from state and local taxes, although tribes may assess their own taxes. Individual beneficiaries generally do not pay state or local property taxes on this land because the United States holds legal title.

Individuals and Tribes

Native Americans are expected to pay taxes to the federal government.

The Indian Citizenship Act of 1924 granted U.S. citizenship to noncitizen Native Americans born within U.S. territorial limits, although some Native Americans were already citizens. Native Americans generally are expected to pay federal income tax.

But there’s an exception: Some tribal members may qualify for a limited federal tax exemption on income derived directly from individually allotted land held in trust, where the U.S. Department of the Interior holds title on behalf of tribes or individuals. The U.S. holds around 55 million surface acres and 59 million acres of subsurface mineral estate in trust. Money generated by this land is intended to benefit Native Americans, but only qualifying income is tax-exempt. If a tribe operates a casino on trust land, the land is exempt from state and local taxes, although tribal taxes or assessments may apply. Casino income generally is exempt from federal income tax at the tribal level, but other taxes may apply.

Important

In contrast to individual tribal members, federally recognized tribes are sovereign. They generally are not subject to federal income tax, but they may owe federal employment and excise taxes. States generally cannot directly tax tribes’ on-reservation activities, although nondiscriminatory state taxes may apply to off-reservation activities.

Tribal taxing authority derives from tribes’ inherent sovereignty, although agreements with state and local governments can affect particular tax collections. Because their lands are held in trust, tribes do not levy property taxes. This leaves them without the usual sources of tax revenue for a government. As a result, many tribes have turned to sales and excise taxes.

In practice, tax treatment varies by tribe and jurisdiction. Qualifying tribal citizens may be exempt from state or local sales taxes on certain purchases made in Indian country. For transactions outside Indian country, state and local sales taxes generally apply where imposed, subject to jurisdiction-specific exceptions.

Due to the high levels of poverty and unemployment on tribal lands, advocates argue that these sources of tax revenue are inadequate to fund basic tribal government services. In practice, different tribes have different policies, meaning that some Indigenous people are released from obligations like sales taxes for purchases that occur on reservations, although for transactions outside of reservations, they would still pay local and state sales taxes.

Federal Income Taxes

For the most part, income taxes for Native Americans are the same as for other U.S. citizens.

The major exceptions include federal income-tax exemptions expressly created by a treaty or statute and qualifying income derived directly from individually allotted, restricted trust land. The United States holds land in trust for tribes, and companies can lease rights to it. Qualifying income from these leases is often exempt from federal income tax, depending on the recipient and governing authority. However, interest income, capital-gains income, and some royalties associated with trust assets are subject to federal and state taxes.

State Taxes

Federally recognized tribes generally are not subject to federal income tax. States also generally cannot tax reservation lands or on-reservation tribal income without congressional consent, but they may tax tribes’ off-reservation activities unless federal law provides an exemption.

But just like the federal government, a state can individually tax Native Americans who live within the state’s territory, rather than on a reservation.

Sales Taxes

Tribes themselves are exempt from sales taxes for purchases on reservation land.

However, states can collect sales tax on qualifying transactions with nontribal members even when the purchase occurs on tribal land. Tribal retailers or businesses may be required to collect and remit that tax. However, states can collect sales tax from transactions with nontribal members even when the point of purchase occurs on tribal land. But the tribal government doesn’t have responsibility for collecting the tax.

Some have argued that these taxes represent “the latest variation on centuries of wealth extraction” because the collection of these taxes by states discourages tribal governments from levying their own tax for fear of scaring away economic activity. Instead, many tribes have struck revenue-sharing agreements with state governments. A 2022 investigation by The Center for Public Integrity found that documented cases and reports put the amount diverted from tribal governments at at least hundreds of millions of dollars annually, although it identified no national total.

Property Taxes

Property tax liability follows distinct rules based on land status and ownership.

Native American lands held in trust are exempt from state and local property taxes, although tribes may impose their own taxes. This protection can also apply to other federally restricted land, but sovereignty or reservation location alone does not determine immunity. Native Americans generally pay property taxes on ordinary, unprotected fee-simple land, while the treatment of other nontrust land depends on ownership, jurisdiction, alienability, and federal law.

Tribal Casinos

Tribal casinos are a significant revenue stream for a number of tribes.

Tribes and qualifying wholly owned tribal entities generally do not pay federal income tax on casino income, but casinos may owe employment, excise, or applicable wagering taxes. Under some gaming compacts, tribal casinos pay “gaming exclusivity fees” for the exclusive right to operate, calculated from measures such as adjusted gross revenue or net win rather than accounting profit. These can be significant sums.

For example, Oklahoma collected over $210 million in fees for tribal gaming exclusivity rights for fiscal year 2024. Those fees came from $3.47 billion in revenue, according to an estimate from the state of Oklahoma.

Do Native Americans Pay Property Taxes on a Reservation?

Native Americans generally are exempt from state and local property taxes on land held in federal trust, including trust land on reservations. Fee land within a reservation generally remains taxable. Most tribal land is held in tax exempt federal trust.

Do Native Americans Pay Taxes on Cars?

A vehicle sale in Indian Country is not automatically tax-exempt. Eligibility for a sales or use tax exemption depends on jurisdiction-specific rules, which may consider the purchaser’s residency, where delivery and ownership transfer occur, and the vehicle’s subsequent use. Fuel taxes may also apply on reservation land, but treatment varies by state, tribe, treaty, type of tax, and applicable agreements.

Do Native Americans File Tax Returns?

Native Americans must file federal tax returns when they meet the ordinary filing requirements, which depend on factors such as gross income, filing status, age, dependent status, and certain special circumstances. The Internal Revenue Service (IRS) notes that “As a general rule, Native Americans are subject to federal income tax just like every other American.”

Could Native American Tax Statuses Change in 2026?

President Donald Trump’s administration could have a number of impacts on Native Americans. Tax issues include the status of tribally chartered corporations and clarification of the Tribal General Welfare Exclusion Act of 2014.

The Bottom Line

In general, tribal members are expected to pay federal income and employment taxes, subject to specific exemptions. For example, qualifying sales to tribal members in Indian country may be exempt from state sales tax, and qualifying income derived directly from individually allotted, restricted trust land may be exempt from federal income tax.

Tribal governments, on the other hand, generally are not subject to federal income tax, but they can owe federal employment and excise taxes. States generally cannot directly tax tribes in Indian country, although nondiscriminatory state taxes may apply to off-reservation activities.

Home

Native Americans and Taxes: How It Works