DOJ sides with Tulalip Tribes in taxation dispute in Washington

The Home Depot at Quil Ceda Village on the Tulalip Reservation in Washington. Photo from QCV

The Obama administration is supporting the Tulalip Tribes in a high stakes taxation dispute in Washington state.

The Department of Justice filed documents in federal court today to contest illegal taxes imposed on businesses on the reservation. Government attorneys say the state and Snohomish County collect $40 million in property, business and occupation and sales taxes every year with no basis in law.

“The United States takes seriously the federal role in protecting tribal self-government, which has its foundation in federal statutes, treaties, and regulations,” said Assistant Attorney General John C. Cruden said in a press release. “To this end, we are committed to eliminating barriers, such as these, which hinder tribes from developing healthy economies and providing necessary governmental services on the reservation.”

The Cabela's at Quil Ceda Village on the Tulalip Reservation in Washington. Photo from Cabela's

According to Chairman Mel Sheldon, the tribe sees none of the benefits of the $40 million in taxes taken from businesses that operate on trust land. Many are located at Quil Ceda Village, a commercial district that is home to over 150 shops, restaurants, entertainment venues and national outlets including Walmart, Home Depot and Cabela's.

“This is a grave injustice,” Sheldon said last month when the complaint was filed. “Like any government, Tulalip must generate tax revenues to fund the infrastructure and local government services it provides, which benefit not just village businesses and patrons, but everyone in Snohomish County.”

States and local governments have always lacked the ability to impose taxes in Indian Country. But many assert authority over non-Indian owned businesses that operate on trust land.

Indianz.Com SoundCloud: 9th Circuit Oral Arguments in Chehalis Tribe v. Thurston County

In December 2012, the Bureau of Indian Affairs finalized a regulation that confirms that such taxes are illegal. The 9th Circuit Court of Appeals, which includes Washington, noted that the rule merely confirms long-standing policy and law in a July 2013 decision involving the Chehalis Tribe.

Although that ruling affected only Thurston County, Snohomish County appeared to concede that some of its taxes are illegal. In June 2014, the county refunded $5 million to non-Indian businesses and property owners on the Tulalip Reservation and was expected to issue millions more, The Everett Herald reported at the time.

Negotiations to resolve the issue, however, failed, Sheldon said. That's what led to the filing of the lawsuit.

"Defendants’ taxes completely preclude Tulalip and the Village from imposing and enforcing their own like tribal taxes, and deprive the tribe of the tax base that other sovereigns use to fund important government activities," the Department of Justice said today in a complaint in intervention. A motion to intervene also was filed.

Federal Register Notice:
Residential, Business, and Wind and Solar Resource Leases on Indian Land (December 5, 2012)

9th Circuit Decision:
Chehalis Tribe v. Thurston County (July 30, 2013)

Related Stories
Washington counties owe millions for illegal tax on reservations (7/7)
9th Circuit sides with Chehalis Tribe in county taxation dispute (7/30)

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