DARRINGTON — The Sauk-Suiattle Indian Tribe is suing the state Department of Revenue over the collection of sales tax from tribal members’ online purchases despite a federal tax exemption.
In a suit filed this week in U.S. District Court in Seattle, the tribe said it is seeking “declaratory and injunctive relief” from collection of the state’s 6.5% sales tax on online purchases. The state Department of Revenue and its acting director John Ryser are named as defendants.
Online retailers began collecting sales tax from buyers according to their shipping addresses in 2018, following a U.S. Supreme Court ruling determining sellers had to collect taxes on behalf of states that impose them. But federal law has long exempted enrolled tribal members on reservations from sales taxes, with a few caveats.
To qualify for the exemption, goods must either be purchased on a reservation or be delivered to the tribal member on a reservation.
Jack Fiander, general counsel for the Sauk-Suiattle Tribe, said these restrictions present an unnecessary hardship for both tribal members and vendors. If a resident of the tribe’s reservation 5 miles north of Darrington wants to purchase a car, they can’t just drive it off the lot. The seller has to deliver the vehicle to the reservation to qualify for the tax break. This often incurs more fees than the sales tax exemption is worth, Fiander said.
The greater concern, though, is the principle of the matter, Fiander said.
Items used for tribal fishing, hunting or gathering are tax-exempt regardless of where they are delivered, according to the Department of Revenue’s site. A form is available from the department for tribal members to request tax refunds from purchases made off-reservation, but it requires applicants to confirm the purchase was delivered to a reservation. Washington’s process for out-of-state tax refunds requires applicants to provide proof of residency, but makes no distinction as to where the purchase was delivered.
In other words, an Oregon resident could buy a car in Washington and drive it off the lot — they just have to submit receipts later, and they’ll be reimbursed the sales tax.
The suit alleges this constitutes discrimination against the tribe. Not everything can be delivered to the Sauk-Suiattle reservation in the Cascade foothills, Fiander said, and there aren’t a lot of alternatives. The only brick-and-mortar retailers on the remote reservation are a convenience store and a small grocery store. Online purchases are often the best way to buy everything from everyday household needs to critical supplies for the tribal medical clinic, Fiander said.
More importantly, the imposition of sales tax constitutes a threat to tribal sovereignty, Fiander said. He said the tribe doesn’t feel they should pay state taxes for benefits they don’t receive.
“For something to actually, legally be a tax, that revenue has to be used to provide government services,” Fiander said. “But (the tribe) provides water, garbage, preschool, law enforcement, all those services, at its own cost. So ultimately, it’s sort of like you’re making a gift to the state in return for nothing.”
In a written statement, Sauk-Suiattle Tribe Chairman Nino Santos II said the tribe’s ancestors exchanged millions of acres of land “at great hardship” for a reservation governed by their own laws. The tribe already imposes its own tax to cover the services it provides to residents, he said.
“Although the 6.5% of the Washington State Sales Tax is small, this is a sovereignty issue,” Santos said. “Given the impoverishment of our people, placing a sales tax in addition to what they already pay only worsens the condition.”
A spokesperson for the Department of Revenue said in an email Wednesday the complaint had been received and was being reviewed by legal counsel. The spokesperson said the department “does not engage in discrimination while administering the state’s tax laws.”
Fiander said the tribe was not seeking repayment on a grand scale by filing the suit. Rather, members want the state to acknowledge their sovereignty, he said. A declaration from the department or a court affirming that the tax has been unjustly applied would be “highly satisfactory,” he said.
But going forward, Fiander said the tribe hopes a solution can be found. In 2020, the Tulalip Tribes struck an agreement with the state to share sales tax proceeds from the tribes’ Quil Ceda Village business park near Marysville. That compact laid the groundwork for all Washington tribes to negotiate similar deals, but Fiander said the Sauk-Suiattle Tribe wouldn’t be in the same position given the lack of major businesses on the tribe’s reservation.
The solution could even be as simple as asking online retailers, like the Washington-based giant Amazon, to offer options for tribal members to use their exemption. Amazon doesn’t charge sales tax if a buyer ships a purchase to Oregon, Fiander said, so he thinks it would be possible to do the same for addresses on reservations with proof of tribal membership.
“Every incremental increase in expenses, even if it’s just a bit, counts here,” Fiander said. “But mostly, it’s a recognition of our status. And that counts a lot.”