State, tribe make deal over taxes

Tuesday, April 6, 2004 | 9:52 a.m.

CARSON CITY -- The Nevada Taxation Commission on Monday approved a first-of-its kind agreement with an Indian tribe in Reno in which the state will share in some of the tax revenue from business on tribal land.

Chairman Arlan Melendez of the Reno-Sparks Indian Colony said agreement will "help us to deter any conflict that leads to litigation." He called it a "win, win situation" in which the tribe recognizes that both it and the state have needs.

The colony has land south of Reno and it enticed a Mercedes Benz dealer from the Sacramento area to locate a franchise on the property. When this was disclosed late last year, there were complaints from local officials and others who said it would drain tax revenues away from local and state governments.

There were even suggestions that a special session of the Legislature might be needed to look at this issue.

There is an existing agreement that as long as the tribe charges the same amount of sales tax on an item sold as is imposed locally, it gets to keep the revenue.

So the tax collected on all cars sold by Mercedes will go to the tribe. The dealership opened last December and the tribe has kept the use tax in a separate account, Melendez said.

Chuck Chinnock, executive director of the state Department of Taxation, explained however the novel agreement provides that the state will receive the use tax on all leases of vehicles by Mercedes.

Chinnock told the Tax Commission that about 25 percent of the vehicle sales are actually leases. And the use tax is imposed on the monthly lease payments. That tax revenue will go to the state and local governments. Officials had no estimate on how much this agreement might bring into the local and state governments.

If the person leasing the car decides to buy it, the sales tax on that purchase will go to the tribe.

Tribal officials told the Tax Commission that the Indian land would "not be a tax-free haven."

Steve Moran, involved in economic development efforts for the tribe, said the money gained by the tribe will be used to build a health clinic. That should help save Washoe County some of what it currently spends on health care for indigents.

Under the agreement, the land is not taxed. The land, formerly agriculture property, was purchased by the tribe. But Mercedes owns the building and that is on the property tax rolls.

The tribe insisted that contractors who constructed the building buy their materials in Nevada and pay the sales tax, they said.

Bob Barengo, a member of the Tax Commission, said the tribes had worked long and hard with the state over the issue of taxation. He noted the tribes charge the same tax on reservations as the local governments. And the tribes negotiated a gaming compact with the state.

Tribal officials said they do not intend to try to attract other businesses from downtown Reno, but they do plan to try to recruit businesses from outside the area.