City Of Shawnee, Potawatomi Nation Battle Over Sales Tax

The battle is brewing between the City Shawnee and a local tribe over sales tax. The City says the Citizen Potawatomi Nation owes them millions of dollars, but the tribe disagrees.

"We're simply not in the City of Shawnee, we're not a part of their tax base and never have been," said Citizen Potawatomi Nation Chairman John Barrett. "We've owned this land since 1867 and paid cash for it, we were never annexed to the city."

Barrett, also known as "Rocky" says the tribe has been in the grocery business for a long time and owns the FireLake Discount Foods Grocery store.

"We don't use Shawnee services, whether it's their police or fire or water or sewer, or other services. We paved all our roads out here and put up street lights and traffic lights," Barrett said. "Suddenly the city is claiming ownership now that there is a successful business here."

Barrett says a Supreme Court decision in 1991 allows them to not have to pay sales tax in the state. But Shawnee City Manager Brian McDougal says that court decision – Okla. Tax Commission v. Citizen Band, Potawatomi Indian Tribe of Okla. – actually does allow the city to collect sales tax from anyone outside of the tribe. 

The case holds that the tribe was not subject to state sales taxes on sales only made to tribal members, but that they were liable for taxes on sales to non-tribal members

McDougal says the law applies to all tribes but the Citizen Potawatomi Nation is the only tribe that has retail operations within city limits. The tribe is to owe Shawnee three cents on every dollar for non-tribal members since McDougal says there are records that the tribe requested to be annexed to the city in early 1960s.

Shawnee Mayor Wes Mainord sent a response letter to Barrett on March 17 to see whether the City and the Tribal Nations can reach an agreement to pay city sales tax.

"We are not trying to vilify or scapegoat any nation, but seek to engage in mutually respectful discussions over a matter of interest to all Shawnee residents, including those who are members of the Tribal Nations," said Mainord.

"After the Citizen Potawatomi Nation opened its FireLake Grocery in 2001, the city's sales tax revenue for groceries declined by over $300,000, by the third year. Even if we assumed that there had been no increase in sales due to growth and inflation, that indicates a loss to the city of approximately $4 million."

McDougal says the challenge is enforcing the sales tax from the tribe. He says the store could request every tribe member show their tribal membership card at the cash register, the same way customers present rewards cards at other grocery stores.

But tracking all non-tribal members at the store and requiring them to pay a 3% sales tax is a task the tribe says the city cannot do on their property.

"But if they'll talk with the District Attorney in Pottawatomie County, he'll tell them that they can't come on the land here and collect taxes. They don't have the police powers," Barrett said.

The tribe also owns a grocery store in Tecumseh, where they bought the land from the city and use city services, and do pay a 3% sales tax to the City of Tecumseh. Barrett says the tribe has created seven out of 10 jobs in Shawnee for the past decade, given $100,000 for the city pool and annually donates a $1 million in charity.

McDougal says all the tribes philanthropic efforts are greatly appreciated, but are not relevant when it comes to paying the city sales tax.

Both the City and tribe plan to work out an agreement in a meeting on Monday at 10 a.m. at the Citizen Potawatomi Nation's Cultural Heritage Center.