State Supreme Court rules that gas tax rebates to Tribes are constitutional

AGC and allies within the business community lost a legal battle recently when the State Supreme Court ruled that gas-tax rebates to tribes are constitutional.

AGC had filed an amicus brief in support of Automotive United Trades Organization (AUTO), an organization of gas-station operators that filed suit over the state's gas tax agreement with Native American Tribes. Under that agreement the state provides payments (essentially a rebate) to the Tribes of 28 cents of the state gas tax for each gallon of gas sold at tribal stations.

In 2007, the Governor, authorized to do so by legislation, entered into agreements with Native American Tribes providing payments to the tribes of 75 percent of the state tax rate, or approximately 28 cents per gallon for every gallon sold out of a tribal station. Since 2007, those payments to the tribes out of the Motor Vehicle Fund (MVF) have exceeded $70 million.

AUTO filed suit, with members of the group concerned that Tribes may be using the gas-tax “rebate” to reduce the price of gas at Tribal stations, undercutting other operators. AGC’s concern is the potential loss of millions of dollars in infrastructure funding – and the amount of the loss could grow considerably in the future, should Tribal gas-station operations continue to expand.

But on Aug. 27, in a unanimous ruling, the Supreme Court concluded:  AUTO bears the burden of showing that the disbursements to the tribes are not "[r]efunds authorized by law for taxes paid on motor vehicle fuels" under article II, section 40(d). We find that it has not met that burden. We also find no unconstitutional delegation of legislative power. The judgment of the trial court is affirmed.

AUTO is currently preparing a motion for reconsideration.

Click here to see the full ruling-