Tribes Hit By Surprise Tax Proposal Reservation Shoppers Would Be Charged Sales Tax
FOR THE RECORD (Idaho edition, January 31, 1998): Name misspelled: Fort Hall Indian Reservation Revenue Director Delbert Farmer’s first name was misspelled in an article in Friday’s paper.
Without notifying Idaho’s Indian tribes, the state Tax Commission sprang a proposal Thursday to tax people who shop on reservations - a move that may puncture relations between tribes and the state.
Tribal representatives swarmed tax policy manager Dan John after he had presented a bill to the House Revenue and Taxation Committee, demanding to know why they hadn’t been notified.
The bill would require non-tribal members to pay tax on items bought within a reservation’s borders. Those purchases are untaxed now.
The tax-exempt status attracts business to reservations. Tribes fear they will lose sales if the state starts to tax their customers.
“The power to tax is the power to destroy,” said Howard Funke, attorney for the Coeur d’Alene Tribe. “That is exactly what would happen in this state if they started to collect those taxes.”
Besides hindering economic development, the measure could jeopardize the tribes’ relations with the state, Indian leaders said.
“We have been trying extra hard to establish a line of communication between tribal government and state government,” said David Kerrick, lobbyist for the Nez Perce Tribe. “We met with the Tax Commission on Jan. 12. No one advised us that this legislation was in the works. We found out about it like anyone else - we saw the agenda.”
The governor’s office had no involvement with the bill, spokesman Lindsay Nothern said.
John said the bill’s intent isn’t to hurt reservations but to stop people from going to reservations to buy “big-ticket” items tax-free. The state is not losing large amounts of tax money, John said, but the Tax Commission wants to prevent such losses in the future.
“It doesn’t limit their ability to do anything; it just makes products sold to non-Indians subject to tax,” John said.
However, the tax would apply to all items bought on reservations - not just expensive purchases, such as automobiles.
“These barriers are strangling us from any opportunity to manufacture or sell big-ticket items,” said Dilbert Farmer, Fort Hall Indian Reservation revenue director.
Farmer noted Indians contribute to state revenue by paying property and business taxes.
“My clothes were purchased at J.C. Penney and I paid taxes,” Farmer said, pointing to his white dress shirt. “My question is: What does the state of Idaho do for me on the Fort Hall reservation?”
Funke, who helped write the tax-exempt legislation in 1984, said the Tax Commission is being dishonest about the tax’s effect on reservation economies.
The money helps tribes more when it stays on the reservations, he said. “If state policy is to assist tribes in economic development, asserting taxes is not a way to achieve that end.”
After cornering John in the Statehouse hallway, tribal lobbyists expressed their concerns about the bill.
Bill Roden, Coeur d’Alene tribal lobbyist, said the bill has several other problems:
The measure would require Indians to pay state sales tax when they buy items on reservations where they are not enrolled members.
Subcontractors employed by tribes to construct buildings on reservations would have to pay tax on construction materials.
People who buy items on a reservation where the tribe charges sales tax - such as the Kootenai Tribe - would be taxed again by the state.
Roden said he’s willing to work with the Tax Commission but wants the bill postponed until next year so tribes will have time to assess the economic impact.
The House committee agreed in a unanimous vote to debate the bill. But two of the three North Idaho representatives missed the vote.
Rep. Hilde Kellogg, R-Post Falls, moved to introduce the legislation but refused to comment afterward.
“I have a whole lot of questions,” said Rep. Larry Watson, D-Wallace. “I want to see the fiscal impact.”