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JULY 20, 2000

The House Committee on Resources voted on Wednesday to kill a controversial tax bill aimed at punishing tribes who do not enforce the collection of state sales tax at reservation businesses.

The bill would have given competitive funding priority to tribes whose retail establishments operating on trust land collect state sales tax from non-Indians. But it also called upon the Secretary of Interior to remove land out of trust for those tribes whose businesses fail to collect and remit the tax to the state.

The bill wouldn't have removed all the tribe's trust land. It would have only removed the land which housed the offending businesses.

Chairman Don Young (R-Alaska) offered a compromise to that particular provision of the bill. Instead of removing the land, Young proposed that the Interior and the Department of Justice collect the tribes who failed to remit the sales tax.

Neither measure convinced the Committee, however. They voted 23-15 to kill both proposals.

Taxation in Indian Country has long been a source of contention between tribes and states. In many cases, states are pre-empted and not allowed to impose state taxes on business on reservation land.

But courts have ruled there are exceptions to the rule. When the state of Washington began to seize cigarettes en route to the Colville reservation, the Supreme Court ruled tribes were required to collect cigarette tax on both non-Indians and non-tribal members.

Other taxation situations often depend on circumstances. In general, state can impose taxes on non-Indians as long as the practice does not infringe upon tribal self-determination or federal policy.

In those cases, states often have no way to make sure the tax is being collected. To compromise, tribes and states often come to agreements on how to collect such a tax.

In Oklahoma, compacts between the two call for tribes to collect the tax and remit a certain portion to the state based on a formula.

Still, Republican Ernest Istook of Oklahoma said the state loses at least $27 million a year to reservation businesses. Istook pushed heavily for the legislation.

"States are losing millions, and only Congress can stop it," said Istook last year when the bill was introduced. "Some Indian tribes are keeping those millions for themselves and using them for political contributions and high-dollar lobbyists to protect how they are profiting from tax evasion."

But opponents to Istook said only 22 tribes throughout the entire country weren't remitting the tax.

Get the Failed Bill:
H.R. 1814 (To provide incentives for Indian tribes to collect and pay lawfully imposed State sales taxes on goods sold on tribal lands and to provide for penalties against Indian tribes that do)

Taxation Decisions:
Oklahoma Tax Comm'n v. Chickasaw Nation, 515 U.S. 450 (1995)
Syllabus | Opinion | Dissent
A state cannot tax reservation land or Indians residing on reservation land.

Department of Taxation & Finance of New York v. Milhelm Attea Bros., 512 U.S. 61 (1994)
Syllabus | Opinion
Non-Indians are not exempt from New York cigarette tax.

Oklahoma Tax Comm'n v. Sac & Fox Nation, 508 U.S. 114
Syllabus | Opinion
A state cannot tax tribal members who live and work on tribal land.

Oklahoma Tax Comm'n v. Citizen Band Potawatomi Indian Tribe of Okla, 498 U.S. 505 (1991)
Syllabus | Opinion | Concur
A state can collect sales tax of non-tribal members.

Washington v. Confederated Tribes of the Colville Indian Reservation, 447 US 134 (1980)
Opinion
A state can collect cigarette and sales tax on non-tribal members.

Relevant Links:
Ernest J. Istook - www.house.gov/istook
The House Committee on Resources - resourcescommittee.house.gov