Mashantuckets' new 1 percent 'tribal tax' is news to Connecticut officials
Blumenthal to investigate legality of charge, which is added onto 6% sales tax
By Brian Hallenbeck Published on 9/3/2009
Every little bit helps.
The Mashantucket Pequots, wrestling with a hefty debt load, have started charging a 1 percent “tribal tax” on merchandise sold in the shops at Foxwoods Resort Casino and MGM Grand at Foxwoods, tacking it onto the 6 percent state sales tax.
The problem might be, though, that they didn't tell the state about it first.
”My office will have to review and possibly investigate this apparent new practice,” Attorney General Richard Blumenthal said Wednesday when The Day asked whether he was aware of the tribe's new tax, which debuted Tuesday.
”It certainly has never been cleared with us,” Blumenthal said. “This surcharge could be problematic, depending on what it is represented to be. If there is no demarcation or identification of the different elements of the tax, that could imply that the state is charging the 7 percent tax — which it is not.”
A receipt for merchandise purchased Wednesday at the Hard Rock Café Store at Foxwoods shows the 7 percent “Tax” listed on a single line, with no breakdown.
”That could well misrepresent and mislead the nature of the tax,” Blumenthal said upon having the receipt described to him. The introduction of the tax has “no connection” with the tribe's financial woes, according to Robert Victoria, Foxwoods' senior vice president of consumer marketing.
”It's bad timing,” Victoria said. “The (tribal) council actually approved it in January. It's just taken this long to get the computers up to speed to implement it.”
The tribal tax applies to merchandise sold in the casinos' retail outlets and to its hotel room charges, Victoria said. It does not apply to food and beverage charges. In the case of a tribally owned outlet, the tribe would keep the entire 7 percent, he said. Six percent of the price of merchandise sold at vendor-owned outlets would be remitted to the state, while 1 percent would be kept by the tribe, he said.
It could not be determined how much the tribal tax would generate in additional revenue for the tribe.
”It's not that much,” Victoria said.
Law prohibits the state Department of Revenue Services from disclosing how much the casinos pay in taxes, Sarah Kaufman, a department spokeswoman, said in an e-mail.
At Mohegan Sun, Connecticut's other tribally owned casino, the 6 percent state sales tax is levied on merchandise sold at all retail outlets, according to Jeffrey Hartmann, Mohegan Sun's executive vice president and chief operating officer.
”We're just like everybody else,” he said. “Our covenants require us to mirror whatever is allowed in the state.”
The 6 percent sales tax collected at Mohegan Sun is remitted to the state regardless of whether it comes from a tribally owned or nontribally owned outlet, Hartmann said.
“We would want to carefully review how it's depicted and how the tribe could justify this practice. We will act promptly to begin that review.”
The attorney general said his office would also look into the legality of the tribe's levy.
”Part of our review will be to examine the compact for applicable provisions,” he said, referring to the state's gaming agreement with the tribe.
The Mashantuckets introduced the tribal tax on the same day they averted default by making a loan payment. The payment, including principal, amortization and interest, totaled $74.1 million, a source with knowledge of the transaction said Wednesday.
EDITORIAL FOOTNOTE; In the Constitution of the Mohegan Tribe,
ARTICLE IX---POWERS AND DUTIES OF THE TRIBAL COUNCIL
Section 2---(S) "To levy and collect taxes and a raise revenue to meet with needs of The Tribe or to support tribal government operations";
Was this Constitution approved by the B.I.A.? Does the State of Connecticut know of this part of the Mohegan Constitution? Is this legal, since the Mohegan Tribe is a Sovereign nation?
Will the Mohegan Tribal Government levy taxes of its own on the reservation (the Mohegan Sun Casino)? What do you think?