Sales Tax Collection Dispute at Turning Stone Resort and Casino by Oneida Indian Nation - , Study notes of Introduction to Public Administration

Download Sales Tax Collection Dispute at Turning Stone Resort and Casino by Oneida Indian Nation - and more Study notes Introduction to Public Administration in PDF only on Docsity! MEMORANDUM TO: NYS DEPARTMENT OF TAXATION AND FINANCE FROM: KATHERINE CORIALE SUBJECT: SALES TAX COLLECTION: ONEIDA INDIAN NATION’S TURNING STONE RESORT AND CASINO DATE: 5/8/2006 CC: ELIOT SPITZER, NYS ATTORNEY GENERAL The Oneida Indian Nation located in Oneida County, NY, sued New York State and Madison and Oneida counties 30 years ago for the return of 250,000 acres of land the state had purchased from the Oneidas in the 18th and 19th centuries. [1] The sovereignty of this land is under dispute; the Oneida Indian’s claim it is their rightful sovereign land, while the State maintains that only part of the land in question is sovereign. In 1993, the Oneida Indian Nation constructed a gaming casino and resort. It is now being debated whether the Nation is obligated under law to pay property tax on said land and collect sales tax from non-Natives for the purchase of such goods as gasoline and cigarettes in Indian stores. The Indian Gaming Regulatory Act of 1988 allows for tribes to operate casinos if such gambling is allowed in the state and the state and tribes enter into compacts allowing such gaming. [6] In New York State, gaming casinos can only operate on Indian land. This law also shields the casino from having to collect state taxes as a sovereign nation, and does not require it to report its revenues to the State as gaming revenues may not be taxed. If casinos can only operate on Indian land and the law shields them from having to collect sales tax, the Casino was originally built under the premise that it was on sovereign land, otherwise the Casino would be operating illegally. The Indian Gaming Regulatory Act of 1988 does not distinguish between Natives and non-Natives for the collection of sales tax – the law would need to be amended to clarify who sales tax can be collected from. Currently, Turning Stone Resort and Casino is operating as mandating by law and the compact. Prior to March 1, 2006, The New York State Department of Taxation and Finance did not enforce legislation to collect sales tax from non-Natives for goods purchased on the Indian land. [2] By willfully ignoring the current tax law, the Department of Taxation and Finance has aroused much concern by local and state officials as well as business owners and interest groups in the surrounding communities of the casino. As of March 1, 2006, the Department of Taxation and Finance was supposed to enforce the collection of sales tax from non-Natives. The Department states it will not begin collecting the sales tax until the Legislature rules on the requested year extension of non- collection as recommended by Governor Pataki. [2] The following economic analysis is assuming the Oneida Nation land is deemed sovereign and the Turning Stone Resort and Casino has a legal compact to operate in New York State under 2 the provisions of the Indian Gaming and Regulatory Act of 1988. The analysis will focus on the issue of sales tax collection from non-Natives, as compared to the economic development the Casino has brought to the region and state. New York State should grant a tax break to non-Native purchases, as the loss in revenue to the state is made up elsewhere by the Casino. Currently, Natives and non-Natives do not pay sales tax on gasoline, cigarettes, or other items purchased on the sovereign land. It is being proposed to have non-Natives pay sales tax. In evaluating a sales tax, efficiency, equity and administration must be considered. With the ability to buy untaxed items on the reservation, consumer’s choices are distorted between taxed and untaxed items. The opportunity cost of driving to the reservation to avoid the tax, versus going to a local business is a valid concern. The purchasing of cigarettes for example, which have an inelastic demand, is favorable to the consumer as they will not bear the burden of paying the tax which is ordinarily passed on to them. To balance the equity argument, is the non-collection of sales tax fair to surrounding businesses that have to apply the tax? No, although later I will demonstrate the added benefits the presence of the Resort and Casino bring to these businesses. Administratively, the tracking of purchases made by Natives as compared to non-Natives may place an undue burden on the Indian stores. What technical systems would need to be implemented? How easily could this be enforced and monitored by outside officials? It has been suggested to give tax exempt coupons to Native members for their purchases, but there is little control over the possible black market that could arise for these coupons. Taxes on cigarettes are inordinately high within New York State and many users look for ways to escape paying the taxes. The highly contested rights of the Oneida Indian Nation and the operation of the resort and casino must be analyzed in an economical and social framework, taking into account costs and benefits. Federal and State governments must balance the economic development and revitalization due to the construction and continual operation of the casino with the possible negative social externalities associated with the gaming casino, its impact on the surrounding areas, and the loss of revenue. I will demonstrate that the benefits of running a gaming casino outweigh the potential detriment to society and local businesses. The presence of the Turning Stone Resort and Casino in Upstate New York has had many significant impacts on the revitalization of the economy and adjacent communities. When the Casino was constructed, the area was already in a state of decline – Griffiss Air Force Military Base was closed, the population was aging, and retention of persons was difficult as the economy was becoming depressed and employment was difficult to find. The areas per capita income was decreasing for years as growth and development slowed. The Oneida Nation Indians not only gave the local economy a boom by constructing the Casino, but Turning Stone had far reaching impacts on State and Federal governments, and still continues to do so. The Oneida Nation’s mission statement is to generate revenues substantial enough to support its members and to fund economic and social development, including contributing to the local areas. [1] Profits realized by the casino are partially redistributed to the tribe members on a monthly basis, a profit-sharing mechanism. The Nation is striving to be self-sufficient, not having to rely on public funding, while still significantly contributing to economic development.