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State tax bill introduced in Congress

WASHINGTON ? Battle lines are again being drawn over a bill introduced in the U.S. House of Representatives that calls for collection of state taxes from tribal businesses on tribal land.

The bill, introduced by Rep. Don Young, R-Alaska, would require payment of state and local taxes on the sale of cigarettes and gas if they are sold to someone who is not a member of the tribe.

Under the new bill, a state would be able to file an 'enforcement petition' with the Department of Interior requesting payment of taxes from a tribal retail enterprise. If no tribal-state agreement on the collection of state taxes is in place, the secretary of Interior and the governor of the state would determine 'the appropriate amount of covered State taxes ... .'

In years past, the House has considered and rejected similar legislation. However, retail trade groups, such as the National Association of Convenience Stores and the Society of Independent Gasoline Marketers, are leading an effort to revive the issue. Trade associations of motor fuels and cigarette retailers targeted tribal governments all over the country with charges of 'tax evasion,' claiming states are losing out because tribes refuse to collect taxes.

If a tribe or individual does not comply with the requirements of the new bill, the Justice Department would initiate a civil enforcement action in federal district court. Penalties for a tribally owned enterprise include an injunction and payment of back taxes. Penalties for a tribal member-owned enterprise include an injunction and civil penalties three times the amount of state taxes owed.

During the 106th Congress, Rep. Ernest Istook, R-Okla., responded to trade association claims by introducing a bill to 'provide incentives for Indian tribes to collect and pay lawfully imposed state sales taxes on goods sold on tribal lands.' It was much like Rep. Young's new bill, however, its penalties for nonpayment went even farther.

The Istook bill would have forced the Department of Interior to take tribal land out of trust status if a retail operation on that land was not paying 'qualified state taxes.' It said effect of the loss of the trust status would be to 'eliminate tribal authority regarding taxation and make the property subject to all applicable state and local sales taxes.'

Rep. Young was supportive of these earlier efforts, but his new bill does not include the same provisions.

Many tribal leaders say they believe legislation like Young's and Istook's is an intrusion on tribal taxing authority and completely unnecessary. The Chickasaw Nation in Oklahoma is one tribe of many able to work with local governments on voluntary agreements.

'We've been able to successfully work with the state and local governments on our own,' said Chickasaw Gov. Bill Anoatubby. 'We shouldn't be forced into things by the state or the federal government.'

Tribal leaders like Anoatubby contend these agreements could be placed at risk if states have an incentive to unilaterally break its compact and have the federal government collect taxes for the states.

There are more than 200 voluntary tribal-state compacts in 18 states with no reported problems. Rep. Young's bill was referred to the House Resources Committee with consideration expected this fall.