PIERRE, S.D. - The state of South Dakota wants to make it easy for its tax collection office so it is asking tribes to collect the same tax on fuel as the state does.
The state, at a State-Tribal Relations Committee Meeting on July 28, said it had sent a letter to the tribes asking that a 22 cent per gallon tax be imposed on fuel sales for all customers. The state would then collect the tax and return tax funds charged to tribal members to the tribes. That would be the easy way - for the state.
It would require the retailer to record an enrollment number of a consumer, reduce the fuel price by 22 cents and then submit the data to the state for a tax refund. The retailer has to pay the tax at the time of wholesale purchase.
Some tribes, however, can avoid paying the tax up front by using an out-of-state supplier that brings fuel to a tribally owned or approved wholesaler on the reservation. They can also bring in the fuel and additives separately and become a fuel manufacturer on the reservation.
The tribes have long advocated that a tribal tax on fuel sales would be imposed at a lower rate to reduce the cost at the pump for tribal members to assist those people at lower income levels. The tribes also want to receive revenue from the tax. The Oglala Sioux Tribe passed a resolution several months ago approving a 13 cent tax to tribal members. The tax would be used for road construction and repair. The tribes would not charge this tax to non-tribal members.
Gary Viken, state Revenue and Regulation Secretary, told state lawmakers it would be a good revenue maker for the tribes at 22 cents.
At stake is an estimated $4 million in tax revenue for the state and the tribes. Fuel taxes in South Dakota are collected at the dock when the distributor loads fuel tankers for distribution to the vendors.
The tribes can circumvent that process by receiving fuel from Nebraska, not paying the tax at the dock and then collecting their own tax for tribal members and non-members. The tribe would then have to indicate how many gallons of fuel were sold to each group and then pay the state its 22 cents, according to state Attorney General Larry Long.
It would be a difficult process, but with a tribal tax revenue department it would be doable. The Winnebago Tribe of Nebraska has an agreement with the state to collect the tax on its reservation and then pay the state a percentage. No such agreement is in place in South Dakota.
The problem for the state came when the State Supreme Court ruled that charging a fuel tax to tribal members who purchase gasoline on the reservation was illegal. The state was required to repay all fuel taxes illegally collected from 1996 to the present. A formula for repayment of the taxes has not yet been completed.
State Senator Michael LaPointe, Rosebud, said tribes could create a workable tax collection system and not go along with the state.
Chairman J.C. Crawford of the Sisseton-Wahpeton Tribe said his reservation has $20 million worth of road repair to do. The BIA is responsible for road repair on the reservations; however, there are so many unmet needs that repairs are limited due to lack of funding.
The state is responsible for maintaining federal and state roads that run through reservations, however, they are in many cases in disrepair, tribal officials said.
So far, no tribe has signed onto the state's request for fuel tax collection.