Indians & Taxes: The Truth...

It's about time that these myths were rectified. Are you listening Gov. Schwartzenegger?

--ryan


Indians and taxes: Many Native Americans Do Pay Property, Payroll and Sales Taxes
2005-02-20
by RAUL VASQUEZ

One of the criticisms Native American leaders on the North Olympic Peninsula say they often hear from non-Natives is that they don't pay any taxes.

But they do.

Dennis ``Sully'' Sullivan, vice chairman of the Lower Elwha Klallam tribe, says that's something the public should know.

``It's just disturbing when you read that all tribes are labeled as tax-free -- that we never pay taxes and everything is given to us for free,'' Sullivan said.

He was reacting recently to statements he's read in newspapers and heard publicly from critics, most notably linked to the former state graving yard project in Port Angeles.

``Those statements are humiliating and degrading,'' Sullivan said.

Ron Allen, chairman of the Jamestown S'Klallam tribe, agrees that a lot of people apparently aren't aware that Native Americans pay taxes.

``There's a common misunderstanding by the general public regarding what tribes and [tribal] individuals do and don't pay,'' Allen said.

``Our individual tribe members definitely pay federal income taxes, and a majority of Indian people who live off of reservations pay property taxes and all the other taxes associated with non-Indian citizens.''

While a sometimes-complex maze of regulations governs when and whether Native American tribes and members are required to pay taxes, some practices are fairly simple to follow.

Payroll, income taxes

Almost all tribal businesses and their employees are required to pay federal payroll and income taxes that pay into funds like Social Security and Medicare, tribal representatives said.

``We pay all of our income tax for wages,'' said Ben Johnson, chairman of the Makah tribe.

``We do that for all our employees.''

Native Americans employed by non-treaty tribal businesses -- which include tribal casinos, gas stations and general stores -- pay federal income taxes regardless of whether the labor is done on or off of reservation land.

In addition, almost all tribal members who don't live on a reservation are required to pay property taxes, including local school district tax levy rates.

Native American tribes that purchase non-reservation land and use it for commercial purposes must pay property taxes on that land.

``The statement that `Indians don't pay taxes' is flat false,'' said Gabriel Galanda, a Native American lawyer based in Seattle who was born and raised in Port Angeles.

Galanda said that in addition to payroll and property taxes, all Native Americans pay sales taxes when buying from a business not on reservation land.

``Tribal members pay state retail taxes for off-reservation purchases, which is where the overwhelming majority of their buying occurs,'' he said.

What they do, don't pay

Mike Gowrylow, spokesman for the state Department of Revenue, said the public is sometimes confused about what taxes Native Americans are required to pay.

He said the state's 29 registered tribes do enjoy certain tax exemptions that stem from the 19th century treaties they signed with the federal government.

Thanks to the tribes' sovereign-nation status, members of the Makah, Quileute, Lower Elwha Klallam and Jamestown S'Klallam tribes are exempt from paying some taxes that non-tribal citizens must ante up.

But most of those tax exemptions work only when a tribal member works, buys or lives on reservation land.

Native Americans who live on tribal reservations, for example, don't pay state or federal property taxes, Gowrylow said.

They also don't pay sales taxes on goods or services purchased on tribal reservation land -- or when what they buy is delivered to the reservation, Gowrylow added.

Also exempt from taxation are profits produced by tribal businesses on reservation land -- including casinos.

Tax base for reservations

According to Allen of Jamestown S'Klallam, the reason these exemptions are fair is that most tribes rely on their tribal businesses to produce their only real tax base.

``Tribal businesses don't produce profit in the normal sense of profit,'' Allen said.

``They are essentially producing a tribe's tax base, because tribes generally don't have a tax base.''

Allen said while a few tribes tax their members, it's still a small percentage.

Even though tribal business and casino profits can't be taxed, several tribal officials said they contribute back to nontribal society by providing jobs and by offering voluntary donations to the state.

According to figures provided Linda Ruffcorn of Jamestown S'Klallam's 7 Cedars Casino, the casino has paid out more than $46 million to employees -- most of them nontribal workers -- since opening nine years ago.

Federal income taxes were taken out of all these wages paid, according to Ruffcorn.

The casino also paid $12.9 million to vendors in Clallam and Jefferson counties for goods and services since opening in 1994.

Ruffcorn added that as part of the gaming compact Jamestown S'Klallam signed with the state, 7 Cedars handed $460,000 in voluntary community impact funds to the state to pay for local law enforcement and other similar purposes.

Lower Elwha statistics

Sullivan of the Lower Elwha Klallam tribe presented Peninsula Daily News with similar statistics.

In 2004, Sullivan's figures show, his tribe's payroll totaled $4.9 million.

From that sum, $1.4 million was paid to government coffers in payroll and income taxes, Sullivan said.

And a 2002 study authored by Cheryl King and Casey Kanzler said that Washington tribes contributed a total of $1 billion to the state economy through employment, payroll taxes and business from private merchants.

Some disputes

There have been conflicts between the state and tribes over taxes.

Such is the case over whether tribal businesses could sell tobacco products to nontribal customers without charging state tobacco sales taxes -- a practice that put nontribal tobacco sellers at a big price disadvantage.

However, a big step was taken in January to resolve that difference.

The state and the Jamestown S'Klallam tribe agreed to a compact that allowed the tribe to sell tobacco to non-tribal customers with the tobacco tax, while also being allowed to keep those tax dollars to pay for health services, roads and education on the reservation.

The state also reached similar deals with other tribes, which led then-Gov. Gary Locke to declare in January that ``the cigarette wars between the state of Washington and the Native American tribes of our state are over.''

Allen said those agreements are a sign of progress in resolving differences that still exist between tribes and governments over taxing procedures.

``We have found ways to resolve our differences,'' Allen said.

Meanwhile, Sullivan hopes that over time the public, too, will better understand contributions Native Americans make to local economies -- especially when conflicts of interest arise as they did during the Hood Canal Bridge graving yard controversy in Port Angeles.

Russell Woodruff, chairman of the Quileute tribe in LaPush, says people need to be aware of Native American economic contributions -- especially through taxes.

``We've always been told we don't pay taxes,'' Woodruff said.

``They just don't realize how much we pay out.''