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Tax controversy surrounds car dealer's move

RENO, Nev. - A new Mercedes dealership opening on land owned by the Reno-Sparks Indian Colony caused quite a stir among some Nevada politicians recently who said if other non-Indian businesses follow suit and decide to relocate on tribal lands the state could lose millions in potential tax revenue.

The controversy erupted in late October when Sen. Randolph Townsend, R-Reno asked Legislative Counsel Brenda Erdoes to look into whether the car dealership would be exempt from paying state sales tax because of its location. The dispute has simmered a bit since first making headlines.

Townsend said his comments were meant to initiate debate on the "long term effect" of such agreements saying he feared more auto dealerships and possibly other non-Indian businesses could seek similar favorable deals eventually costing the state valuable tax dollars down the road.

Under Nevada law, Erdoes said, tribes can collect a tax equal to the amount of the state sales tax and keep the revenue for tribal use. The state or local government still collects other tax revenue such as property and payroll taxes along with business license fees.

Senate Majority Leader Bill Raggio, R-Reno, also expressed concern and questioned whether the legislature should consider changing the law when it meets again in 2005. Erdoes said the law could be repealed or amended to require tribes to pass along a portion of that tax to the state from non-Indian purchases, although she said it's not likely to happen.

"There was kind of a knee-jerk reaction in the beginning that's seemed to have settled down a bit," Erdoes said in a phone interview.

Townsend said a tour of the dealership site and a meeting with tribal leaders and Mercedes representatives left him satisfied with the agreement.

"I think this is pretty much over and put to bed," Townsend said. "I no longer have any concerns about the project.

Raggio could not be reached for comment.

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The initial controversy took tribal leaders by surprise. Arlan Melendez, chairman of the Reno-Sparks Indian Colony, was disappointed saying his tribe is only trying to strengthen its economy. Melendez said the tribe even made it a point to attract an out-of-state business to Nevada in an attempt to avoid a similar tax dispute that erupted when two northern Nevada counties fought over a Wal-Mart moving across the county line.

"We were a little bewildered about one business located on Indian land," Melendez said. "The state isn't losing any money because they weren't in Nevada. It took us 12 years to find this dealership so I don't think we'll ruin the state. I guess we're supposed to be on the side of the road selling whatever it is we can to survive. Some people think its economic racism."

The 1,100 member tribe runs four smoke shops and leases property to two plant nurseries, a storage company, a used car dealership and a landscaping firm. Melendez estimates the new Mercedes dealership will bring in $700,000 a year in revenue, about enough to cover the tribe's police budget. They're also planning to build a new health center to serve area tribes.

"It's a prime example of what we use our tax dollars for," Melendez said.

The Mercedes sales facility, part of the Sacramento-based Von Housen Automotive Group, will be located in south Reno on Virginia Street. It's scheduled to open in mid-December.

Melendez said in negotiating the long-term deal with Von Housen the tribe worked "a level playing field" to reach the agreement, not offering any special benefits to locate on tribal land. He said tribal leaders decided to purchase the 12-acre site south of Reno years ago speculating that the city would continue to grow in that direction. Now they're about to reap the benefits.

"Maybe they never thought an Indian tribe would be inventive," Melendez joked.

Carlos Basquez, a public relation representative for Von Housen, said the automotive group, which opened a service center in Reno six months ago, was looking to fill the Mercedes sales vacuum in the area. When they went in search for property they hit upon the perfect spot and opportunity with the Reno-Sparks Indian Colony.

"We were looking for land all over the place. It was the best real estate deal we could find," Basquez said. "It's the right piece of land, in the right location, at the right price. Mercedes is thrilled to be back in Reno."