The Indian Tax Double Standard

Ryan Dreveskracht points out the double standard of sales tax in Washington State: the Department of Revenue turns a blind eye to the sales taxes it loses when Washington citizens drive to Oregon to make large consumer purchases. Meanwhile, the state vigorously enforces its tobacco sin taxes on Washington citizens who drive to Indian reservations to purchase cigarettes. Similarly, Idaho Governor Butch Otter infamously wrote a love letter to Washington and Oregon businesses, seeking to woo them to Idaho by promising lower corporate income taxes. Washington responded in kind: ("States trying to attract each others' businesses"). Still, nobody accused any Northwest state government of "marketing a tax advantage" or "creating an unlevel playing field." Meanwhile, tribal governments that leverage their favorable sovereign tax status are perennially accused of doing such things by their neighbor governments.

In addition, state and local governments can issue tax-exempt bonds for economic development projects like hotels, convention centers, golf courses and recreation facilities to promote their economic development. Meanwhile, the IRS has determined that like-kind hotels, convention centers, golf courses and recreation facilities on Indian reservations do not serve "essential governmental functions." As such, tribal governments cannot avail themselves of cheaper capital.

On June 15, the Internal Revenue Service Advisory Committee on Tax Exempt and Government Entities issues a report, which in part concluded that: "the [tribal] essential governmental function standard should be eliminated. Achieving at least parity with state and local governments in terms of access to low cost capital for more wide-ranging economic development projects has been an unmet goal of the tribes for decades." Agreed.

The Indian tax double standard. Will it ever end? Will there ever be parity? I'm not optimistic.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  He can be reached at 206.691.3631 or, or via