Tribes, state at odds on fuel tax
BOISE – Idaho Indian tribes are back at the negotiating table with the state over fuel taxes, though the tribes are smarting over legislation Gov. Butch Otter signed into law March 30 to impose a deadline on the negotiations.
“I gave my word last year, and we have a draft agreement done already, and we’ll probably be presenting that to the governor’s office sometime in the next two weeks,” said Chief Allan, chairman of the Coeur d’Alene Tribe.
But, Allan said, “I think the tribes are feeling, our tribe too, that the state’s pushing an issue that really doesn’t need to be pushed, especially in light of the economic study that we had the University of Idaho do, showing we’re a big player in the economy.”
The study showed the Coeur d’Alene Tribe’s impact on North Idaho’s economy is $250 million a year. The fuel tax negotiations are over $3.5 million a year in fuel taxes on reservation gas sales, about $500,000 of that from the Coeur d’Alene Reservation.
The issue has caused hard feelings for years as the state has repeatedly sought to tax reservation fuel sales, but has lost repeatedly in court on constitutional grounds because states can’t tax sovereign Indian nations. After the last big court ruling, Idaho had to pay back $3.7 million in improperly collected fuel taxes, plus interest, to the Coeur d’Alene, Nez Perce and Shoshone-Bannock Tribes. The state is still wrangling in court with the Shoshone-Bannocks over an additional $7 million-plus in refunds.
Ted Spangler, attorney for the state Tax Commission, said those refund payments were made within the past year or so.
This year’s legislation, HB 249a, narrowly passed the Senate and was signed into law despite pleas from tribal leaders and the state’s Indian Affairs Council for a gubernatorial veto. It declares that unless tribes reach agreements with Otter by Dec. 1, they lose and the state starts imposing its state gas tax on reservation fuel sales.
Bill Bacon, general counsel for the Shoshone-Bannock Tribes in eastern Idaho, said, “To put things in perspective, this law affects five gas stations owned by Native Americans. That’s it. … Isn’t that a racist bill?”
Nevertheless, the Shoshone-Bannocks are negotiating a fuel tax agreement with Otter. “We’re in the process of hopefully finalizing an agreement in the next week or so,” Bacon said.
The Nez Perce Tribe also is in negotiations with the governor’s office. “We should be having some meetings probably within the next few weeks to continue on,” said Darren Williams, legal counsel. However, Williams said, “The way the legislation is crafted, unless it’s contested in court, then the state would probably gain more in the end by not having an agreement. We hope that’s not the case.”
The legislation seeks to impose the state tax on reservation sales – where tribes now charge their own tribal gas taxes – by rewriting Idaho tax laws to try to shift the “incidence,” or burden, of the tax from the Native American retailer to the non-Indian distributor.
That’s the same thing lawmakers tried to accomplish with retroactive legislation in 2002, only to see it overturned by the Idaho Supreme Court and the 9th Circuit U.S. Court of Appeals. The U.S. Supreme Court declined to review the 9th Circuit’s ruling.
Lawmakers have been hopeful that a year-old U.S. Supreme Court decision in a Kansas case will give them a better shot this time. But Bacon said the new legislation still doesn’t match Idaho’s tax laws to those in Kansas.
“This law will be easier to defeat than the last law,” Bacon said. “At some point in time, the Legislature may be able to adopt something that will pass muster, but this thing doesn’t even come close – and in the meantime, all we’re going to do is have more litigation and more litigation and more bad feelings.”
David Hensley, legal counsel for Otter, said, “The governor has said that our effort is best placed in negotiating an agreement.”
Under the legislation, any tribe that reached an agreement by the deadline would be exempt from the new law. Hensley said Otter wants any agreements signed to be “perpetual.”
“Regardless of the legislation, if we have agreement and something happens down the road, we have those agreements to stand on,” he said.
He said the governor also is interested in keeping tax rates even between tribal and non-tribal gas stations, clarifying responsibility for road maintenance on reservations, and ensuring that all fuel taxes go to fund transportation needs.
“We’re willing to work with each tribe independently on those needs,” Hensley said. “One size is not going to fit all – we recognize that.”
The issue first arose when the Coeur d’Alene Tribe began purchasing fuel for its gas station from Goodman Oil Co. of Lewiston in 1994, without Goodman charging the tax. The tribe contacted the Tax Commission and agreed to send tax payments for its sales to non-tribal members.
But in 1997, the Tax Commission went after Goodman Oil for taxes on all the fuel it delivered to the reservation, which meant it wanted to also tax the fuel sold to tribal members. Goodman sued and won, with courts ruling that the state can’t tax any reservation gas sales by tribal retailers.
Bacon said he already drafted a legal complaint challenging the new law, but “in a good-faith effort to bring the negotiations to a close, my client has decided not to file the lawsuit just yet.”
The Sho-Bans also have drafted new taxes they plan to assess on non-Indian farmers who raise $150 million a year worth of potatoes and wheat on leased land on the Fort Hall Reservation, which lies at the heart of eastern Idaho’s potato-growing country. They won’t implement the new taxes if they can reach an agreement with the governor, Bacon said.
Allan, of the Coeur d’Alene Tribe, said, “We’re kind of in a tough situation. Our lawyers are telling us that there are some legal flaws in the bill. But all along we said we would negotiate an agreement, even without a law. … If it can’t get done, then we will look at the court remedy.”