AUTO executive director Tim Hamilton said he and others representing the approximately 300 service stations in the lawsuit believe the state has improperly paid more than $35 million to tribal service stations, undercutting competition. "It just guts us," he told The Aberdeen Daily World. He said the refund agreements [image-nocss] pay tribal stations back 75% of state taxes collected on fuel at tribal stations, which amounts to about 28 cents a gallon. He contended that some of this money allows tribal stations to operate at lower costs, pricing out nontribal stations.
According to a statement by AUTO on its website, Article II, Section 40 of the 18th Amendment requires that all motor vehicle excise taxes collected on the sale, distribution or use of motor vehicle fuel (including the gasoline tax) be deposited into a special fund dedicated solely to highway purposes. The purpose of this amendment was to ensure that taxes on motor vehicle fuel consumed on public roadways were actually spent on highway purposes. The special fund created by this constitutional amendment is known as the Motor Vehicle Fund.
In 2007, the state legislature revised the gasoline tax and included a provision designed to generally authorize the governor to negotiate with Native American tribes regarding the gasoline tax. As a result, the state entered into agreements providing "refunds" of taxes allegedly paid, such that in the last two years alone the state has sent more than $35 million out of the Motor Vehicle Fund to tribes. (Click here to read the 2009 Tribal Fuel Tax Agreements Report.)
On Jan. 12, 2010, AUTO attorneys Paul J. Lawrence and Matthew J. Segal of K & L Gates LLP wrote Attorney General Rob McKenna explaining how the tax refunds paid from the Motor Vehicle Fund did not conform with the 18th Amendment.
It said, "We request and demand that your office investigate and institute proceedings concerning the legality of these compacts." (Click here to read the letter to McKenna.)
McKenna declined to act, they said, and defended the negotiations and agreements as lawful policy choices." (Click here to read McKenna's response.)
On May 11, 2010, a K & L Gates team of Lawrence, Segal, and Kari L. Vander Stoep, filed suit on behalf of AUTO and its members in Grays Harbor County Superior Court. The suit seeks injunctive and other relief to require the State to abide by the Washington Constitution, and not make purported refunds from the Motor Vehicle Fund in contravention of the 18th Amendment . (Click here to read the suit.)
The suit asks for a "writ of prohibition" to prevent the governor and others from authorizing additional payments to the tribes out of the Motor Vehicle Fund.
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