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Tulalip tax bid rebuffed

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TULALIP, Wash. - Taxation by tribal authorities meets with opposition and recent U.S. Supreme Court decisions don't stand by the tribes.

Home Depot is set to open a new store on the Tulalip reservation and company officials said any sales tax will be given to the state, not the tribe.

The Tulalips formed a new city called Quil Ceda Village and planned to collect sales tax that normally would have ended up in the state and local community bank accounts.

The tax problem not only involves Home Depot, but Wal-Mart, another anchor in the Quil Ceda Industrial Park. The issue surfaced when the Tulalips became the first American Indian tribe to form an incorporated community.

It established the city of Quil Ceda Village this year under tribal law on 495 acres of its land fronting the highway just north of the Marysville exit. Now the tribes wants the Legislature next year to pass a law ceding collection of the 8.2 percent state sales tax to the tribe to pay for essential Tulalip governmental services. The city has a charter, an all-Tulalip city council and a city manager.

Wal-Mart officials were put off by the Tulalips who told the national chain it would have to send any sales tax to the tribe and not the state or county. It was reported in some local newspapers that shoppers also were upset with the proposed arrangement. Wal-Mart sent the first sales tax check to the state and subsequent meetings have ironed out the differences between tribal officials and Wal-Mart and Home Depot management.

"The goal is total self-governance, total self-determination of the Tulalip people," said John McCoy, governmental affairs director for the tribe and acting city manager.

The revenue would pay for police, roads, water and sewer and other infrastructure and social programs.

The tax issue has become a deep-seated controversy outside Indian country. Each time the issue makes its way through the court systems, lower court decisions are overturned. The major complaint is that American Indian tribes do not have the authority to tax non-Indians on goods sold in businesses located on fee lands and are either owned or not-owned by tribal members.

In this case the land is trust land and the industrial park and city are owned by the Tulalip Tribe.

The state Legislature may not address the issue during an upcoming special session, called to deal with roads. State Rep. Jim Clements, R-Yakima, said he will fight the Tulalip's right to collect sales tax.

"Once you let the Indian nations come in and exert control over taxation, you are giving up your 14th Amendment rights," Clements said. "That's state's rights. Unless we can collect sales tax from tribal members, why should we let them collect the state's sales tax?"

Clements doesn't fear litigation over the issue and in fact issued what might be considered a threat to the Tulalips if they take the issue into the court system.

"My feelings about being threatened with court is that they can kiss off any chance of being heard by the Legislature. Let them go to court; they'll lose their feathers."

Eric Facer, a Washington, D.C., lawyer and expert on taxes on American Indian land, said tribes like the Tulalip often run into opposition when their success with casinos translates into economic development.

Gaming has allowed tribes to do more than just survive, it has empowered many tribes to flex their political muscles as the fight to maintain sovereignty becomes a strong issue, Facer argues.

"It creates some tension."

Most of the tension comes from states that have been troubled with independent entities within their borders.

In fact, there has been surprisingly little friction between the tribe and Snohomish County over the Tulalip's taxation plans.

County Finance Director Dan Clements said: "Our marching orders from (Snohomish County Executive) Bob Drewel are to get a situation that works for the tribe. Tribes don't have a tax base; they are not set up to be cities. They want a status similar to cities that manage their destinies. We would love to see this work.

"I don't think losing revenue is a major concern for us. But it's different for the state, (which) gets the lion's share of the revenue. Plus, it would set a precedent for other tribes," Clements said.

The county would take into consideration services already provided by the tribe - it pays for its own water, sewer and road system and provides funding for fire and emergency medical service - in negotiating any agreement to return the county's portion of the sales tax to the tribe.

Facer said that if the Tulalips can't persuade next year's Legislature to pass a bill to negotiate the sales tax issue with the tribes, they could still prevail without having to go to court.

"If they want to play hardball, they can just set up stores under the name of the tribe and you can't touch them," he said.

The federal courts have held that states cannot enforce the collection of taxes in tribally owned enterprises on reservations because the tribes, like the states themselves, enjoy sovereign immunity from legal intervention, Facer said.

And tribally owned stores could undercut competition by charging a lower tax rate than off-reservation stores.

But McCoy said his tribe wants to avoid litigation and work out a fair arrangement with the state.

While the tribe has the authority to levy its own taxes on top of the state sales tax, such an action would "clearly create a problem by putting them at a competitive disadvantage with surrounding retailers," O'Neil said.

One way or another, McCoy is confident that Quil Ceda Village will continue to flourish.

The city's Wal-Mart, which opened in April on lands leased from the tribe, is "doing well," a company spokesman said.

Next month, the Home Depot store is scheduled to open. A strip mall to house tribal entrepreneurs is under construction. There are plans for another mall to house upscale retail shops. Eventually, the tribe plans to move its casino to Quil Ceda Village and connect it to a new hotel.

"We don't know how long the gaming industry is going to be around. The day the casino opened in 1992, we began to plan to diversify because we don't want to put all our eggs in one basket," McCoy said.