American Indian tribal entities exhibit a variety of government-to-government relationships with the states within which they are located. While tribal nation sovereignty is the cornerstone of the relationship, there is still significant variation tied to history and the various treaties established. This has led to a varied pattern in the type of relationships between states and tribal governments. One area where this difference is noticeable is in the framework for the reporting of sales of gasoline on tribal lands.
In general, tribal sales to American Indians are not taxable by states. This has led to the possibility, in some states, that a certain volume of sales may not be reported. The potential for significant unreported sales may be of concern if it creates bias in the attribution process utilized by the Federal Highway Administration (FHWA) in apportioning resources from the Highway Trust Fund to each state. The attribution process is based on estimates of state contributions to the federal Highway Trust Fund, which are themselves based on states' reported fuel sales. This implies that unreported tribal sales adversely affect the federal share to states with significant under-reporting. While under-reporting could occur for various reasons, it is of great interest to assess the degree to which, if at all, it is associated with gasoline sales on tribal lands.
The Louis berger Group and ICF Consulting (the Project Team) was selected by FHWA to undertake a comprehensive investigation of the reporting of American Indian gasoline sales on tribal lands (the Project). The Louis berger Group led Task 1, which is described in Section 1 of this report and entailed ascertaining the scope of the problem through economic data review. ICF Consulting led Task 2, which sought to characterize current reporting arrangements for selected states by conducting outreach to tribal and state entities and soliciting feedback. The findings of Task 2 are described in Section 2 of this report, 'the State of the Practice'. Section 3 presents recommendations that stem from the research and analysis conducted for Tasks 1 and 2.
Key elements of the work carried out by the Project Team, as summarized in this report, includes the following:
The research by the Project Team reveals that retail fuel activity on tribal lands is significant with as many as 55 American Indian tribes in 24 states currently operating fuel retailing establishments. The analysis identified 51 counties that contain tribal reservations with on reservation sales. In general, the vast majority of retail activity exists west of the Mississippi, with exceptions in Connecticut, New York, North Carolina and Wisconsin. The Team's findings are the following:
The Project Team completed a comprehensive investigation of various available data to identify fuel sales on American Indian tribal lands. The research and findings contained in Section 1.1 are primarily descriptive: The Team analyzed available data to identify where retail gasoline sales take place on tribal lands, and to the degree possible, the magnitude of this activity.
The sources queried by the Project Team included a variety of databases, as well as information provided by Associations of American Indian enterprises, federal agencies and local economic development corporations. One important source of information is the Department of Commerce's Economic Development Administration American Indian Reservations and Trust Areas. The report proved invaluable for an initial assessment of tribal economic activity, providing details on the economic infrastructure on the American Indian reservations.  In addition, the Project Team assembled data from the Economic Census for 1997 and 2002 to identify total retail sales activity for establishments on tribal lands and/or owned by American Indians.
A detailed summary of findings is included in Appendix A of this report. broadly, the research finds:
The gasoline service station and convenience store sector is a large and diverse segment of the retail industry.  In 1997, for example, gasoline service stations accounted for over 11 percent of all retail establishments and 8 percent of total retail sales nationally.  Following several years of rapid expansion, the economic recession beginning in 2001 resulted in a diminution of retail sales growth. The industry and service station sector rebounded dramatically, however, beginning in 2003. Indeed, according to the National Association of convenience Stores (NACS), 2003 sales at the nation's convenience stores eclipsed $337 billion in 2003.  2003 profits exceeded $4 billion, an increase of nearly 55 percent over 2002 levels.  The rapid increase in revenues marked the first inflation-adjusted gain in retail sales in the sector in four years, even after accounting for the steep rise in wholesale fuel and cigarette prices. 
Operating under conditions of near perfect competition, no one retail establishment could maintain excess profits over an extended period. indeed, with no significant barriers to entry and diverse national, regional and local competitors, new competition will ensure that excess profits would quickly disappear for any establishment or location.
If any retailer were able to maintain a price advantage, however, that retailer would garner significant market-share and could depress sales at neighboring competitors. A significant body of research has documented the extent of cross-border sales of both alcohol and cigarettes (two fungible commodity-style products with heterogeneous state excise tax rates) between adjacent taxing jurisdictions.  The research studies have demonstrated that tax disparities do, in fact, induce cross-border sales with retailers operating in the state imposing preferential tax rates benefiting at the expense of retailers in neighboring tax jurisdictions. recent evidence suggests that tax competition has emerged in the motor fuel retail market as Native American-owned retail establishments have begun to market ex tax motor fuels. 
As an initial assessment of American Indian involvement in motor fuel retail sales, the Project Team assembled data from a separate tabulation of the 1997 Economic Census reporting specifically on American Indian and Alaskan Native-owned enterprises in the Survey of Minority-Owned Enterprises: Company statistics Survey.
In 1997, the Census bureau estimated that American Indian and Alaskan Native-owned and operated approximately 187,921 business establishments, an increase of over 83 percent from 1992. These firms represented over 1 percent of all domestic firms , and were present in every state in the nation. Despite this wide representation, the bulk of American Indian economic activity is concentrated in states with large tribal populations: The three states with the highest number of American Indian enterprises included California, Texas and Oklahoma, while the three states with the highest share of American Indian owned firms were Alaska, Oklahoma and New Mexico.
The Economic Census also reports estimates of American Indian owned business establishments at the two-digit Standard Industry Classification (SIC) code for all states and counties (except in cases requiring data suppression because of small sample sizes or limited economic activity).  Unfortunately, the two-digit classification for gasoline service stations also includes automotive dealers. Nevertheless, the category (SIC Industry 55: Automotive dealers and service stations) does allow for an initial assessment of states with American Indian owned service stations.  Using the national ratio of service station sales as a guide, American indian owned retail establishments operate in as many as 40 states. Delaware, District of Columbia, and Hawaii have no American Indian owned service stations or automotive dealerships in 1997. 
The five states with the largest sales volume of American indian and Alaskan Native-owned owned SIC 55 retail establishments were Oklahoma, North Carolina, New York, Texas and Indiana. A table summarizing all the data is included in Appendix A.
|State||American Indian and Alaskan Native-Owned Firms|
Source: US Census bureau Economic Census (1997)
Note: States with significant presence of SIC 55 firms but no on-reservation sales reported in Table 1.2 are included in Table 1.1. these include Indiana, Illinois and Georgia. It is assumed all firms in SIC 55 in these cases are engaged in automotive dealerships or operate off a reservation.
To identify instances of on-reservation sales, the Project team first relied on the Economic Development Administration report and Tiller's Guide to categorize states based on whether American Indian tribes within their boundaries engage in retail motor fuel sales. The initial investigation identified over 50 American Indian tribal reservations wherein, either the tribe or individual members operate motor fuel service stations. A subsequent search of legal sources in LexisNexis™ revealed several additional tribes involved in motor fuel retailing and named as parties in various legal disputes. The Project Team included these tribes and their respective states in the summary file, as well. The results of are summarized in Appendix A.
The Project Team also utilized a proprietary business database assembled by InfoUSA as a further check on the establishment survey. The Team purchased the database for a select number of counties based on an initial assessment of the EDA reports. To isolate retail establishments on American Indian reservations and land trusts, the Team relied on mapping software to address-match the queries of retail establishments obtained from the InfoUSA database. Staff then overlaid american Indian reservation polygons and selected all retail establishments observed within reservation boundaries. This initiative yielded further confirmation of retail establishments on American Indian reservations in several western and eastern states with potential reporting issues related to tribal sales. finally, some selected findings for fuel sales on tribal lands are also included in Section 2 as part of the survey findings.
After estimating the number of American Indian establishments, the Team refined its investigation and began to categorize the types of business establishments into one of two types; stand-alone service stations, or service station ancillary to other business enterprise. Details for making the determination are as follows:
Stand-Alone business Establishments: For the purposes of this section, the Project Team has relied upon the Tiller's Guide for categorizing service stations, as stand-alone businesses or ancillary to other economic activities. the Tiller's Guide, while not categorizing tribes based on economic activity, does provide useful insights into the types of initiatives currently underway on tribal reservations. Moreover, the report explicitly describes instances of tribal gaming facilities with ancillary service activities, including motor fuel service stations, convenience stores and smokeshops.
Businesses Ancillary to Other Economic Activities: In addition to stand-alone gasoline service stations, other American Indian economic development initiatives include a full spectrum of economic activities; however, certain tourism-based initiatives, such as recreation and gaming facilities, provide synergistic benefits when co-located with motor fuel service stations. While ancillary to the tourism-based draw, service stations leverage the proximity to the tourist destination to improve traffic and bolster sales. According to the National Indian Gaming Association (NIGA), 224 tribal governments engage in gaming activities in 28 states. The burgeoning gaming industry has facilitated increased tribal-state negotiations and resulted in 249 gaming compacts. American indian gaming activities generate over $14.5bn in revenue (21 percent of total industry revenue) and employ approximately 400,000 persons. 
The Team followed two steps for determining the existence of gasoline service stations at American Indian gaming complexes. First, the team cross-referenced the specific tribes identified in the NIGA with the reference materials acquired from the Economic Development Administration. Finally, the team contacted tribal representatives to ascertain the existence of service stations amongst the gaming facilities and resort-complexes.
The existence of American Indian-owned retail fuel establishments does not necessarily imply tax-free sales, or even that there are any contentious issues relating to sales. Indeed, as noted in the 2002 Federation of Tax Administrators (FTA) publication, Survey of American Indian Issues most wholesale distributions of motor fuel to retailers occurs with the excise tax already applied, irrespective of whether the retail establishment is American Indian owned and operated. instead, the emergence of on-reservation fuel sales ex-tax arose, in part, as a result of judicial decisions affirming tribal sovereign immunity and in at least one instance, a tribal entity engaged in refining and wholesale fuel distribution.
For the purposes of this section, the Project Team relied upon the FTA survey results to identify states with reporting issues. The FTA documentation is suggestive:
States where Reporting Is Successful: The majority of states have avoided under-reporting issues through tax collection at the terminal level or simply because no American Indians engage in on-reservation motor fuel sales. for those states with on-reservation sales, but no reporting issues, the continuation of the status quo relies upon enforcement and monitoring of wholesale and distribution activities within the state.
States Where Reporting is Unsuccessful: the FTA survey reported that tax officials in 13 states have received citizen or special interest complaints of on-reservation ex-tax fuel sales. It should be noted that the FTA report is outdated. As discussed in later sections, the states of Arizona, Idaho, Nebraska, New Mexico, and South Dakota, identified as having reporting issues in the report, appear to have mostly resolved the issues that affected the reporting of sales on tribal lands, while Iowa, North Dakota and Washington have moved towards improved reporting as well.
The Project Team found that, of states studied, only New York and Kansas  continue to experience reporting issues and have not moved towards resolution. The situation in Florida, Louisiana, Nevada, Texas and Wisconsin, who indicated reporting issues in 2002, is unclear at this point as these were not case studies for the Project Team.
The degree to which gasoline sales on tribal lands are made to non-residents of the tribal lands is of interest. If these sales are negligible, then presumably there are no real issues with respect to reporting: sales of fuel on tribal lands can be estimated with simple formulas tying fuel sales to population, vehicle ownership, density or other factors.
If non-resident sales are found to be significant, this invalidates the simplest, but not the only, approach to estimating tribal sales. This is also of interest in that these sales to non-residents, not formally exempt from state taxation, may be the source of under-reporting. It is important to stress that this exercise is not intended as an estimate of tax evasion, but rather an effort to ascertain whether tribal sales can be simply estimated based on formulas if non-resident sales are negligible. In the case non-resident sales are measurable, the exercise also attempts to give a rough estimate of their scale. If fuels sold on tribal lands already include the state excise tax, however, reporting has presumably already taken place at the terminal or distributor level.
In order to address the issues, an econometric model was constructed. Using data for a large sample of 1,496 counties , the Team analyzed the degree to which tribal areas with fuel sales appear to generate sales to non-residents. The approach is essentially one where fuel sales to non-residents are estimated indirectly. In this approach, the team first analyzed relationships between per capita gasoline sales in each of the counties and a series of variables that are hypothesized to affect sales within the county, including:
In addition to these variables, a series of statistical controls are added to determine if there is a significant relationship between whether a county is adjacent to a tribal land where the selling of gasoline takes place, or actually contains tribal land. What the analysis sought to quantify is the degree to which tribal lands with retail fuel facilities attract sales from non-residents. The method for identifying non-resident sales is based on observed sales in counties adjacent to, or actually containing, the tribal area. If proximity to a tribal area with retail fuel facilities leads to lower observed fuel sales in the county itself, then sales to non-residents may be significant. by relying on multivariate regression techniques, the Team is able to isolate these effects from the other effects above that are hypothesized to influence gasoline sales within a county.
The results of the statistical analysis are reported in Table 1.3 below. The main results, however, can be summarized. For the simplest model, which is referred to as Equation 1, the Team was simply trying to determine the main factors that influence per capita fuel sales. These factors include:
These findings are all intuitive: A higher population density is associated with a greater prevalence of modal alternatives to automobiles, as well as reduced distances (if not necessarily travel times) to work and shopping. as mentioned, higher state gasoline taxes will deter driving as well as encourage purchases in lower tax states, with both effects reducing per capita gasoline sales in the county. Finally, higher levels of vehicle ownership are associated with more vehicle miles driven and, as found here, higher gasoline sales. Other variables were tested as well, notably per capita income in the county, but were not found to have a significant influence on per capita gasoline sales.
Having established a satisfactory model explaining the typical determinants of gasoline sales, the Team then introduced additional variables to test for the effects of gasoline sales on tribal lands. Specifically, the team explored whether there is evidence that sales on tribal lands to non-residents are significant. The following results were observed:
In general, the findings show strong (but indirect) evidence that sales on tribal lands attract purchasers from adjacent counties. Depending on the exact form of the regression model, the Team found that counties adjacent to tribal lands where gasoline purchases are made have between 7 and 9 percent lower per capita gasoline sales themselves. The approach used, multiple regression analysis, ensures that these effects are not confused with other differences between counties (such as population density) that affect gasoline sales. In other words, the estimated shortfall in per capita gasoline sales for counties adjacent to tribal lands with sales are shortfalls from the expected levels of sales after controlling for county attributes found to influence fuel sales, such as population density, tax rates, and vehicle ownership.
In contrast, the econometric approach does not yield significant evidence that counties containing gasoline sales on tribal lands have higher than expected per capita sales. The fact that counties with tribal sales do not exhibit higher per capita sales is perhaps surprising given the findings for adjacent counties. One would expect that sales attracted from adjacent counties would result in higher than expected sales. This may be an indication that the census data on gasoline sales may not capture all sales on tribal lands. This possibility, which would need to be further substantiated, would explain the lack of a significant pattern of higher than expected county-wide gasoline sales in counties with tribal sales.
This result is also robust to various other forms of model specifications. For example, if "controls" are added for each state to capture that state's particular characteristics beyond population density, tax rates, and vehicle ownership the effect is still present: being adjacent to a tribal area that sells fuel reduces fuel sales in that county.
This is an average effect, however, that does not control yet for the actual price differential between the tribal area and the adjacent county. This price differential is unobserved. It is assumed that the price differential is important, however, and a variable is constructed to capture instances where it is assumed that no differential exists: As discussed in the later sections of this report, in states where the fuel tax is imposed at the terminal level (or at the rack), it typically enters the downstream supply with the excise tax already included in the price. In other words, in states where retail prices already include the state excise tax because of terminal level-taxation (but not always)  it is implied that there is no price differential between the tribal area and the state. In these cases, one would expect that the effect of proximity would vanish and that adjacent counties would not long exhibit lower sales than expected.
The Team carried out just such an analysis and confirmed its initial hypothesis. Generating a variable that indicates whether fuel in a state is taxed at the terminal level, the Team re-ran Equation 2 and Equation 3. The new equation, however, includes a new variable that indicates tax levies at the terminal level.  As shown in Table 1.2, these new specifications (Equation 4 and Equation 5) reveals that if one accounts for fuel being taxed at the terminal level, the effect of being adjacent to a tribal area with fuel sales mostly disappears. specifically, a county adjacent to a tribal area with fuel sales will now only Generate sales that are 3 percent lower than expected rather than 8 percent lower.
|Independent Variable:||Equation 1||Equation 2||Equation 3||Equation 4|
|County Population Density||-0.09**||-0.09**||-0.08**||-0.08**|
|Dummy Variable: Adjacent||-0.09**||-0.08**||-0.076*|
|State Gasoline Tax Rate||-0.25**||-0.26**||-0.27**|
|Per Capita Vehicle Ownership||0.18*||0.20**|
|Dummy Variable: Contain||0.002|
Source: United States Census 2000, SF-3; United States Census Geographic Area Series 1997; Census Tiger Files 2000; The Louis berger Group
Notes: "Dummy Variable: Adjacent" indicates the effect of a county being adjacent to tribal lands with gasoline sales
"Dummy Variable: Contain" indicates the effect of a county having tribal lands with gasoline sales within its borders
* Indicates variable is significant at the 95 percent confidence level
** Indicates variable is significant at the 99 percent confidence level
All variables are converted to natural logarithms, and coefficients here are equal to elasticities, indicating the percent change in county per capita gasoline sales following a 1 percent change in the independent variable. for dummy variables, they equal the percent change in per capita gasoline sales if the county is adjacent to tribal lands with sales or contains tribal lands with sales
If Equation 3 is run with controls for counties adjacent to tribal lands but only in states with identified reporting issues, the coefficient (elasticity) increases to -0.96, while the significance declines to the 93 percent confidence level
|Independent Variable:||Equation 4||Equation 5|
|County Population Density||-0.09**||-0.09**|
|Dummy Variable: Adjacent||-0.08**||-0.08**|
|State Gasoline Tax Rate||-0.26**||-0.26**|
|Per Capita Vehicle Ownership||0.17*|
|Dummy Variable: At Terminal||0.05**||0.05**|
Source: United States Census 2000, SF-3; United States Census Geographic Area Series 1997; Census Tiger Files 2000; The Louis berger Group
Notes: "Dummy Variable: At Terminal" indicates the effect if the state levies fuel sales at the terminal level
* Indicates variable is significant at the 95 percent confidence level
** Indicates variable is significant at the 99 percent confidence level
The econometric analysis detailed above was suggestive that tribal areas with fuel sales generate significant sales to non-residents. For the purposes of reporting, this raised two issues. First, it implied that a simple formula-based estimate of sales on tribal lands would be biased if it was based solely on measures of the tribal area itself, such as population, per capita vehicle ownership or other factors. Second, the analysis implied that these non-resident sales were much higher when fuel is not taxed at the terminal. The imposition of the excise tax at the terminal can mitigate the effect of the price differential between the tribal area and the adjacent counties, as the fuel should have the state tax factored into the price at the pump . The fact that tribal sales to non-residents are higher in states that do not impose the motor fuels tax at the terminal level suggests in turn that a price differential is a major incentive to purchase fuel on tribal lands.
Does this have relevance for reporting? As will be discussed in the remainder of the report, the impact of fuel sales on tribal lands on reporting is varied, with most states having secured working reporting agreements that generate satisfactory accuracy in reporting. However, there is also evidence that some states, typically with contentious issues relating to fuel sales with no state tax imposed, also have potential reporting issues. The existence of sales without state taxes imposed may be highly correlated with reporting:
Several of the states and tribes have pursued legal options to address the issue of untaxed sales. The degree to which there is a potential legal solution to the issue of untaxed fuel sales on tribal lands is of interest. The report now examines the legal and legislative landscape as it affects fuel sales on american Indian tribal lands.
Beginning in 1970, the federal government set forth a policy of supporting tribal attainment of economic and political development through self-government (Ansson, 1999). The power to tax and raise revenue, while remaining independent of competing tax regimes, is the essence of sovereign immunity and is a vital part of for self-government (Tabor, 2004). Strictly applied, sovereign immunity holds that American Indian tribes are independent, sovereign nations immune from state taxation, excepting instances wherein congress provides an explicit exception.
Sovereign immunity is the defining issue in state American indian relations and taxation. The US Supreme Court has affirmed sovereign immunity and denied state attempts to tax American Indian economic activity on tribal reservations. Moreover, two recent federal circuit court decisions have called into question the legality of states' efforts to tax distributors who deliver motor fuel to tribal reservations. In the 2005 session, the Supreme court will review one of these circuit court decisions and rule on state efforts to levy excise taxes on tribal fuel sales.
Recent legal challenges, as well as legal commentators, have cited provisions in the 1936 Hayden-Cartwright Act as a defensible congressional exception. The legislation expressly enables states to tax fuel sales on "...United states military or other reservations." The full text of the section is provided hereafter:
1936 Hayden-Cartwright Act, 4 U. S. C. §104
All taxes levied by any State . . . upon, with respect to, or measured by, sales, purchases, storage, or use of gasoline or other motor vehicle fuels may be levied, in the same manner and to the same extent, with respect to such fuels when sold by or through post exchanges, ship service stores, commissaries, filling stations, licensed traders, and other similar agencies, located on United States military or other reservations, when such fuels are not for the exclusive use of the United States.
While legal analysts have suggested the act enables state taxation (Bloeser, 1996), courts have since rejected this interpretation of "reservations" because of the "ambiguity" in the statute and the necessity for explicit congressional authorization for state taxation on tribal reservations. indeed, as the majority noted in Coeur D'Alene Tribe v. Hammond, while not previously addressing the issue itself, the 8th Circuit and all federal district courts have held "...clear congressional authorization under the Hayden-Cartwright act is not present..." (Coeur D'Alene v. Hammond at p. 691).
The Supreme Court recently considered two petitions for Writ of Certiorari from cases originating in Idaho and Kansas. In both cases, the respective Circuit Courts ruled in favor of the tribes and against the state, idaho in the 9th Circuit Court and Kansas in 10th seeking to impose state motor fuel excise taxes on tribal retail activities. While the Supreme Court denied cert for the Idaho case, the court will hear oral arguments on behalf of litigants in the Kansas case during the October, 2005 term. A summary of the two Circuit Court decisions follows hereafter:
The following section summarizes the majority opinion in the Coeur D'Alene Tribe case:
Given the uncertainty associated with litigating state excise taxation schemes, legal analysts have begun to recommend state-tribal tax compacts as an alternative, mutually beneficial resolution to tax disputes. As reported by Ansson, 200 tribes in 18 states had entered into tax compacts with states for the purposes of collecting and remitting cigarette and gasoline excise taxes. the author noted that in several cases (notably, Nevada and Louisiana), the compacts have allowed the tribes to retain all proceeds from the excise tax, provided the tribes levy an excise tax at a rate consistent with the state. while obviating the tax advantage of on-reservation retail establishments, the approach does provide the tribal government with a stable source of revenue, thereby affirming sovereign immunity and furthering the goal of tribal self government articulated in 1970.
In short, tax compacts may well provide an appropriate incentive for documentation of on-reservation sales to ensure accurate reporting of state sales to the Federal Highway Administration. The two recent Circuit Court decisions, discussed previously, illustrate the need for collaboration.
The FTA publication, Survey of American Indian Issues also reported on the extent of state-tribal tax compacts. Its analysis indicated that by 2002, 10 states had entered into motor fuel tax agreements with at least some of the tribes within their respective boundaries. In addition, several more states reported having existing agreements for the administration of excise taxation of tobacco products. Finally, the Project Team's outreach effort, described in Section 2 of this document - revealed that six states (including south Dakota discussed below) had recently reached agreement with several tribes subsequent to the publication of the FTA survey, and two more were moving towards resolution. The results of this effort are summarized in chart attached in appendix A.
The following examples are illustrative of existing state-tribal tax compacts:
Subdivision 1. Taxes paid by Indians. The commissioner of revenue is authorized to enter into a tax refund agreement with the governing body of any federally recognized Indian reservation in Minnesota. The agreement may provide for a mutually agreed upon amount as a refund to the governing body of any sales or excise tax paid by the total resident Indian population on or adjacent to a reservation into the state treasury, or for an amount which measures the economic value of an agreement by the tribal government to pay the equivalent of the state sales tax on items included in the sales tax base but exempt on the reservation, notwithstanding any other law which limits the refundment of taxes. 
It is mutually beneficial to the State of Oklahoma and the federally recognized Indian tribes of this state, exercising their sovereign powers, to enter into contracts as set forth in subsection b of this section, for the purpose of limiting litigation on the issue of state government taxation of motor fuel sales made by Indian tribes. It is in the interest of this state to resolve disputes between the state and federally recognized Indian tribes on this issue by entering into contracts under which the Indian tribes are in part compensated for any tribal motor fuel tax revenues the Indian tribes might lose by reason of the adoption and enforcement of this act. Such mutually beneficial agreements allow both the State of Oklahoma and the Indian tribes to benefit from tax revenues from sales of motor fuel on Indian country. 
Agreement to collect taxes for tribes--Department of Revenue and Regulation fee. The department may enter into tax collection agreements with any Indian tribe under the provisions of this chapter and chapter 1-24. these agreements may provide for the collection of any of the following state taxes and any tribal taxes imposed by a tribe that are identical to the following state taxes:
...The fuel excise tax imposed by chapter 10-47B.
The agreement may provide for the retention by the department of an agreed-upon percentage of the gross revenue as an administrative fee. 
Our review of current litigation and legislation finds this to be a dynamic area where several states are moving forward with efforts to redress inadequacies. In general, the focus of legislative developments has been on taxation; however, as will be discussed further in this report, a resolution of the taxation issue would implicitly resolve outstanding reporting issues.
It is surprisingly difficult to answer this question with certainty for every state where tribal sales occur. One issue is that most states themselves do not explicitly detail their estimates of sales on tribal lands. For example, where state taxes are imposed at the terminal level states may not differentiate estimates of sales to retail establishments on tribal lands.
Nevertheless, there are currently at least two states that have varying degrees of reporting issues. These states are places where there is the potential for reporting bias. For example, it appears that New York State may be one of several areas where reporting is an issue, due in part to two factors: First, anecdotal evidence suggests that despite the fact fuel theoretically has the state fuel tax imposed at the terminal, some amount of fuel is apparently sold without either the state fuel tax and/or sales tax. Confirmation of this fact is provided by the well-known price disparities between many retail outlets on tribal lands and those off reservations . Second, many of New York State's tribal lands are near fairly populated urban or adjacent to highways, meaning that the potential non-resident market is large.
While there is movement towards agreements, at this point there are no formalized reporting relationships. This means that most tribal fuel sales are not currently reported. The implications for bias are therefore real, and the potential scale of the bias are suggested by the data in Table 1.4 below, which outlines the scale of parts of the industry on tribal lands in New York state. The data is derived from the InfoUSA establishment and employment database, with estimated sales derived from employment on a formula basis. The table is a partial count of retail fuel establishments on tribal lands, including several where anecdotal evidence suggests sales do not include state motor fuel taxes. All are characterized by prices at the pump significantly below those charged off-reservation.
As shown, sales at these establishments may be close to $50 million a year, amounting to less than 0.5 percent of total New York State sales. It is unclear whether these fuel sales figure at all in New York State estimates. This figure would certainly represent an upper-bound on potentially unreported sales .
It appears that the potential for reporting bias is real, though this bias would be a relatively small fraction of total state sales. One can suggest that certain key factors appear to be associated with reporting issues:
The role of reporting agreements is clearly primary in ensuring accurate reporting of fuel sales. This is clearly understood by many tribal and state governments, as witnessed by the establishment of several successful agreements in the last several years. The following section of our report now examines the state of the practice in reporting agreements.
|Reservation||Company Name||Establishment||Total Employment||Estimated Sales|
|Big Indian Smoke Shop||1||20||$5,380,000|
|Seneca Hawk Restaurant||1||60||$18,000,000|
|Tade Nino Neh-Gas||1||5||$910,000|
|Cattaragus Reservation Total||4||125||$36,290,000|
|Chief's Pit Stop Too||1||5||$910,000|
|Seneca Hawk Petro||1||10||$3,000,000|
|Alleghany Reservation Total||2||15||$3,910,000|
|Randy's Smoke Shop||1||4||$1,200,000|
|Tuscarora Reservation Total||2||24||$7,200,000|
Source: The Louis berger Group, Inc.; InfoUSA (2004).
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