Tribal Gas Tax Exemption Under Fire

Erik Smith/ Washington State Wire

A group representing nontribal gas station owners says the tribes get an unfair tax break that lets them beat the competition on price. Under compacts with 16 tribes, Washington state gives them a 75 percent discount from state gas taxes. There are 51 tribal gas stations in Washington, where fuel prices are consistently 7 to 12 cents a gallon less than at other stations due in part to the tax rebate. If tribes were to pay the full amount, the state would reap an additional $30 million a year to fix highways.

In 2007, the Legislature passed a law allowing Gregoire to make fuel-tax compacts with the tribes. When they buy fuel, the tribes pay the full wholesale price, including 38 cents a gallon tax upfront. The state sends them a rebate check for 75 percent of the tax.

The Automotive United Trades Organization (AUTO), which represents nontribal service stations, is suing the state. AUTO argues that the existing compacts violate the state constitution, because the 18th Amendment requires gas taxes be used only for highway purposes. The state counters that, based on court rulings, it would collect no fuel tax at all from tribes if it weren't for the compacts. Tribes are required to use the tax rebates for transportation, and often do, but details of how the money is spent are exempt from public disclosure.

"No one but the tribes know, and they will not let anyone look at their books," said Tim Hamilton, a former Grays Harbor-area station owner and executive director of AUTO. The Puyallup Tribe voluntarily posts a description of its road projects and some cost information on its website. Audit reports by the tribes are typically provided to the Department of Licensing, but those cannot be reviewed by the public or lawmakers.

Tribal Gas Tax Refunds Challenged

The Automotive United Trades Organization (AUTO) in Washington state has filed a lawsuit seeking to end state sales tax reimbursements to Tribal gas stations.  The refunds are based on agreements Governor Christine Gregoire signed with the state’s Tribes in 2007. The agreements refund 75 percent of state taxes collected on fuel sold at Tribal stations -- approximately 28 cents per gallon. The agreements provide that the reimbursed monies are to be used by the Tribes for police and transportation services, but allow Tribes to decide how the money is spent on those services. The state Attorney General’s office has said: "By providing the Tribes with 75 percent of the tax revenues collected on the fuel sales from the tribally owned and operated stations but limiting their use to 'highway-related purposes,' the state provides funding for road and highway projects that might not otherwise be pursued ... "

AUTO Executive Director Tim Hamilton says non-Tribal stations are being undercut by the refund payments to Tribes, which amount to approximately $35 million. "It just guts us," he said. The AUTO lawsuit seeks to have the state licensing department halt any more payments to the Tribes, but does not seek monetary damages beyond a potential request for attorney's fees. "We're not going after the sovereignty of the Tribe, and we're not going after the state's right," Hamilton said, but the group is challenging the state’s ability to redistribute taxes to Tribal stations.

Mining Leases On Tribal Lands Produce Cash And Questions


(Crow Nation gas well - Reuters)

After years of legal wrangling, the Anadarko Agency office of the Bureau of Indian Affairs recently held the largest-ever auction of oil and gas mining leases on Tribal land. The auction offered mining lease rights on over 1500 plots located on Kiowa, Comanche, Apache, Fort Sill Apache, Caddo, Delaware, and Wichita Tribal and allotted lands. The sale netted just over $6 million in purchases, with the majority of the lease rights going to the Sodak, Marathon and Chesapeake oil companies.

Revenues like this are certainly much-needed in Native communities, but the money does not go directly into Native hands. The funds will be managed by the BIA in trust for the Tribes whose lands underlie the mining leases. As the claims in the Cobell litigation highlight, the fiduciary relationship between the BIA and Tribal members has been marred by allegations of mismanagement and breach of trust.  It will be incumbent upon Tribal governments and their members to monitor the revenue flow from these leases to ensure the funds are properly used for Tribal needs. A further question arises regarding future revenue streams from the mineral resources the leases are designed to produce. Whether Tribes will receive royalty payments from wells that begin pumping oil and natural gas on their lands – and how much money can be expected – is undetermined at this time.

Indian trust beneficiaries who have questions about this sale may contact their fiduciary trust officer using the interactive map on the OST Web site , or call OST’s Trust Beneficiary Call Center at 1-888-678-6836