WA tribal fuel tax agreements creates a 75/25 split in taxes.

Washington has 29 federally recognized tribes in the state and an additional 7 non-federally recognized tribes. As sovereign nations, it has always been difficult reaching an agreement on how 
the state and the tribes interact when it comes to public service and taxing. Washington State has tried to mitigate some of this confusion over fuel taxes by working with the tribes so that both the needs of Washington’s roadways and the rights of the tribes can be met.

State law allows the Governor to:

 “Enter into an agreement with any federally recognized Indian tribe located on a reservation within this state regarding motor vehicle fuel taxes included in the price of fuel delivered to a retail station wholly owned and operated by a tribe, tribal enterprise, or tribal member licensed by the tribe to operate a retail station located on reservation or trust property. The agreement may provide mutually agreeable means to address any tribal immunities or any preemption of the state motor vehicle fuel tax”

This agreement which started in 2006, credits 75% of the state fuel tax back to the tribes. The agreement makes it easier for the tribes to charge less for fuel than most non-tribal fuel stations. The tribes are required to pay 100% of the state fuel tax upfront, but afterward they are given a reimbursement for 75% of the fuel tax. The state keeps 25% of the revenue. You might remember our previous post on state fuel tax, if not; check it out to see how the taxes collected from your fuel are spent in the state.

As part of the law, the tribes must abide by laws regulating the quality of gasoline and only purchase gasoline from lawful distributors. The tribes are required to spend the proceeds they received from the fuel tax on highway purposes which includes construction, maintenance, transit, planning, and policing of the roadways. This agreement also stipulates that the fuel tax transactions can be audited and therefore must be auditable. The pricing of fuel at tribal gas stations is supposed to be comparable with the rest of the state. The Department of Licensing (DOL) oversees this agreement and is required to publish an annual report to the legislature on updates to the fuel tax agreement between the state and the tribes. DOL publishes a listing of which tribes and distributors are participating in the agreement.

The fuel tax agreement is controversial to some people. Of course the state has agreed to opt out of a large percentage of revenue.  In 2010, almost $32 million was refunded to the 22 tribes that opted into the agreement. While this may sound like a lot of money, the 25% of the tax that’s collected from the gasoline sold by the tribes, generated $7.7 million that went back into the state’s roadways.

As I mentioned earlier, the taxes refunded to the tribes must still be spent on highway purposes. Many transportation projects have benefitted from this agreement such as:  

The state is currently involved in a lawsuit with the Automotive United Trades Organization (AUTO), which is claiming that the fuel tax agreement violates the state constitution, because, the 18th Amendment of the state constitution requires that:

 All fees collected by the State of Washington as license fees for motor vehicles and all excise taxes collected by the State of Washington on the sale, distribution or use of motor vehicle fuel and all other state revenue intended to be used for highway purposes, shall be paid into the state treasury and placed in a special fund to be used exclusively for highway purposes

The claim is that because the audited information is not available to the public and is only provided to DOL, no one really knows if all the money is being spent on highway purposes. The Seattle Times reported on this issue during the 2012 legislative session, and the article touches on some legislation that was introduced regarding this issue.