Appeals court rules Kansas can tax fuel sold on Indian land

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DENVER, Colo. - The 10th U.S. Circuit Court of Appeals has ruled that the state of Kansas can tax fuel sold at gas stations located on Indian land in the state.

The May 30 decision reverses a lower court ruling which held that it would be detrimental to the economic viability of Indian tribes to charge state tax on gasoline sold on Indian land.

The decision favoring the tribes in the Sac and Fox Nation of Missouri, Iowa Tribe of Kansas and Nebraska and the Kickapoo Tribe of Indians, of the Kickapoo Reservation in Kansas vs. Karla Pierce, Secretary, Kansas Department of Revenue was reversed by the 10th U.S. Circuit Court of Appeals because judges said the tribes didn't show what part of their retail fuel sales were made to tribal members and what part to the general public.

The ruling will affect all tribes under the jurisdiction of the 10th Circuit Court of Appeals. In Oklahoma, a similar case led tribes to form a compact with the state. David Mullon, associate general counsel for the Cherokee Nation explained: "It's an old notion which has been around. The problem arises in how they can enforce the tribes to collect taxes"

Mullon said the Supreme Court has already enunciated that the state has an interest in taxing sales by tribes to non-Indians. "You can hear echoes of that when they say they (the tribes) didn't break out which portion was tribal members versus non-Indians."

He went on to say that he would have to read the decision to see if the ruling broke new legal ground.

Under the compacts Oklahoma tribes charge fuel tax and then pay the state. The state in turn returns revenues to the tribes.

"In Oklahoma the issue, for purposes of motor fuel, was resolved pretty much to the satisfaction of the state and the tribes when Oklahoma adopted a new motor fuel code in 1996, which provided for a compacting process with the tribes and revenue sharing among the compacting tribes. The tribes agree, as a part of the compact, that they will collect all of the state motor fuel taxes. Yet, in turn on a quarterly basis a revenue sharing arrangement has been set which carves out a percentage of that revenue and transfers it to the compacting tribes. Everybody is very happy with that arrangement in Oklahoma," Mullon said.

Karla Pierce, secretary of the Kansas Department of Revenue was not in her position when the original suit was filed. She said she was meeting with attorneys to review the court decision. Asked if the state of Kansas would consider compacting with tribes like the state of Oklahoma has, she said she needed time to review the ruling before anything could be decided.

"I think that one of the concerns was that it was an issue of fairness in business competition," said Scott Holeman, communications director for the department. "A station down the road can't compete if gas is being sold for 20 cents a gallon less. They should be taxed the same."

Asked why the state of Kansas wanted to tax the tribal gas stations, located away from large metropolitan markets, he replied, "It is fair to everyone. What the judge said is that they need to show who is profiting. Are most of the customers Native Americans or are they just passing by? It has been an issue of fairness to all."

"What do they mean fairness? asked an angry Iowa Chairman Louis DeRoin. "We're a sovereign nation, we should be higher than the state. The Kansas Treaty says when Kansas was admitted to the union that the tribal reservations would be no part of the state of Kansas.

"But they want to tax us. We keep our own roads up, we got our own fire department, our own police department, they don't do nothing for us. But they want taxes. OK, they can't tax us, so they want to tax the distributor. They don't tax the distributor from Missouri if they go over there or Nebraska or Oklahoma.

"That's just the way they have been doing things - anything to tax us. They still tax us, they tax the gasoline for the roads, but they don't use that for our roads."

DeRoin went on to say that the tribe will appeal the decision, but in the meantime, "We'll just get gas in Missouri and Nebraska. Our reservation is in Kansas and Nebraska. We'll just get our gas in Nebraska."

"We're shocked the court ruled in favor of the state,." said Kirby Robidoux, vice chairman of the Sac and Fox Nation. He said the fight with the state over fuel tax began five years ago. "Currently the council has directed me not to comment further since we are pending legal review." Kirby expected to make a statement regarding the ruling next week.

Acting Vice Chairwoman Nancy Bear of the Kickapoo reacted to the court's ruling by saying she was disappointed."We respectfully disagree with the decision, but I think that we have some time here for our attorneys to put together some factual information and then we will be back at them," Bear said the tribe plans to appeal the decision.

One question tribes in Northeastern Kansas may soon find answered is whether non-Indians will buy fuel from tribal gas stations without a price break? Unlike the Oklahoma compacting tribes, where tribally owned stations blanket the state, tribes in Kansas are just starting to see economic growth.

The tribes affected are isolated and depend on the revenue from tribal businesses such as casinos and gas stations for economic growth. The state of Kansas estimates taxing the tribal stations will bring $2 million a year in taxes to the state.