Tribes closing in on ability to share sales tax with state

OLYMPIA — A bill clearing the way for the state and Tulalip Tribes to stop fighting over sales tax dollars and start sharing them is on its way to the governor’s desk.

The state Senate on Thursday approved House Bill 2803 to allow the governor to negotiate compacts with tribes that divvy up the state’s portion of sales tax collected from non-tribal member businesses on reservations. Gov. Jay Inslee is expected to sign the bill which passed the House last month.

The impetus for the legislation is an agreement the Tulalip Tribes reached earlier this year with the state and Snohomish County to settle a federal lawsuit on who is rightfully entitled to sales tax receipts generated at the booming Quil Ceda Village shopping center.

Under the deal, the tribe would receive an estimated $4.1 million this budget cycle, with the sum growing to an estimated $30.2 million in 2025. Snohomish County, meanwhile, would continue receiving all its regular sales tax allotment.

And the tribe agreed to spend up to $35 million to design and build a 48-bed civil commitment center in the county, a capital investment sought by the state.

Once House Bill 2803 becomes law, the state and the tribe can write the terms of that three-party agreement into the state’s first sales tax revenue-sharing compact.

“We are so pleased that we finally brought this to the finish line,” said Tulalip Tribal Board Chairwoman Teri Gobin on Friday. “That money will be put right back into the local economy.”

She said the tribe has been trying for 20 years to get the state and county to enter into a compact for the sharing of some of the tax revenues generated within Quil Ceda Village. A compact will provide certainty for future economic development and assure a revenue stream to pay for infrastructure and governmental services, she said.

In June 2015, the Tulalip Tribes sued the state and Snohomish County to stop the state’s collection of the tax on sales to non-Indians at non-tribal stores in Quil Ceda Village. The tribes contended it was their exclusive right, as a sovereign government, to tax the hundreds of millions of dollars in yearly sales at the thriving shopping destination. The U.S. Department of Justice backed the tribes in the case.

The village consists of 2,100 acres of shops, a resort and a casino, but no homes. Major shopping attractions include Seattle Premium Outlets, Cabela’s and Walmart.

In 2016, the state collected nearly $27 million in sales tax on more than $400 million in sales at Quil Ceda Village. Snohomish County and Community Transit took in another $9 million in taxes.

In October 2018, a federal judge ruled in favor of the county and state. The tribes appealed.

Last April, days before initial briefs were due to the U.S. Ninth Circuit Court of Appeals, representatives of the state Attorney General’s Office requested the county and tribes try mediation. Nine months of talks led to the Jan. 8 memorandum of understanding.

In the Senate, where the bill was debated Wednesday and voted on Thursday, Republicans attempted unsuccessfully to amend it. They also expressed concern about the potential loss of revenue to the state’s budget from revenue-sharing compacts with the other 28 federally recognized tribes in Washington.

An amendment proposed by Sen. John Braun, R-Centralia, sought to prevent any compact from taking effect until a federal appellate court ruled against the state.

“It was a convincing win,” he said of the 2018 decision, adding there’s “absolutely no reason” to think the Ninth Circuit Court of Appeals or U.S. Supreme Court would reach a different conclusion.

Senate Majority Leader Andy Billig, D-Spokane, said the parties had a settlement and “the purpose of the settlement is to avoid a further court case.”

Braun countered that it is a “proposed settlement. We are asked to see if it makes sense. I do not think it makes sense.”

The bill passed 32-16 in the Senate and 98-0 in the House.

Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com. Twitter: @dospueblos