Supreme Court Decision on State Taxation of Yakama-Based Gas Station May Set a Precedent

In Washington State, it’s hard to beat gas prices at the Cougar Den on the Yakama Nation. The tribe doesn’t pay state fuel tax, and it transfers those savings to its customers.

But the Washington State Department of Licensing challenged the tribe’s exclusion in a U.S. Supreme Court hearing on October 30, 2018. The court is expected to issue its decision on Washington Department of Licensing v. Cougar Den, Inc., in 2019, determining whether Cougar Den is subject to Washington’s fuel tax or exempt under the Yakama Treaty of 1855.

The crux of the case is whether a tribal corporation must pay state taxes on fuel it transports on public highways in Washington State. The gas station purchases fuel in Oregon and transports it to Yakama land. The 1855 treaty allows Yakama Nation tribal members “free travel,” hence, the tribe asserts it isn’t required to pay state fuel taxes that go toward road repairs, etc. Washington State is arguing that the state fuel tax isn’t a tax on travel; it’s a tax on a product.

“This is a pretty standard importation tax, which is to say that it’s taxing the travel of goods into the state, which, again, seems to be what the Yakama got as a result of this treaty: the ability to take goods to market and to take goods from market, regardless where that market is,” Justice Elena Kagan has said.

Lower courts previously ruled in favor of the Cougar Den gas station.

The Bureau of Indian Affairs’ 2013 regulations are also bound to impact the Supreme Court’s decision. In 2013, the BIA put limits on the ability of state and local governments to tax activities on tribal lands.

But the BIA’s 2013 regulations have not exempted all tribes from state taxes. For instance, in October 2018, federal courts ruled against the Tulalip Tribes’ Quil Ceda Village. The 2,100-acre shopping and entertainment complex is home to dozens of commercial and retail businesses. Several of these businesses are owned by the Tulalip Tribes, including the Tulalip Casino and the Tulalip Resort Hotel. Many of the businesses at Quil Ceda Village, however, lease land from Tulalip, such as Wal-Mart, Home Depot, Cabela’s and other stores.

In Tulalip Tribes v. State of Washington, the Tulalip Tribes challenged the state and Snohomish County’s collection of certain sales and business taxes at Quil Ceda Village. But the District Court for the Western District of Washington held the state and county were not preempted by the BIA’s 2013-issued regulations or tribal sovereignty from collecting those sales and business taxes. That’s no small cut of revenue. As the National Law Review reported: “In 2015, Washington collected more than $31 million in sales tax from the Quil Ceda Village shopping area, and Snohomish County collected more than $10.2 million.”

The National Law Review article, co-written by four K&L Gates attorneys (Bart J. Freedman, Benjamin A. Mayer, Francesca M. Eick and Christina A. Elles), concluded:

“The Cougar Den decision, once issued, is likely to have lasting impacts on taxing in and related to Indian country in the Pacific Northwest. It will join the 2013 regulations to form the basis of modern law on tribal taxing issues. Parties who are conducting and/or considering conducting business within Indian country and with Indian tribes, in the Northwest and around the United States, should stay tuned for the result.”







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