Millions at stake in Tulalip lawsuit over sales tax revenue

The tribes want the taxes collected at Quil Ceda Village, which now go to the county and state.

TULALIP — A high-stakes trial set this spring could decide who gets to collect millions of dollars in sales tax generated each year by stores on Tulalip tribal land.

The Tulalip Tribes sued the state of Washington and Snohomish County in 2015. In a federal lawsuit, lawyers for the tribal government seek the right to tax sales at Quil Ceda Village. Most of the sales tax collected there now flows to Olympia and Snohomish County.

The tribes want to levy their own taxes because, they say, they see little in return in the way of state roads or other infrastructure. To avoid double taxation, the tribes want to bar the state or county government from collecting taxes at its retail hub.

A bench trial is scheduled in U.S. District Court in Seattle starting May 14. It’s expected to last 10 days.

Whatever the legal outcome, County Executive Dave Somers promised to try to keep all parties as whole as possible. The tribes and the county already work closely on land use and other issues.

“There is a long list of services we provide broadly to all of the citizens of the county,” said Somers, who previously worked for the Tulalip Tribes as a biologist. “We’re going to try to work together as governments. They’re not going anywhere and we’re not going anywhere.”

Even so, all sides are gearing up for court. Earlier this year, the County Council increased its contract with an outside law firm, Orrick, Herrington & Sutcliffe, by up to $200,000, to a maximum of $275,000.

In a court declaration, Glen Gobin, a past member of the Tulalip Board of Directors, described growing up on the reservation, when the land that’s now Quil Ceda Village was leased to the Boeing Co. as a test facility. It was off-limits to the Tulalips, who owned the land.

When Boeing left the site in the 1990s, tribal government was looking for new economic opportunities. They settled on the retail concept and set out to create the road connections and regulations to make it happen. Walmart opened in 2001 and The Home Depot about a year later.

“While we’ve been successful in developing the Village until this point, without tax revenues, we face significant financial barriers as we consider future development,” Gobin said in the court filing. “There are infrastructure projects, such as those necessary to develop west of 27th Avenue, that we have not been able to move forward on.”

The tribes incorporated Quil Ceda Village as a separate government, just like any other city or town. It needs to keep up “with growing infrastructure and service needs, such as addressing increased traffic and providing adequate police protection,” Gobin wrote.

Up to this point, Tulalip has subsidized Quil Ceda Village through cigarette and gaming revenues, which it would like to put to other uses. Tulalip receives about $6 million in annual lease payments and fees from Quil Ceda Village businesses.

In a court filing, lawyers for the tribes said the state and county “siphon off tax revenues from an economy that they have done nothing to create or sustain.”

For the county, losing the case could deal a heavy financial blow: an estimated $8 million loss to the yearly operating budget.

Shortly after the lawsuit was filed, county officials speculated that losing that much tax revenue could eliminate up to 90 county government jobs. Three-quarters of the county operating budget supports public safety, including the sheriff’s office, the jail, deputy prosecutors and the court system.

Quil Ceda Village covers more than 2,000 acres along I-5 west of Marysville. It’s a federally chartered city on tribal trust land. The more than 150 businesses there include Cabela’s and Seattle Premium Outlets.

The state Department of Revenue recorded $413.8 million in taxable sales there during 2016. That generated an estimated $26.9 million in tax revenue for state government and another $8.9 million for local government. The county receives most of the local portion, with a smaller amount going to Community Transit.

This isn’t the only recent tax tussle over tribal lands.

Snohomish County in 2014 refunded about $5 million in property taxes collected from Quil Ceda Village businesses for schools, fire districts and other local governments. The county paid back the money to comply with a federal court ruling in favor of the Chehalis Tribe over property taxes levied on the Great Wolf Lodge in Thurston County. Tulalip leaders hailed that decision as a victory for tribal sovereignty.

Noah Haglund: 425-339-3465; Twitter: @NWhaglund.

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