Consultation and more consultation, clear and fair deliberation on any
question of taxation - this should be the motto for the Internal Revenue
Service as it contemplates a regulation that spells the potential
disruption of the Mohawk Akwesasne community economy in Northern New York.
These are tough times and the tribes, particularly in less populated areas,
are barely beginning to coalesce community economies that can re-circulate
cash flow and create jobs, commercial wealth and sustainable prosperity.
The new IRS regulation designed to collect taxes on imported fuels,
including product transported from Canada into Indian country, will have
devastating effects claim the tribal businesses. They estimate that cuts to
eliminate the territory's 18 gas stations could wipe out up to 300 jobs.
"The new tax would deprive the tribal government of $1 million a year in
revenues, now used to support up to 180 different programs," reported
Associate Editor Jim Adams (Vol. 24, Iss. 12.)
According to Acting Assistant Secretary for Tax Policy Greg Jenner,
"abusive situations exist with regard to fuel imports." This, Jenner states
for the IRS, "deprives the United States Treasury of revenue intended for
the Highway Trust Fund."
Regulations are regulations, sovereignty is sovereignty, and there is a lot
in this issue that reveals the difficulties of maintaining open
government-to-government relations in difficult cases. The proposed tax is
from a federal sovereignty, levied not directly on the Indians but at
mostly non-Native importers of the product. Reported Adams: "Unlike state
sales taxes, the burden of the federal excise tax is imposed on the refiner
or importer of fuel, not on the retailer or the customer." Nevertheless,
the added cost is added to the price of fuel sold at the Indian pumps.
The new rules become enforceable as they place the liability on "the
importers," or "enterers" for uncollected motor fuel taxes. The IRS could
deduct the bill from the bond that importers are required to post with the
U.S. Customs Service. Technically, the federal excise taxes on fuel and
cigarettes can be considered tax obligations imposed on the manufacturers
and importers of those products; not necessarily tax liabilities of the
Mohawk businesses. This is a difficult context for an Indian tribe to
defend against as a matter of law - particularly so since every other
Indian business on Haudenosaunee territories within New York, from Seneca
and Tuscarora to Cayuga and Oneida, receive fuel or tobacco products that
include the added cost of the federal excise tax having already been
assessed to the refiner or manufacturer. Yet, these Indian businesses
maintain a competitive edge in the marketplace because state taxes do not
For every gallon of fuel sold in the state of New York federal and state
taxes combined add 50.15 cents to the price of gasoline and 53.75 cents to
the price of diesel. Of these amounts the federal excise tax comprises 18.4
cents for gasoline and 24.4 cents for diesel. The state taxes, for which
the tribes and tribal businesses are not liable, are as follows: NYS Motor
Fuel adds 8.05 cents for gasoline and 8.00 cents for diesel; NYS Gross
Receipts adds 14.60 cents for gasoline and 12.85 cents for diesel; and NYS
Pre-Paid Sales adds 9.10 cents for gasoline and 8.50 cents for diesel. This
leaves the Indian businesses with a price margin of 31.75 cents per gallon
of gasoline and 29.35 cents per gallon of diesel. Although this margin has
been sufficient for Indian businesses in other New York tribal communities
to remain operational, the application of the federal excise tax at
Akwesasne may play differently, potentially offsetting the delicate balance
structured between the tribal government and its private business sector.
The St. Regis Mohawk Tribe levies an administrative fee in the amount of
4.00 cents per gallon to support essential government services, provide
matching funds for federal grants and to strengthen the community's ongoing
tax fight. In other New York Indian communities the fuel stations are
either tribally owned and regulated, or privately owned and not regulated
by their tribal governments. So the Mohawk reality is distinct.
As a result, together the St. Regis Mohawk Tribe and many major businesses
are mounting a vigorous challenge to the new Internal Revenue Service
campaign to collect federal motor fuel excise taxes. They cite the dramatic
impacts upon their nascent community economy and the now established
customary practice of protection from taxation based on inherent
sovereignty and treaty law. The St. Regis Mohawk Tribe is also strongly
invoking the lack of consultation in its challenge to the fuel excise
regulations. They call on the IRS to engage in consultation with their
In last week's edition of Indian Country Today, Christie Jacobs, director
of the IRS Office of Indian Tribal Governments, responded by saying the new
regulations, "were not meant to affect tribal governments, but applied to
individuals who might or might not be Native." Jacobs explained that the
import regulation had been issued without prior consultation with tribes
because they were "a broad application regulation targeted at a broad
problem." But, "If tribes feel these regs have caused any problem, we'd be
happy to sit down with them," she said. This is a positive and welcome
approach by Jacobs, who over several years has helped guide the IRS to a
clearer understanding of the governmental status of Indian nations.
Whatever the legalities of this particular taxation initiative which
undoubtedly impacts the St. Regis Mohawk Tribe, no one can deny Mohawks and
other border tribes have endured serious challenges in recent years. The
vise of taxation, state and federal, always threaten, even while the most
court-reaffirmed obligations of state and federal governments to tribal
governments remain unmet.
The tribe is seeking an exemption from the IRS regulation. Attorneys are
studying the case while community meetings are scheduled. "Tribal Council
will advocate concerns at the federal level on the devastating effect it
will have on community programs and services," say tribal spokespeople.
Perhaps, as a former tribal attorney suggested, the regulations may be
fought on the grounds that they should properly be promulgated by
"congressional statute," rather than by "IRS regulation."
We trust the Mohawk delegation will make a good case to the IRS, which
needs to consider the impact of its regulatory power on self-governing
communities with recovering economies. It should also ill consider the
public campaign by anti-Indian groups such as the Association of
Convenience Stores, and others who launch acute and targeted anti-Indian
attacks against all tribal rights. The Mohawks as an Aboriginal and free
tribal people and government have inherent rights and the IRS would do well
to review and respect this history.
We encourage the Eastern Doorkeepers and the IRS to find a mutually
beneficial way forward.