City moving to collect sales tax from tribally owned retailers

SHAWNEE, Okla. – An Oklahoma town is asking its local tribal businesses to start making mandatory contributions to its sales tax coffers.

On Feb. 4, Shawnee mayor Wes Mainord sent letters to the leaders of the Absentee Shawnee Tribe, Citizen Potawatomi Nation, the Kickapoo Tribe and Sac and Fox Tribe requesting meetings later this month to discuss collecting city sales tax revenues generated by purchases made by non-Natives at tribally-owed stores located within the city’s tax base. Part of the 8.5 percent sales tax on purchases made in Shawnee is a 3 percent tax assessed by the city.

“While we welcome economic development in our community and intend to work with you to increase the standard of living of our shared standard of living in Pottawatomie County, the city is concerned about the decrease in its sales tax revenues and thus its ability to provide its citizens, including many members of the tribal nations you lead with necessary services,” Mainord wrote. “The city has no choice but to take steps to secure its sales tax revenues for sales within the city limits.”

Mainord has requested that the four tribes either establish a monthly payment in lieu of taxes arrangement or have their businesses report to the city the same way that non-Native retail outlets report to the Oklahoma Tax Commission. As per the U.S. Supreme Court’s 1991 ruling in Oklahoma Tax Commission v. Citizen Band of Potawatomi Indians, tribes do not have to remit state sales taxes on purchases made by tribal citizens on tribally-owned businesses located on reservations or trust land. However, the decision does not say anything about taxes levied by county or municipal governments, and many other tribal retail outlets across Oklahoma – including those run by the state’s largest tribe, the Cherokee Nation – do not assess city sales taxes on tangible purchases.

The letter came after a unanimous vote by the Shawnee City Commission in December 2013 to penalize any delinquent or fraudulent sales tax reports submitted by retailers within the community.

“The City Commission has discussed this matter in the context of collecting sales tax from all of our retail businesses,” Shawnee City Manager Brian McDougal said via email. “The tribal enterprises have grown and ventured into the retail arena, and as such since they are also retailers in the city we are requesting they remit sales tax to the city, just as we are requesting non-tribal entities to collect and remit it.”

Attempts to confirm declining sales tax revenue with the city were unsuccessful. According to commission meeting minutes published on the city’s website, sales tax revenues have increased five of the last six fiscal years, with the lone exception being 2009-2010. Sales tax revenue accounts for about 10 percent of the city’s budget.

The largest of the four tribes involved, Citizen Potawatomi Nation has a discount grocery store, a gift shop, a casino and two convenience stores that would potentially be impacted if the tribe is forced to start making payments to the City of Shawnee. One of the largest employers in Pottawatomie County, the tribe employs 2,200 people and has an estimated economic impact of more than $522 million.

In an effort to level the playing field, the tribe assesses the same 8.5 percent sales tax on purchases made at its stores as those made at non-tribal stores in the area, but puts a portion of its tax revenue towards scholarship funds and other tribal programs rather than send in money to the City of Shawnee.

For John “Rocky” Barrett, the chairman of the Citizen Potawatomi Nation since 1985, the city’s request presents not only a legal challenge, but a logistical one as well if enforced.

“What am I supposed to do?” he asked. “Stop every customer and make them show me their CDIB card?”

Citizen Potawatomi Nation officials estimate that if forced to start remitting sales tax payments to the City of Shawnee for purchases made by non-Natives at its businesses with a Shawnee ZIP code, they would be sending in about $640,000 annually. They also emphasized Wednesday that that figure was a ballpark number due to the lack of demographic data on its customers.

Barrett also disputes the city’s claim that the tribe’s complex and retail outlets – which are on trust property – are within the city limits. Dating back to 1867, the tribe has no documentation of the land ever being formally annexed by the City of Shawnee and its government complex does not receive any utilities from the city. Instead, with its own sewage plant and rural water district, the Citizen Potawatomi Nation provides many of the services independently for residents in far southern Shawnee.

“They don’t have a legal claim to our money,” he said. “They’re claiming criminal jurisdiction to go after non-payment. Our statutes read it’s illegal to claim money under false pretenses.”

Attempts to reach the leaders of the three other tribes potentially impacted by the City of Shawnee’s request were unsuccessful.

The Absentee Shawnee Tribe’s complex has a Shawnee mailing address, as does the tribe’s gift shop and one of its casinos.

The Kickapoo Tribe is headquartered in McLoud, Okla., 15 miles to the northwest, but operates a casino and a convenience store within the Shawnee city limits. Shawnee is also on the southern edge of the Sac and Fox Tribe’s jurisdictional area and is home to that tribe’s housing authority, one of its casinos, a multipurpose facility and two tribally-licensed smoke shops.

All four tribes were asked to respond by Feb. 14 to the request for a meeting or the City of Shawnee would proceed with other legal options available to collect the money, including possible litigation. After finding out about the city’s ultimatum in the Shawnee News-Star, Barrett said his tribe would ask for more time before agreeing to a sit-down meeting, but is prepared to go to court if necessary.

“Every tribe in the state is at risk if Shawnee goes through with this and is successful,” Barrett said.