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.

How much of your gas prices are going to Washington State in taxes?

As gas prices continue to climb, Washington’s commuters may be surprised to find out how much of each gallon they drive goes back into maintaining the roads and highways they use every day. Fuel tax information is not broken down on any type of payment receipt when you fill up your tank. Let’s take a look at how the taxes are distributed for each gallon of gas in Washington State.

The gas tax that is collected is split amongst counties, cities, and state accounts. About half of the fuel tax goes to support the Washington State Department of Transportation’s ferry system and highway programs. Any highway repairs or construction projects come from this money.



Source: WSDOT



The other half of the state fuel tax is given to cities and counties within the state. This money is put towards maintenance and construction of roadways that are not highways in the state. Either way, the fuel tax money collected from the state gets distributed directly back into Washington’s roadways.

During the second half of 2011, Washington state ranked 7^th in the nation (and the District of Columbia) for amount of state and federal fuel tax charged per gallon of gas. Washington’s current tax rate is 37.6¢/gallon. While this is higher than the national average of 27.6¢, some states like New York and Illinois charge upwards of 50¢/gallon in fuel tax. Alaska charges the least in state fuel tax at just 8¢/gallon.





Source: Citizen's Guide to the Senate Transportation Budget

 

 

All states are charged a federal fuel tax in addition to their individual state’s fuel tax. The federal rate is set at 18.4¢, which has not increased since 1993. When you add the federal fuel tax to the state’s fuel tax, Washingtonians pay 56¢ on every gallon of fuel.

The fuel tax is a regressive tax since all income levels pay the exact same in taxes. Poorer families that still have to commute to work, often traveling long distances, have to pay the same amount in taxes as the most well-off commuters who have more flexibility to move closer to their workplace. As a percentage, the less economically stable you are, the more of your income is paid in taxes when you fill up the tank. For the middle and higher classes, a smaller percentage of their overall income is paid in fuel taxes.

While prices at the pump fluctuate based on crude oil prices per barrel, the state and federal taxes you pay do not account for the bump.