Ruling could limit how much state could collect on Indian gas and tobacco sales
Saturday, August 14th 2004, 5:44 pm
By: News On 6
OKLAHOMA CITY (AP) -- An appeals court ruling could cut down on Oklahoma's ability to collect taxes on gasoline and American Indian tribal tobacco sales.
If the 10th Circuit Court of Appeals' ruling stands, some Oklahoma tribes, especially those with gasoline stations near rural casinos, may not have to pay taxes to the state.
Attorney David McCullough, who represents several Oklahoma tribes, called the decision "interesting" and said it "certainly will apply in Oklahoma."
In its ruling earlier this week, a three-judge panel of the federal appeals court said a Kansas tax policy infringes on a tribe's right to govern itself.
In Kansas, the Prairie Band of the Pottawattamie Nation imposes a 20 cent tax on a gallon of gasoline and 22 cents for diesel at a rural gas station. The $300,000 a year collected from that tax pays for the tribe's roads and bridges.
Kansas and Oklahoma alike, impose fuel taxes on distributors, who then pass the tax on to the Indian retailers.
In the case that was struck down by the appeals court, the judges found that it was unrealistic to expect a rural gas station to impose a fuel tax because a fuel market was created by a nearby Indian-gaming facility.
In the Kansas case, the court relied heavily on the fact that the gasoline station was next to a remote, $35 million casino. As a result, 73 percent of the gasoline station's customers are either casino patrons or employees.
McCullough said the ruling could be extended to include some tribal cigarette sales, which the state also taxes.
"The real key is whether it's just bringing in a product to sell to non-Indians or whether it's creating a market," McCullough said.
Oklahoma Tax Commission officials said Friday they weren't aware of the ruling and would have to study it before commenting.
McCullough said tribes most likely to benefit from the ruling are those with businesses "that are off the beaten path."
Most of Oklahoma's 39 tribes have compacts with the state regarding sales of tobacco and motor fuels. Under those agreements, the gasoline and cigarettes they sell are taxed at a lower rate.
McCullough envisions some tribes canceling their compacts if the ruling stands.
Chickasaw Nation attorney Bob Rabon said the ruling would apply to at least one gas station, but the tribe "would not take advantage of this ruling, even if it does apply," Rabon said.
"The Chickasaw Nation's leadership has agreements with the state of Oklahoma on a number of issues and intends to honor them," Rabon said.
In the Kansas case, the appeals court overturned a federal judge's ruling. The state could ask the entire 10th Circuit to hear the case or appeal directly to the U.S. Supreme Court.
Rabon said the Supreme Court likely will see the case eventually because of its national implications.