Tribal members are exempt from state fuel taxes, but the state requires tribes to keep accounts of sales to people who aren't members of tribes. The state terminated the agreement Dec. 5, saying the Yakama Nation was not abiding by its audit requirements.
The tribe said in a news release that it filed suit Dec. 6 in Yakama Tribal Court.
Harry Smiskin, tribal council chairman, said the state had negotiated in bad faith. The Yakamas have stronger treaty rights than most other tribes in the state, he said, and the state shouldn't use a cookie-cutter approach to a fuel-tax agreement.
"They're the ones that pulled the plug on it, not us," he told the Yakima Herald-Republic for a story Thursday. "So it left us with no other alternative but to file in court."
The state's decision to scrap the agreement requires fuel distributors to assess the state tax of 37.5 cents per gallon on all fuel delivered to tribal stations on the reservation. The tribe's lawsuit attempts to block the state from assessing those taxes.
Washington Department of Licensing spokesman Brad Benfield said the state ended the agreement because mediation between the two sides failed after more than 180 days. But he said the state is delaying ordering distributors to collect the tax while the litigation is pending.
At issue is a federal consent decree between the tribe and state that allows tribal fuel station owners on the reservation to buy bulk fuel mostly free from state taxes to sell to tribal members, who are exempt from state fuel taxes. However, sales to nontribal members are subject to taxation.
The Yakama reservation is a checkerboard of tribal and nontribal land, and non-Indians outnumber tribal members in two reservation towns: Toppenish and Wapato.
Under the agreement, tribal station owners pay the state fuel tax on only 25 percent of bulk fuel delivered.
Both parties entered mediation after the state said the tribe failed to submit required audits of fuel sales from 2007 to present. State officials have previously estimated that the tribe owes some $11 million in fuel taxes.