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.

Washington State Seeks $11m In Gas Taxes From Yakama Nation

A new legal challenge has flared up from a controversial revenue-sharing agreement between Washington State and Tribes located therein – the state claims the Yakama Nation owes more than $11 million in taxes from gasoline sales revenue.

Pursuant to a consent decree in federal court, the state and the Nation split gas tax revenue, with 75 percent of sales from reservation gas stations going to the Nation. The Yakama Nation is credited up front when fuel is purchased wholesale, based on calculations of its member population and gallons of fuel delivered to reservation stations. The Nation’s members are exempt from the state's gas tax for fuel sold on Tribal lands, but the Nation is required to keep records and audit fuel sales from eight stations and submit the information to the state. The Department of Licensing asserts the Nation failed to submit audit reports in 2007, 2008, and 2009 that are required to differentiate sales to its members from sales to non-members.

After requesting the audit reports, the Department notified the Nation in March that it would request the up-front gas tax money be repaid. "DOL is unable to verify, due to lack of audit reports...that the Yakama Nation has used any gallons of fuel sold or distributed to the Tribe in the manner described in (the agreement)," the letter said. "The Yakama Nation is then subject to the state's taxes on all fuel delivered to the reservation under the Consent Decree."

A meeting with the Nation has been scheduled for June 13.

A Tax On The Checkerboard

Fractionation of Pine Ridge Reservation (

The exterior boundaries of Tribal reservations are usually fairly well defined, and provide a delineation for when one is leaving state land and entering “Indian Country”. However, the ownership and control of land within the bounds of the reservation is often far less clear. Through previous federal policies such as allotment and termination, much Native land was alienated from Tribal ownership. As a result, ownership maps of present-day reservations often resemble a “checkerboard”, with plots of non-Native-owned land interspersed with Tribal trust lands.

For many Tribes, reacquiring the land within reservation boundaries is both an economic and cultural imperative, and Tribal leaders seek creative legal and business methods of eliminating the checkerboard. The Tulalip Tribes in Washington are presently considering a unique economic tool in this regard: imposing a tax on sales of land by Tribal members to non-Natives. The Tulalip Grassroots Committee, an organization of Tribal members, has proposed a 17 percent tax on the land value on real estate transactions to discourage Tribal members from selling land to non-Native buyers. "We believe the reservation is sacred and we wanted to make sure that not as much land goes out of trust status," states Tulalip Chairman Mel Sheldon.

With real estate prices plummeting nationwide in the tumult of the current economic crisis, Tribes with cash are positioned to more quickly eliminate checkerboard spaces within reservations. While a tax such as that proposed by Tulalip may help reduce alienation of Tribal lands, there is also risk of alienating the surrounding business community by raising a new barrier to transactions on reservations. Balancing the interests of internal cohesiveness and positive external relations will become increasingly important as Tribes navigate through the current nationwide economic crisis.

Tribes' "Special Privileges" Under Attack In Oklahoma

"It is simply unfair..."  Rep. David Dank

Assailing what he calls “special privileges that give (Native Americans) unique advantages” and declaring “It’s time for our Legislature to restore sanity to Oklahoma’s dealings with the Tribes”, Oklahoma state Representative David Dank has introduced three bills before the state Congress: 1) a constitutional amendment to give private businesses the same right to make corporate campaign contributions as Tribes; 2) a second amendment requiring compacts between Tribes and state government be ratified by the state Legislature; and 3) a bill giving private businesses located close to competing Tribal stores the same sales tax exemptions as the Native-owned businesses. Dank outlines his plan and purpose in an article in this week’s Oklahoman newspaper.

Dank’s reasoning is based on his view that:

Tribes collect no sales taxes on items sold from their grocery and convenience stores, or other Tribal businesses. They collect about half of normal tobacco taxes from Indian smoke shop sales. Tribal businesses pay no property taxes, the state receives little or nothing from Tribal auto tags, and Tribes, unlike private businesses, are free to make millions in corporate campaign contributions.

Meanwhile, the Tribes reap millions from a state-issued monopoly on casino gambling in Oklahoma because of a 15-year compact that cannot be altered.

These are tax exemptions and breaks that siphon tens of millions of dollars each year from local school districts, city and county governments and our state treasury. Non-Tribal citizens and businesses are being taxed to make up those losses. In some cases, non-Tribal businesses are being driven into bankruptcy by the unfair competition made possible by these special privileges.

Dank’s article neglects to mention some other ways in which Native American Tribes are “special”. Unlike every other municipality in the country, and despite being recognized by the US government as sovereign, Tribal governments are not allowed to levy property taxes on the Tribe’s own land. This state of affairs deprives Tribes of untold millions in revenues each year that other municipalities use for roads, police, and other civic services. For Tribes fortunate enough to be located near population centers or interstate highways, gaming revenue is but a partial substitute for the lack of taxing authority, as illustrated by the endemic poverty and substandard infrastructure on reservations.

The private sector of Oklahoma’s economy also reflects a “special” place for Native Americans. As he laments the Tribes’ “special financial privileges” that “cost state and local governments millions and damages competing private businesses”, Dank omits the fact that Native American and Alaska Native householders in Oklahoma had a median income 18.1 percent less than the median level for all households, and an overall decline in median income of 24.2 percent since the year 2000 – the biggest drop of any demographic group in the state. Meanwhile, the Caucasian demographic in Oklahoma has realized a 42.8 percent increase in household income level since the year 2005.

Special indeed.

New York Pursues Tobacco Tax Revenue From Tribes

In what is viewed as a direct challenge to Tribal sovereignty and trade rights, New York Gov. David Paterson has signed a new law to impose and collect state sales taxes on tobacco products sold to non-Indians on Tribal land. With New York facing a multi-billion dollar budget deficit, revenue officials estimate the state could realize more than $62 million in new tax collections each year from the tobacco trade on reservations.

At the press conference announcing the new law, Gov. Paterson stated:

We profess great respect for the Indian sovereign nations and we expect to continue to demonstrate that respect for them, and what we are going to do today is try to alleviate an issue that’s existed for a very long time and we won’t be able to alleviate it just today, but we hope we’re taking steps in what will be a process that will reach that goal and that end. With the current financial situation, this tax will help bring extra revenue for the state.”

The new law requires tobacco wholesalers to sign an oath, under penalty of perjury, stating that the cigarettes they sell will not be resold untaxed in violation of state law. A state appeals court enjoined a similar law in 2006 because the state had not developed a coupon system for reservation retailers to claim tax refunds on cigarettes sold to Tribal members. Gov. Paterson stated that the new law is intended to circumvent that particular issue and collect the tax without addressing it.

Seeing that we can’t get around that encumbrance, (the state) introduced legislation that we will now ask for certification under penalty of law to those wholesalers that sell without collecting taxes. That’s in simple (terms) what the bill does. This is a new approach and we hope this will be an effective approach to solve this problem.”

Business leaders in the Haudenosaunee Confederacy have vowed to collaboratively battle any attempt by New York State to interfere in the Indian tobacco trade. Mark F. Emery, director of media relations in the Oneida Nation Public Affairs Department, stated that the new law will be immediately challenged in court.

None of the state’s other efforts to infringe on sovereignty have worked, and there is no reason to believe this will work either. If the state is serious about resolving this issue, it will negotiate with Indian nations rather than constantly attacking them.”