Suppliers, competitors complain tribal fill-up has unfair advantage

After years of disputes with local competitors, suppliers and politicians, a tribal gas station in Southern California has brought in some professional help.

But the Red Earth Travel Center in Salton City is likely to remain controversial. The Torrez Martinez Indian Tribe, with nearly 800 members, opened it near their Red Earth Casino about seven years ago. But Imperial County District 4 supervisor Gary Wyatt claims the tribe is not collecting state taxes, and owes millions.

Capitol Weekly spoke to several officers of the tribe, but all declined to comment about the Travel Center or the tax issues. A major tribal fuel wholesaler, First American Petroleum, said they were coming in on short term basis to help the tribe.

For Wyatt, however, the issue is clear.

“They don’t have a problem collecting it (sales taxes),” Wyatt said. “They just don’t remit it. They keep it as extra profit.”

The issue is not unique to Salton City. Other rural businesses competing with tribes have similar concerns across the state.  Reached at a meeting of the Regional Council of Rural Counties in Sacramento on Wednesday, Wyatt said a lot of representatives of other rural counties were worried about tribal run gas stations in their own areas.

He added: “There doesn’t seem to be any power within the state to go after them and force them to pay the money.”

Indeed, Wyatt has been pushing the state Board of Equalization (BOE) to investigate the tribe since 2009. In a letter to the BOE in October of that year, he urged them to investigate and assess back taxes.

“Indian retailers have an obligation to collect these taxes on non-Indian customers,” said BOE spokeswoman Anita Gore. She declined, however, to discuss Red Earth’s potential sales tax liability.

Sales are exempt from state taxes only when fuel is purchased and used by a tribal member on tribal land, she said. She added that agency policy would not allow her to comment whether they were going to take any action against “a particular taxpayer.”

The agency issues a regularly-updated document called Publication 146: “Sales to American Indians and Sales in Indian Country,” which states, “There are no special exemptions from the state’s motor vehicle or diesel fuel taxes related to fuel sales in Indian country.”

But Robert Ramsey disagrees. He’s the founder and CEO of First American Petroleum, which specializes in selling fuel to tribal gas stations. The company is licensed as a tribal business under the Yakima Indian Nation in Washington State, of which Ramsey is a member.

“The states don’t like it that we have the ability to deliver fuel without any state tax,” Ramsey said. “States always take this position until they go down that road and find out that everything we do is completely above board.” He said there are no pending legal actions against his company around taxes.

A call to the Red Earth Travel Center showed that the price for a gallon of unleaded regular was $3.39 – except they didn’t actually have any gas in stock to sell. Ramsey said that the tribe was having some issues managing the station, and that his company is stepping in with “some technical advice.”

“That’s what we do, we help Indians in Indian country,” Ramsey said, adding, “It’s just not that easy to start up a fuel station,” due to the quickly changing fuel prices and other variables.

But the tax issue is only part of a long list of disputes the tribe’s travel center has caused with local politicians and businesses. Reed Sellers, owner of Sellers Petroleum in Imperial, said that he began working with the tribe back in 2003, when they first conceived putting a gas station near their casino.

For three years, Sellers said, he was the tribe’s gas wholesaler. But by 2008, the tribe owed him $200,000, so he cut them off. But Sellers also had commercial clients who were able to use cards to fill up at several different locations, including Red Earth. So he said that he stopped paying them for these purchases until the debt was paid off over a period of 16 months.

What he didn’t know at the time was that the tribe wasn’t paying sales taxes to the state on their or any other fuel sales. Sellers said he is in a dispute with the BOE, who says that he owes them $30,000 in back taxes from these sales. He claims that by law the tribe is supposed to pay these taxes, but the BOE is not attempting to collect.

“They say they’re a sovereign nation so they don’t have to pay the tax,” Sellers said. He added, “California is turning their heads and refusing to do anything about it.  They’re forcing us to pay these taxes that are owed by the tribe.”

After he stopped selling to them, Sellers said that Torres Martinez turned to another wholesaler who is now out of business, partly because the tribe stopped paying him as well.

Dennis Rieger is the owner of an Arco station six miles south of Red Earth on Highway 86. Rieger said he opened his station two years ago and at first undercut Red Earth by a few cents. The two stations are essentially locked in a one-on-one competition, as the next-closest station is another Arco, 29 miles north of his station and 23 miles from Red Earth.

For a time, he said, Red Earth lowered their prices and were undercutting him by 18 cents – something he said would be unsustainable if they weren’t paying their taxes. As of Wednesday, however, he was charging six cents less — and actually had gas on hand.

Rieger said he has written letters to both the BOE and the state Attorney General’s office, complaining that the tribe’s refusal to pay their taxes and their use of out-of-state gas – First American ships out of Las Vegas – gives them an unfair competitive advantage. But like Sellers, he said he hasn’t been able to get the state to do anything.

“I would appreciate enforcement on both of these issues so I can stay in business,” he concluded in a letter to the AG’s office in November.