Non-Indian business on tribal land? Neighboring jurisdictions can tax you

Even though the business Bob’s Burgers & Brew is located on land owned by the Tulalip Tribes, the company pays sales tax, business and occupation tax, and a leasehold tax to Snohomish County. The owners say if the Tulalip Tribes also imposed a sales tax on the business, it would put them at an economic disadvantage. Courtesy photo

Richard Walker

Because Tulalip Tribes in excellent financial health, no tax revenue? Tulalip Tribes challenging it in appellate court

Are you a Native-owned business on Tulalip Tribes-owned land? You pay taxes to the Tribes. Are you a NON Native-owned business on Tulalip Tribes-owned land? You pay taxes to the state and county. And for the time being, it looks as if it is going to stay that way.

Why? Because a judge says the Tulalip Tribes is doing well financially. And the county isn’t going to give up their fight; they get tens of millions a year from taxing non-Native businesses on Native land.

U.S. District Court Judge Barbara J. Rothstein ruled Oct. 4 that Tulalip Tribes doesn’t need the tax revenue being siphoned off by Snohomish County because the tribes is doing well with its own enterprises, among them are the Tulalip Resort Hotel Casino, Tulalip Amphitheater, and a pharmacy.

Jon Rickert, co-owner of Bob’s Burgers & Brew, told ICT Oct. 5 that even though his business is located on land owned by the Tulalip Tribes, he pays sales tax, business and occupation tax, and a leasehold tax to Snohomish County. Rickert said if the Tulalip Tribes also imposed a sales tax on his business, it would put his business at an economic disadvantage. He doesn’t think that will happen, though, saying of the Tulalip Tribes: “We have had a good affiliation with them for 10 years.”

Jon Rickert, co-owner of Bob’s Burgers & Brew, told ICT Oct. 5 that even though his business is located on land owned by the Tulalip Tribes, he pays sales tax, business and occupation tax, and a leasehold tax to Snohomish County. Video screen capture

The reason for the ruling in a court of law?

“Tulalip is by all accounts in excellent financial health … despite collection of State and County taxes” at the incorporated on-reservation village of Quil Ceda, Rothstein wrote in her decision.

Tulalip Tribes board treasurer Mel Sheldon said the next day that the Tribes’ financial health was “not germane” to the issue, and that the Tribes would appeal in U.S. 9th Circuit Court.

The Tulalip Tribes is not imposing its own sales tax on businesses owned by non-Natives because those businesses would pay more in taxes than businesses in neighboring jurisdictions, putting them at an economic disadvantage. That’s a concern many businesses expressed during lease negotiations with the Tulalip Tribes: they wanted “contractual assurance they would not be subject to double taxation … Double taxation was a subject of significant concern,” two Tulalip Tribes officials testified.

Who pays what?

All business-related taxes and lease fees collected by the Tulalip Tribes supports law enforcement, utilities and other public services in Quil Ceda Village.

A Native-owned business pays a sales tax to Quil Ceda Village of 8.6 percent; if it leases land from the Tulalip Tribes, it makes a lease payment as well.

A business owned by a non-Native in Quil Ceda Village pays a 6.5 percent sales tax to the State of Washington, a 2.6 percent sales tax to Snohomish County, and a business and occupations tax to Snohomish County based on gross receipts. Snohomish County cannot levy a property tax on tribe-owned land, which Quil Ceda Village is. But the county imposes a leasehold tax on businesses that lease land from the Tulalip Tribes.

The state Department of Revenue returns to municipalities a portion of the sales tax revenue it collects there to support local services. Not so for Quil Ceda Village; that portion goes to Snohomish County. Tulalip Tribes officials say that means they must pay for public services in the village with other funds.

The state and county aren’t going to give up easily. “The State of Washington and Snohomish County collect tens of millions of dollars in taxes annually from the non-Indian owned businesses at Quil Ceda Village,” according to court documents. And neither is the Tulalip Tribes, which contends county and state taxation on its land violates its sovereignty and the U.S. Constitution.

Article 1, Section 8, Clause 3 of the U.S. Constitution states that only Congress has the authority to "regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." And in 1831, the U.S. Supreme Court ruled in Cherokee Nation v. Georgia that Indian Nations are “domestic dependent nations” under the protection of the federal government, and that state laws cannot be imposed on Tribes.

“We knew this was such a leading edge issue that would hopefully benefit all of Indian Country,” Sheldon said of the tribes’ challenge of state and county taxation on its land. “We believed we had a case in which the judge would see in our favor. It’s not over."

Third-largest source of jobs in Snohomish County

The state and county contend that the revenue they collect from Quil Ceda Village helps support public services they provide to businesses and residents of the reservation. In their closing brief, the state and county argued that they provide “the vast majority of the government services to non-Indian taxpayers,” “provide public goods and other government services to the taxpayers in return for tax revenue,” “provide transportation networks, which are critical to any commercial enterprise,” “provide important law and justice services,” and provide other services, “both on and off the reservation, that benefit the community, including Tulalip.”

The Tulalip Tribes contend the tribes and Quil Ceda Village, not the county and state, provide the bulk of public services on the reservation and in the village.

Quil Ceda Village government departments provide building plan review, permitting and inspections; business and food service inspections; law enforcement; maintenance of parks and trails; freshwater, stormwater and wastewater systems; traffic planning; utilities; and wetlands mitigation.

The village provides fire protection and emergency medical services under a negotiated fee-for-service contract with the Marysville Fire District. The Tulalip Police Department responds to approximately 6,000 calls for service each year, and refers 90 percent of the cases for criminal prosecution arising in the village, according to court documents. The Tulalip Tribes contracts with the county for jail services, funds one full-time county prosecutor, and contributes funding to the sheriff’s office and state patrol.

“The Tulalip Tribal Court provides a forum for all civil disputes arising in the Village, including between Village businesses and their customers,” court documents state. “From 2011 through 2015, nearly 100 civil disputes arising in the Village were filed in tribal court. The tribal court also exercises jurisdiction over criminal offenses by Indians, and by non-Indians in certain domestic violence cases. From January to May 2015, the tribal prosecutor had a total of 114 cases arising in the Village, including theft, drug, and trespass cases.”

Tulalip Tribes officials also contend the county is reaping benefits from economic development it had nothing to do with creating.

Quil Ceda Village – 2,100 acres fronting Interstate 5 -- was the former site of a U.S. military ammunition depot when the Tulalip Tribes began restoring and redeveloping the land in the 1990s. Leaders of the Tulalip Tribes had long envisioned the area as an economic center. The Tribes installed roads and utilities, incorporated Quil Ceda Village as a municipality, attracted business tenants and negotiated leases. Quil Ceda Village has made the Tulalip Tribes the third-largest source of jobs in Snohomish County, according to the local economic alliance.

A combination of Tulalip and federal funds paid 93 percent of the costs of two interchanges on Interstate 5, and those improvements serve off-reservation communities on the east side of the highway as well, court documents state. Tulalip Tribes pays the state Department of Transportation to maintain traffic signals near the interchanges, and pays for care of the shoulder and median.

According to court documents, the Tulalip Tribes also pays half the salary of the principal of an off-reservation school attended by students from the Tulalip Tribes.

Q&A with Washington state Department of Revenue

U.S. District Court Judge Barbara J. Rothstein has ruled that the state and county may impose taxes on non-Native owned businesses located in Indian Country. The idea is, tribes do not have jurisdiction over non-Indians, even on tribally-owned lands.

Tribal Nations have jurisdiction over Native Americans. But does that jurisdiction extend to Native-owned businesses on non-tribal land – just as with states and counties and non-Native owned businesses on tribal land?

ICT posed that question and others to the Washington state Department of Revenue. Staff members responded through Anna Gill, the department’s communications director.

ICT: Can an Indian tribe impose a tax on an Indian-owned business that is located off-reservation in a neighboring jurisdiction? Can an Indian tribe impose a leasehold tax on an Indian-owned business for the lease of land off-reservation in a neighboring jurisdiction?

DOR: Generally, a federally-recognized tribe has taxing authority on land held in trust for the tribe by the federal government. Trust land may be within a tribe’s reservation or off-reservation. Many tribes in Washington have off-reservation trust land. While the department has adopted a rule providing guidance regarding state taxes that may potentially apply in Indian Country, it is not its role to opine regarding a Tribe’s taxing authority over its members.

ICT: The state returns to municipalities a portion of sales tax revenue to support local services. The state Attorney General's Office recognizes Quil Ceda Village as a municipality ("Yes, Quil Ceda Village is legally organized as a municipality." Brionna Aho, communications director, Attorney General's Office, June 15 email). But the state does not return to Quil Ceda Village a portion of sales tax revenue to support local services, as it does other municipalities. Why?

DOR: The department collects both state and local sales and use tax, periodically distributing local tax revenue to counties, cities, and special purpose districts imposing the taxes. (Revised Code of Washington 82.14.050 et seq.)

Several years ago, the Tulalip Tribes requested state legislation authorizing the department to similarly collect tribal sales tax in Quil Ceda Village and periodically distribute tax revenue to the Tulalip Tribes (see HB 1879, introduced in 2003; and HB 1721, introduced 2005). The bills expanded the definition of “city” in pertinent state law to include Quil Ceda Village. Neither measure was enacted.

Current state law does authorize Washington agencies and local governments to enter into agreements with federally-recognized tribes that may provide for cooperative funding. The Tulalip Tribes and nearby local governments have entered into several such agreements. For example, in 2015 the Tulalip Tribes and Snohomish County entered into an agreement obligating the county to provide $1 million to help fund a highway project designed and constructed by the Tulalip Tribes.

Richard Walker, Mexican/Yaqui, is a correspondent reporting from Anacortes, Washington. Contact him at