SALES to non-Indians subject of coalition's work

Sunday, June 3rd 2001, 12:00 am

By: News On 6

OKLAHOMA CITY (AP) _ A coalition of national groups is lobbying Congress for federal legislation that would let states collect taxes on fuel and tobacco sales by Indian tribes to non-Indians.

A successful effort could mean tribes would pay an estimated $1 billion per year in taxes to state and local governments. But Oklahoma tribal leaders don't like the idea, noting that most of the state's tribes pay tobacco and fuel taxes through compacts.

``I really think it would set the relationship between the federal government and tribes back several generations,'' said Chickasaw Nation Gov. Bill Anoatubby. ``A negotiated settlement is a lot better than something that is forced.''

The fight over taxes paid by Indian businesses dates to 1987 in Oklahoma, when the state Tax Commission assessed the Absentee Shawnee Tribe $2.7 million in back taxes, penalties and interest for cigarettes sold between late 1982 and 1986. That led to a 1991 U.S. Supreme Court decision that said tribes should collect tax on tobacco items sold to non-Indians.

But the ruling didn't offer a way for the tax to be collected, and justices wrote that states can't sue tribes if they continue to refuse to collect the tax.

As a compromise, the Tax Commission in 1993 created a compact with participating tribes. Of the 39 federally recognized tribes in Oklahoma, 29 have entered the compacts.

The state tax on cigarettes is 23 cents per pack. Tribes that have entered the compacts pay a state tax of 5.75 cents per pack when they buy tobacco from wholesalers. Noncompacting tribes pay a state tax of 17.25 cents per pack at the wholesale level.

Tribes last year paid more than $8 million in state tobacco tax. The state collected $55 million from nontribal vendors.

Tribal fuel sales have angered state officials because tribes weren't paying the 17 cents-per-gallon state fuel tax that is used mainly for road repairs. Motor fuel tax last year generated $480 million in Oklahoma.

The state sued for fuel taxes and the U.S. Supreme Court ruled in 1995 that states could tax fuel that tribes sell to non-Indians. As a result, the Indian fuel tax law was written in 1996. It set up state/tribe compacts in which the state shares some of its fuel taxes with the tribes. Twenty-eight tribes have motor fuel compacts with the state.

Tribes that don't compact still have to pay the 17 cents-a-gallon state tax at the refinery, and don't get a portion of what the state refunds to compacting tribes.

``Our whole contention was that motor fuel taxes pay for the roads. They (tribal members) drove those roads just like we do,'' said Vance McSpadden, an executive with the Oklahoma Petroleum Marketers Association. ``The problem really is not in Oklahoma. Our system we've developed is pretty foolproof.''

McSpadden's group is part of a national group, The Coalition Against Sales and Excise Tax Evasion. Founding members of the coalition include the Petroleum Marketers Association of America, the National Association of Truck Stop Operators and the National Association of Convenience Stores.