This summer, Southern Ute Indian Tribal members can ask for sales tax exemptions at more businesses in Ignacio and be assured it will be granted.
“It’s been a gradual thing. ... Not everybody asks for it,” said Amos Lee, general manager of Farmers Fresh Market.
After some confusion about the law, the tribe held a meeting with the Ignacio Chamber of Commerce earlier this summer, and the grocery store and other shops and restaurants started granting the exemption, when customers present tribal identification cards. Some auto dealers had provided sales tax exemption on cars delivered to the reservation for some time.
The broad sales tax exemption pits tribal members’ rights against Ignacio’s need for cash to maintain the town.
“I think any loss of sales tax is going to pose a hardship to Ignacio. We don’t have a lot of revenue, and any loss is going to be significant,” said Interim Town Manager Mark Garcia.
The town’s sales tax revenues have been up recently, but that is likely driven by the new Family Dollar and grocery store.
Federal law put the exemption in place years ago, but it needed to be clarified by state law because there was confusion among stores and service providers, said Sam Maynes, an attorney for the Southern Ute Indian Tribe. So in 2013 and 2014, the Southern Ute Indian Tribe and the Ute Mountain Ute Tribe lobbied that the sales tax exemption be clarified in state law, and in 2014, clarifying legislation was signed by the governor.
State Sen. Ellen Roberts, R- Durango, sponsored the legislation, and she thought it would apply only to big-ticket items, such as cars, she said in an email.
“My intention was to bring state law in line with federal case law, per the tribe’s request and to clarify for the county clerk and for local car dealers, at their request, tax on sales of vehicles,”she said.
Ignacio’s leadership also believed the change would apply to large purchases like cars, Garcia said.
“The law has a broader reach than we understood,” he said.
Tribal members and all tribal entities, including tribal businesses are exempt from paying sales tax on all purchases within the town of Ignacio because it is within the reservation.
At this point, a lawsuit against the state may be the only option, Garcia said.
“We have attempted to negotiate in good faith,” he said.
The Ignacio Town Board has met with tribal representatives mostly in executive session to seek a resolution, and officials with the two governments have talked about the tribe paying the town en lieu of the taxes.
The tribe is open to continued discussions, Maynes said.
The town cannot prove how much revenue is being lost because the Colorado Department of Revenue cannot break out the transactions exempted from sales tax for different reasons, Garcia said. Nonprofits and government entities can be exempt from sales taxes.
A bill to change the law would likely face opposition from Department of Revenue, the Colorado Attorney General’s Office and the tribe, Roberts said.
“They believe the statute and its current application is correct,” she said.
Lee, with Farmers Fresh Market, plans to generate a report that shows how much revenue is lost at his store for the town. But it’s unlikely every business in town would be able to do the same, he said.
While it’s not burden on his business, he would like to see the tribe and the town work together to resolve the issue because Ignacio does not have a lot of tax revenue.
“What’s important for this community is that people can get on the same page and work together,” he said.
mshinn@durangoherald.com
