PORCUPINE, S.D. - The Oglala Sioux Tribal Council passed a resolution that would create an excise tax on motor fuel sold on the Pine Ridge Reservation, which will stop collection of nearly $1 million per year by the state of South Dakota from tribal members.
The Oglala Sioux Tribe is the first of the tribes in South Dakota to pass the excise tax legislation. This comes at the heels of a South Dakota Supreme Court ruling that declared the state has collected fuel taxes from tribal members illegally for many years.
The door was opened by the ruling that stated it was illegal for the state to collect a motor fuel tax from a tribal member on that member's reservation. Because of that ruling, the tribes have taken a more active stance with sovereignty and are working on resolutions that will create a revenue stream from the sale of motor fuels.
The state's high court overturned a lower court ruling based on a lawsuit, Muddy Creek vs. the State of South Dakota that has been ongoing for eight years.
The Oglala Sioux Tribal Council also served notice to the state that it would pursue federal court action to stop the collection of the 22-cent state tax on motor fuels still charged to consumers on the Pine Ridge Reservation.
State Attorney General Larry Long said the state will stop charging tribal members in a few weeks, or "sooner." It's all connected to legal issues following the Supreme Court ruling.
The Oglala Resolution set up a 16-cent per gallon tax that will save the tribal members 8 cents a gallon.
"We are not looking for a cash crop. We want the tax dollars paid here spent here," said Oglala Tribal President John Steele.
"We are only concerned with the customer getting the essentials for day to day living, funds for health care, for food, educational purposes, and clothing. We are not like some of the other tribes where they have major roads going right by them - where they could really do competition. We are isolated," Steele said.
The most important aspect of this action by the Oglala Sioux Tribe is to exercise its right of sovereignty, with the impact of economic development close behind. Money collected on the reservation will stay on the reservation, Steele said, and that's part of sovereignty.
"In the past the tribes went along to get along," said Craig Dillon, Oglala Tribal council member. "It's time for the state to realize that their plan will not fit. This is the awakening of the tribes. We will import the fuel, tax it and sell it with our own gas company. The door has been opened for the tribes to exert their sovereign immunity," Dillon said.
Each business that sells motor fuel on the Pine Ridge Reservation will pay the 22-cents per gallon state tax that is collected by the wholesaler and pay the 16 cents to the tribe on fuel purchased by tribal members.
Long said an agreement between the tribe and the state will have to be formed on how the 16 cents charged to tribal members will be accounted for. Members of any other tribe will not be allowed the Oglala discount. They too will pay the 22 cents to the state.
OST Fuels will act as the wholesaler and tribal officials claim the 22 cents will not be paid to the state. It is the expectation of the tribe that the tribal excise tax will replace the state tax for all people who purchase the fuel. Gasoline may be shipped in from Nebraska, Steele said, to avoid the state-imposed wholesaler tax collection.
Patty Pourier and Loren "Bat" Pourier own Muddy Creek Oil company. It was their lawsuit that worked its way through the South Dakota Supreme Court. Pourier said the tribe can act as an exporter of fuel from Nebraska and not pay any tax.
The Pouriers have been working with the system as wholesalers for many years. They will set up the software needed by the tribe and retailers to track the tax collection and payment system.
Other states have gone through the courts on the same issue. Each have different laws governing the collection of motor fuel taxes. Long said South Dakota places the legal incidence on the consumer, therefore even when the tribe owns the fuel, the state tax can be imposed on anyone. The tribe can say, only tribal members can buy the fuel at the 16 cents.
Long said it would be easier if the tribe would collect the same as the state, but the Oglala Resolution is designed to help people that are in poor financial situations buy fuel at a lower price.
The average price of unleaded lower octane gasoline is $1.52 in the area surrounding Pine Ridge. With a savings of 8 cents per gallon, it would pay for tribal members to buy gasoline on the reservation, Steele said.
It was estimated that about four million gallons of gasoline are sold on the Pine Ridge Reservation each year. With the 16 cents a gallon tax, it would bring in $640,000 for the tribe. The resolution requires that all motor fuel tax revenue be used for road construction and repair and the repair of road maintenance equipment.
How the tax is collected and by whom is still up for debate, as far as the state is concerned.
"Now comes the time when this governor (Republican Gov. Mike Rounds) wanted an agreement that our taxes would be uniform. I don't think that's a point to discuss.
"I asked him why and he said the competition. I said isn't that what America is all about? And the state assumed they would collect the tax on our behalf and return a percentage agreed upon," Steele said.
After the State Supreme Court Ruling, two pieces of legislation passed that would place the statute of limitations for a tax rebate at six years prior to the final date of collection from tribal members, and the governor was given full authority to negotiate fuel tax agreements with the tribes.
The method of return for overpaid illegally-collected taxes to the tribal members in the state is not yet set. And accirding to the passed legislation states, the statute of limitation will only go back six years. The lawsuit has been ongoing for more than eight years.
Steele said the laws that were passed do not allow the state any wiggle room. However, the state does not agree and Long said the state is still in control when it comes to taxing non-members whether on or off the reservation.
The state asked for a rehearing on the statute of limitations. Long said that gives the revenue department time to work out a tax collection agreement.
What the state is worried about is staying out of federal court because it has to show that the state tax was not charged to tribal members, that's where the equal 22-cent tax comes in to play.
"If the tribes would collect the 22 cents we would collect it and then send the tribes their share. At 16 cents it makes it less attractive. We have to make sure the tribal member isn't charged the 22 cents," Long said.
The retailer will need some direction, because, the state argues, they will have to keep track of the two different taxes. And with the equal taxation it makes no difference to anyone except the members, Long said.
Long said the problem in South Dakota is that a constitutional provision requires all motor fuel tax be collected and spent on road construction and maintenance and that the state has the "obligation to collect the tax, or the right to collect the tax and if we don't we could be in constitutional trouble."
The motor fuel tax is just the beginning. Steele said the tribe would look at all the taxes that are imposed on the people without anything coming in return, such as utility taxes.
"The taxes need to come back to the tribal government, which works on behalf of the people to get some service back to them. It's just a crime, people paying taxes and not getting any benefits back."
"We are just going to act sovereign and do our thing. If someone wants to take us to court, we will go to court. I think we are on solid ground," Steele said.