Winnebagos v. Kansas

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WINNEBAGO, Neb. ? The Winnebago Tribe is preparing to seek a federal court injunction against the state of Kansas as an impasse continues over fuel tax collections.

The state has not moved from its original attempt to collect motor fuel taxes and prosecute tribal officials since it confiscated fuel tankers and filed civil and criminal charges in early April.

Attorneys for John Blackhawk, chairman of the Winnebago Tribe, and Lance Morgan, executive officer for Ho-Chunk Inc., the business arm of the tribe, said there has been little conversation between them and the Kansas Attorney General's office that would bring about any settlement. The Winnebago tribe is based in Nebraska but supplies fuel to federally recognized tribes in Kansas.

Blackhawk said the tribe would file an injunction in federal court against the state of Kansas.

The Kansas Department of Revenue wants the tribe to pay $1.5 million in motor fuel taxes it claims are owed the state for motor fuel sold to three Kansas tribes by HCI Distribution, a company owned by Ho-Chunk Inc. It has filed civil suits for personal assets against Blackhawk and Morgan, Morgan's wife, Erin, and Earlene Hrdec, an employee of HCI Distribution, to recoup the tax the state claims is owed.

"We are just going through another jurisdiction that doesn't know what we do. The Kansas Attorney General is bound and determined to impose the taxes. It's anti- tribal," Blackhawk said.

"There hasn't been a change in attitude in 200 years. Then they used to put our leadership in jail until they agreed to the government's demands and signed the paper and they called it negotiation.

"That's a heavy-handed approach and history is being repeated," he said.

The tribe is operating under three different strategies, he said. First is the issue of taxation of a tribe on sovereign lands. Then there is the appeal to sovereign status and finally, under federal commerce laws and the U.S. Constitution the tribes are allowed to do business with each other without state intervention.

"What happens here will impact all of us (all the tribes in the region)," Blackhawk said.

On April 9, the state of Kansas confiscated two of HCI Distribution's motor fuel tankers and 10 trucks from another carrier, Davies Oil. Davies delivered fuel to the Prairie Band Potawatomi Reservation. HCI Distribution served the Sac and Fox, Kickapoo and Iowa tribes.

The Winnebago tribe has an agreement with the state of Nebraska to mix fuel and sell it on the reservation without paying the full state motor fuel tax. It pays the state 25 percent of all the tax that is collected. The tribe is also in the process of negotiating with the state of Iowa. The tribe owns a casino, convenience store and hotel in Sloan, Iowa.

But tribal officials said that the state of Kansas has declined to negotiate any agreement with the Winnebagos. Blackhawk offered to sit down and talk with the state, but Kansas doesn't want to talk, Blackhawk and the attorneys said.

HCI Distribution pays a road tax to the state of Kansas and tribal officials argue that should be enough.

The motor fuels are mixed on the Winnebago Reservation in Nebraska. Therefore law does not allow that taxes be collected on motor fuels by the state of Kansas, argue attorneys from the firm of Dorsey and Whitney in Minneapolis, Minn. They claim that the tax should only apply to the tribes that sell the motor fuel, but the state can't tax them because of the sovereignty issue. In fact the state lost a federal court case on the issue.

"(The state of Kansas) has no justification to make charges," said Mark Jarboe, attorney representing the Winnebago Tribe.

In a letter sent to the state of Kansas Department of Revenue, Attorney General's office and Division of Tax Operations, the Winnebagos demanded that the two motor fuel tankers be returned and that all charges be dropped. The deadline for the state to act was May 2 at the close of day. The consequences for not complying would be a federal court filing against the state, said Jarboe and Vernle C. Durocher Jr., also an attorney with Dorsey and Whitney.

The federal lawsuit will ask the court to declare the state's actions invalid, order the state to return the property that was seized, enjoin the state from enforcing the Act against the Winnebago tribe in the future and award compensatory and punitive damages.

"They (Kansas) misapplied the Kansas statute. We applied for a distribution permit, they turned it back and now the tribe is being charged as a distributor. It's a misunderstanding," Durocher said. "The state is caught between a rock and a hard place."

"They don't like it that the Kansas tribes can get fuel from the Winnebagos, but that's the way the law works," Jarboe said.

The letter cited Kansas law that attorneys argue does not apply to the Winnebago Tribe because it does not purchase motor fuel in Kansas for distribution, but sells the motor fuel before it has been put in storage within the state. "The sales to the Kansas purchasers take place on the reservation of the Winnebago Tribe of Nebraska located in Winnebago, Neb., and HCI then ships the fuel directly to the purchasers in Kansas," the letter states.

"Because the Act imposes the tax only upon the distributor, and because HCI is not a distributor, HCI cannot be liable under the Act for any taxes on the motor vehicle fuel sold to the Kansas tribes," the letter adds.

Mary Tritsch, spokeswoman for the Kansas Attorney General's office said the charges still stand and the state is proceeding with the case. The state also sticks by its original claims and charges against the tribal individuals and the company for back taxes and criminal charges. That condition prevents the two parties from talking to each other to solve the issue. The state insists on payment of the back taxes and arrest of the individuals. It also demands that HCI Distributing agree to quit running trucks through Kansas, attorneys said.

At one point, talk of extradition was contemplated by the state, but that idea is off the table now. Blackhawk and Morgan can freely move around without fear of being arrested by state officials.

"We have received overwhelming support from tribal leaders and attorneys and from some states that claim Kansas is out of line on this issue," Morgan said.

Blackhawk and the attorneys say that the state of Kansas does not understand Indian law. Durocher stated that Assistant Attorney General Steve Maxwell, "doesn't know and doesn't care how Indian law works."

The Winnebago authorities and attorneys claim the right thing for Kansas to do is to drop the proceedings. Blackhawk and Morgan have been summonsed for an appearance in court on June 5.