Trial begins over sales tax at Quil Ceda Village

SEATTLE — Dueling attorneys described Quil Ceda Village in starkly different terms Monday during the first day of a federal trial. They are asking a judge to decide who has the right to collect millions of dollars in sales tax each year at the tribal-owned shopping hub — and who doesn’t.

In opening statements, an attorney representing the Tulalip Tribes chronicled nearly five decades of work to develop barren, polluted land along I-5 into a bustling place of commerce that draws tens of thousands of visitors every day. The tribes and the U.S. government poured millions upon millions of dollars into the road network, electrical grid, sewer and other essentials. The state and the county “watched from the sidelines” as the area took shape, but “now appropriate 100 percent” of the sales tax collected there, attorney Cory Albright argued.

“But for these federal and tribal efforts, there would still be nothing on these 2,100 acres,” Albright said.

Daniel Dunne Jr., a private-practice attorney hired for the case as a special Snohomish County deputy prosecutor, argued the other side.

“I think the tribes are being somewhat ungenerous to the state and the county,” Dunne said. “They are not on a tribal island. They are not unconnected to the outside world.”

Dunne and an assistant state attorney general described the outside government services that support Quil Ceda Village, its shoppers and employees: freeways, highways and schools, the court system, firearm background checks and more. The tribes’ investments there, he said, are “typical of any mall.”

The Tulalip Tribes sued Washington state and Snohomish County in 2015. They’re arguing that federal law pre-empts the state or county government from collecting sales tax at Quil Ceda Village. The tribes say they need the money to provide services like any other city, such as permitting, building inspections and business licenses

The trial is expected to last until the end of the month. The sides will file closing briefs 10 days later. U.S. District Judge Barbara Jacobs Rothstein will issue a decision after that.

“The Tulalip Tribes laid down the foundation of our argument today for why we should keep the taxes that are generated in our tribal municipality,” Tulalip Tribal Chairwoman Marie Zackuse said in a statement Monday. “One that was built with our own resources, and for which we supply critical infrastructure and government services, including police and fire.”

At stake is nearly $27 million for the state and another combined $8.9 million for Snohomish County and Community Transit, based on 2016 tax collections.

Of the local share of those taxes, just under $6 million went to the county. That’s enough to pay for 40 sheriff’s deputies, the judge was told. About three-quarters of the county’s $249 million operating budget goes to public safety.

The implications could extend well beyond the county. A loss could result in the state no longer being able to collect sales tax from non-Indian owned businesses operating on lands held by the other 28 federally recognized tribes in Washington. Alternatively, the judge could issue a narrow ruling to limit the effects to Quil Ceda Village.

The U.S. government has intervened to support Tulalip’s case. Daron Carreiro, a U.S. Justice Department attorney who specializes in Native American affairs, said the tribal government, “hasn’t been able to implement its own laws on its own territory.”

Assistant State Attorney General Heidi Irvin said tax revenues collected there are “not a prize that goes to the government that has spent the most money on infrastructure projects.” Irvin said there’s no evidence of Tulalip facing financial hardship, judging by the $100 million investment in a new casino the tribes announced last year.

The tax rate at Quil Ceda Village is 8.9 percent. That compares to 9.1 percent in Marysville.

The county’s lawyers say there’s nothing stopping tribal government from imposing an additional sales tax. The tribes argue that would amount to double taxation — and could put Quil Ceda Village stores at a competitive disadvantage.

The land that makes up Quil Ceda Village was condemned by the U.S. government for use as an ammunition depot during World War II and the Korean War. The Tulalip Tribes later leased the land to the Boeing Co. That arrangement remained in place until the late 1990s.

Walmart was the first major tenant to arrive in 1999. About 150 non-tribal businesses are there now, including Cabela’s and Seattle Premium Outlets.

Quil Ceda Village is governed by a council with similar authority to a city council.

The shopping magnet has helped provide tribal members with brighter economic prospects. In 1970, unemployment on the reservation was 72 percent. Les Parks, who serves on the tribal board, remembered graduating high school to dim job options. When he first joined the board, in 1996, he witnessed a crucial step toward transforming the Boeing site: the opening of the 88th Street overpass funded by the tribes and the federal government. At the time, 88th was a dirt road on the Tulalip side.

“We knew that our elders had set this land aside for us decades ago,” Parks said. “We have needs like every other government. We’re on our own, basically. That’s what this is all about: Our future generations and our right to self-regulate and our right to be who we are as a sovereign nation.”

Noah Haglund: 425-339-3465; nhaglund@herald net.com. Twitter: @NWhaglund.