Sales tax is the largest revenue source for area towns to provide community services. But Ignacio's sales tax revenue could take a significant hit if Southern Ute Tribal members and the tribe itself are exempt from paying any sales tax in town. The issue has been simmering sort of under the radar for months, if not years.
It goes back to 1984 when Congress passed PL98-290 as an addendum to existing federal law regarding Indians and specifically the Southern Ute Indian Tribe. It refers to jurisdictions within Southern Ute Reservation boundaries. It says, "The State of Colorado shall exercise criminal and civil jurisdiction within the boundaries of the town of Ignacio, Colorado, and any other municipality which may be incorporated under the laws of Colorado within the Southern Ute Indian Reservation..."
A 2014 state law, HB14-1080, sponsored by State Sen. Ellen Roberts and State Reps. Michael McLachlan and Don Coram supposedly aligned state law with PL98-290. But there are differing opinions on how those should be interpreted.
Interim Town Manager Mark Garcia told the Times, "When Ellen Roberts carried the bill, she thought it was for big ticket items, but it's for everything."
Town and tribal representatives have been negotiating the issue for some time. Garcia indicated the town is frustrated with the process. Town officials talked with Roberts in a work session before the June 15 board meeting.
The board also met on June 1 to discuss the issue and then sent letters to the tribe and town businesses.
The letter to the tribe said, "The tribe has opted to reach out to vendors without considering the Town's draft language, which is unfortunate. ... To date, we feel that our concerns are not being heard, and your actions have been critical while not taking multiple factors into consideration... moving forward we want to discuss critical issues such as the fiscal impacts from the loss of sales taxes and high utility rates (charged by the tribe), and all the other work that is not moving due to this sales tax exemption issue."
The letter to vendors said, "The Southern Ute Indian Tribe recently notified Town vendors of changes to Colorado law that now creates sales tax exemptions for the Tribe and Tribal members. This law passed in 2014, and the town has been actively refuting the assertion that this law extends to vendors within the Town of Ignacio."
Language is ambiguous in both the 2014 state law and the 1984 federal law, the letter said, but the Colorado Department of Revenue has interpreted it to allow the exemptions. "The Town is not in agreement with this interpretation, nor the extent of the law," the letter said. It asked town businesses to keep records of sales taxes not paid by tribal members so the town can document the fiscal impact.
Garcia provided a town board resolution from 1983, signed by Mayor Frank Gallegos, stating the basis for town support of PL98-290. It cited desire to clarify law enforcement jurisdiction within the town. It also says, "WHEREAS, the Town has been assured... that nothing in this resolution would support the contention that Indians purchasing items within the corporate limits of the Town of Ignacio would not be subject to Town of Ignacio sales tax."
Tribal attorney Sam Maynes said Tribal Councilor Mike Olguin was at the June 8 Ignacio Chamber of Commerce meeting to advise chamber members of the sales tax exemption and the need for vendors to come into compliance. This is state, county and town sales tax on sales within the reservation to the tribe and tribal members. Eric Johnson, chief sales tax auditor for the State Department of Revenue, also was there "to affirm that the (2014) law applies to town vendors and the need for them to keep records."
Maynes asserted that there's no ambiguity in the 2014 law.
HB14-1080 says in part, "The General Assembly hereby declares that on-reservation sales to the Ute Indian Tribes and tribal members are exempt from state and local sales taxes and use tax under federal law..."
The purpose included codifying the exemption to reflect the Department of Revenue's interpretation of current law and continue the department's policy of not requiring a purchased vehicle to be delivered onto the reservation for the exemption to apply.
The law also says, "All sales of tangible personal property or services to the Southern Ute Indian Tribe, Ute Mountain Ute Tribe, or an enrolled member of either tribe, are exempt from taxation under Part 1 of this article if the vendor is located" on the reservation or the product is delivered onto the reservation. Delivery is not necessary to get the exemption for a vehicle sold to an enrolled tribal member who lives on the reservation, and if the vehicle is registered to an address on the reservation.
The Fiscal Impact Note predicted a reduction of less than $5,000 per year to the state general fund. It indicated that the main change from existing law was to eliminate the vehicle delivery requirement to qualify for the exemption. It said the majority of tribal members living on the reservation "are already exempt from sales taxes."
As for local impact, it says, "This bill would affect the local sales taxes due on a few transactions per year, reducing local government revenue similar to the state revenue impact."
The 2016 budget projects $280,000 from town sales tax and $720,000 from the town share of county sales tax.
At the June 15 town board meeting, restaurant owner Dave Silva asked for guidelines, such as whether the exemption would apply to everyone on a meal ticket with a tribal member, or just the tribal member. He said he started that day to not charge the tax to tribal members. "I was really confused," he said.
Trustee Tom Atencio responded, "Good luck because we're learning too."
Silva said, "We will lose a ton of town revenue from the 7-11. Our town is little but it's nice."
Atencio questioned whether the town should continue pursuing the sales tax exemption issue. "I hate to spend more money on it if we aren't going to go anywhere," he said.
There was no formal vote on that, and it was unclear whether other trustees agreed with Atencio.
Another long-time issue for the town is the utility rates the tribe charges town customers for water, sewer, and natural gas. Last October, trustees opted not to pass on the latest tribal rate increases to customers because the prices, especially for sewer, were already considered high. They stated intent to look at the impact on town finances in mid 2016.
Garcia said there will be a mid-year financial report in July.
In January this year, Garcia advised trustees that the town needs to bring in more revenue to cover expenses. That would require voter approval to raise the sales or property tax rate.
Property tax is a very minor revenue source in Ignacio. Assessed valuations are low, and voters have rejected property tax increases at least twice in recent years.