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Tribes gain new revenue with tax agreement

PIERRE, S.D. - A new governor, a new philosophy and new openness with tribes will lead to tax deals that will benefit the tribes with much needed new revenue.

South Dakota Governor Mike Rounds promised to work with the tribes when he took office a little more than a year ago, and with an open door, luncheons and agreements, the largest of the nine tribes in the state have agreed to long-needed changes in tax policy.

The change comes after the state Supreme Court sent down an opinion that tribal members cannot be charged a tax for fuel purchased on their reservation.

"Our goal was to work with the tribes to get their fair share and increase tribal revenues if they choose to impose motor fuel tax," said Gary Viken, secretary of the Department of Revenue and Regulations.

Viken said that no changes had been made in any of the tax agreements with the tribes since the 1990s, but the agreements were written in the 1970s. The new agreements with the four largest tribes will bring a new source of revenue. In the past the state received all the tax from motor fuels and other taxes, such as sales tax and excise taxes.

The state collected 22 cents per gallon on motor fuel and kept it all. Now, the tribes will keep a hefty percentage of the tax. The amount kept by the tribe is based on the latest census report that shows how many non-Indians live on the reservations in comparison to tribal members.

The Oglala Sioux Tribe, entered the motor fuel tax agreement on Dec. 8, 2003 and will keep 96 percent of all state tax revenues collected. The state will receive 4 percent.

That means the tribe will receive more than $900,000 in the first year and as motor fuel sales increase so will the tax received by the Oglala government.

Oglala Lakota President John Yellow Bird Steele said the money received will be used to rebuild and maintain public and private roads. There are driveways to homes on the Pine Ridge Reservation that have never seen "a blade in their life," Steele said. "We will put gravel on those roads, some are 100 feet long, some are miles long.

"This agreement is a gain for our jurisdiction and for our sovereignty."

The tribes retain jurisdiction over the imposition of taxes to certain consumers on the reservations and also the jurisdiction to prosecute those people or businesses who do not comply with the collection or payment of the taxes.

Steele said the tax income will be leveraged to increase the amount needed to maintain the roads. The tribe has taken over the maintenance from the BIA and also inherited some vintage equipment, Steele said. The tribe will submit bids for construction of the roads.

The Oglala agreement covers only motor fuel taxes, but Viken said the tribe is considering other taxes as well. Steele said the state wants to negotiate the cigarette, excise and sale tax, and he agreed to work with the state.

The Standing Rock Sioux Tribe entered into the tax agreement on Dec. 4, 2003. The reservation is located in two states, North and South Dakota and only the South Dakota portion of the reservation is included in the agreement.

Charles Murphy said he would pursue negotiations with the State of North Dakota to come up with a similar agreement on tax collections.

Standing Rock will receive 63 percent of all tax revenues from the collection of motor fuel, retail sales and service taxes, use tax, contractors tax and cigarette taxes.

In all cases the state will collect the taxes and provide the administration of the collection. There will be no expense to the tribes for this service.

Steele said when the tribe first passed a motor fuels tax ordinance in June 2003 it would have organized a tax commission and would then have to contract an external company to collect and audit the taxes, which could have cost $300,000 to $400,000 per year. The ordinance puts the fuel tax at 16 cents per gallon. With the agreement between the state and the tribe they will receive more than 21 cents per gallon.

The Cheyenne River Sioux Tribe and the Rosebud Sioux Tribes negotiated the agreement to include all taxes collected by the tribe or the state, equal to those of the Standing Rock Sioux Tribe.

Cheyenne River will receive 76 percent of all taxes collected. The Rosebud Sioux Tribe will collect 88 percent.

Viken said if the tribes had not passed the tax ordinances and taken jurisdiction the result of the court decision would have created a mountain of paperwork, just for the fuel tax. Retailers would have to keep specific records of all who purchased fuel, whether they were tribal members or non-members and collect two different tax amounts.

These agreements mean the retailers on the reservations pay the tax up front when they buy the fuel from a wholesaler because the tax is paid at the rack, or to the wholesaler.

"It's a simple way of taxing all fuel at the same rate," Viken said.

Other reservations in the state are smaller and more checkerboarded, which can create a different problem. The state has talked with the Crow Creek and Lower Brule Sioux tribes. The Flandreau Santee Sioux Tribe and the state will start the dialogue this month, Viken said.

The tax issue is a first move to deal with issues that affect the tribe and the state as a whole. Other issues will be on the table including health care, education, housing and employment.