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Tribes and gaming roundup

A growing number of California Indian tribes have opened gas stations, often undercutting local competition by not charging state sales tax.

But the state Board of Equalization may put a kibosh on the practice. In a March 9 legal opinion, BOE tax counsel Carolee Johnstone said that tribes and tribal suppliers must pay most of the taxes in question—something that could quickly take away their competitive advantage.

“Indian and non-Indian retailers are required to collect and remit to the BOE use tax on on-reservation sales of tangible personal property, including gasoline and diesel fuel, to non-Indians and to Indians who do not reside on a reservation,” she wrote.

In other words, it is Indian customers who are exempt from taxes, not Indian retailers – and then only if the Indian lives on the reservation where the transaction takes place. This is important because a significant proportion of sales at many Indian gas stations are to non-Indians. For instance, several tribes own stations located next to casinos, though many of these have been paying taxes. Even tribal members themselves, the opinion states, must general apply to the state for repayment of these taxes after the fact.

The opinion also takes on the Yakama Tribe of Washington State, and First American Petroleum, though it doesn’t mention the tribal gasoline distributor by name. The company, owned by a Yakama Tribal member, has made a business selling off-label gas to tribal gas stations across the west.

Part of the Yakama’s claim to being tax exempt is based on an 1855 treaty between the tribe and the federal government, which spells out the tribe’s right to use the highways for trade. According to Johnstone, the BOE is not charging the Yakama’s for the use of the highway, but have the right to charge them taxes on the actual goods they transport.

“It is our opinion that neither the imposition of the requirement to pay prepaid sales tax nor the imposition of excise tax on fuel imported by Yakama enterers, as described above, violates the right to travel language set forth.”

While the BOE letter mostly does not lay out proposed actions the agency plans to take, it makes it clear that tribal distributors could be in their sites.

Would Chesbro bill create “state recognition”?

Assemblyman Wesley Chesbro, D-Eureka, has put forward a bill designed to make sure state agencies better cooperate with Indian tribes in California. But some worry that his AB 968 would open the door for so-called “state recognition” of Indian tribes, in conflict with the federal government, which currently has sole legal authority for determining who is a legitimate tribe.

The bill “would require all state agencies to cooperate with federally recognized California Indian tribes pursuant to these provisions.” But it would also “require every state agency to adopt a policy of communication and consultation with, and require the governor to meet at least annually with elected officials of California Indian tribes, regardless of whether a tribe qualifies as a federally recognized California Indian tribe.”

“My concern is the language of this creates state recognition of tribal groups,” said Cheryl Schmit, with the casino watchdog group Stand Up for California.
Schmit sent an opposition letter to Chesbro on Wednesday outlining her concerns. She notes that there are currently 72 groups in California seeking federal recognition, and warns that the creation of so-called “state recognition” could create regulatory chaos. Some tribes that have been frustrated in the federal route have also sought versions of state recognition in connection with efforts to open casinos.

Chesbro was not immediately available for comment. It should be noted that the bill hasn’t moved since being introduced on Feb. 18. It currently sits in the Assembly Governmental Organization Committee.

Correa ups the ante with SB 40 amendments

Sen. Lou Correa, D-Santa Ana, has added amendments to his online poker bill, SB 40, that would increase the number of sanctioned website hubs from three to five. But there’s a catch – three of these sites would get a head start on the other two.

According to amendments introduced on March 31, the California Gambling Control Commission would authorize three sites, then add “up to two additional Internet poker websites” within three years.   

But opponents of Correa’s approach say one particular group – and one particular member of that group – is really the driver behind the bill and the amendments. SB 40 is supported by the California Online Poker Association (COPA). The association, in turn, has largely been driven by the Morongo Band of Mission Indians, one of the largest and most-established gaming tribes in the state.

“These amendments were generated by Sen. Correa’s office in consultation with a variety of related interest groups,” said Ryan Hightower, a spokesman for COPA. “With regard to your second question, the state doesn’t want to flood the market too early and water down potential revenues.  Additionally, DOJ will need time to establish regulatory practices for that many sites.  By requiring a report within three years, the market will be well-regulated when the other sites launch.”

The Morongos have been pushing the idea since 2008, when then-Assemblyman Lloyd Levine put forward a poker bill. They opposed that effort, which gained little headway, but the Morongos have been building a coalition ever since. According to sources, representatives of Morongo have clashed publicly with those of the Pechanga Band of Luiseño Indians and others at meetings of the California Nations Indian Gaming Association (CNIGA) about the direction of Internet poker legislation.

Patrick Dorinson used to be a spokesman for COPA and Morongo, but has since gone to work for the rival Poker Voters of America. He took aim at the amendments, saying there was still too much exclusivity written into the bill.

“If you look at their demands, they would appear to give special treatment to COPA and carve out a site for them,” Dorinson said. “I think it’s highly unlikely that kind of bill would get consensus in the Legislature. The way to do this is have an open market, where all current California licensees, tribes and card rooms, could have their own sites.”

Correa’s bill is one of two poker proposals currently alive in the Legislature. The other is SB 45 by Sen. Rod Wright. It also lays out licenses for three operators, but contains fewer specifics and is more aimed at creating a general framework for online gaming.

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