A tribal-owned gas station in Salton City is selling gas so cheap that competitors, county officials and others are crying foul.

Arco Travel Center owner Dennis Rieger claims the Red Earth Travel Center, which is owned by the Torres Martinez Desert Cahuilla Indian Tribe, is undercutting competition by not charging state sales tax.
Red Earth was selling unleaded regular gas for $3.55 a gallon this week, and less than $3.80 for diesel.

Many gas stations across the Coachella Valley have dropped gas prices in recent weeks, but most are hovering around the $4 mark for regular unleaded.
Motorists have lined up at Red Earth's station on Highway 86 to fill up their tanks.

“I can't blame people,” said Rieger, head of Salton Sea Ventures Inc., which invested $11.5 million to build the Arco station two years ago about 6 miles south of Red Earth on Highway 86 at South Marina Drive. “But it's a big, unfair advantage. I can't even pay my bills because of this.”
Rodney Bonner, Torres Martinez's tribal administrator, insisted the tribe is doing nothing wrong.

“We pay taxes; we pay everything that we're supposed to as far as doing business on tribal land,” he said. “It's a competitive business. Whatever we're doing; it's nothing illegal.”

Rieger said he had to lower the price of his station's regular unleaded gasoline to $3.79 this week to compete. But that's what it costs him to purchase the fuel, he said. He also lowered the diesel price to $3.99.

Rieger, others in the industry and at least one Imperial County supervisor claim the Red Earth gas station isn't paying upward of 60 cents per gallon in taxes.
They claim that's how it can sell gas substantially cheaper, lure customers from competitors and still turn a profit.

Gary Wyatt, Imperial County's District 4 supervisor, said he has tried since 2009 to get state officials to investigate why the Torres Martinez tribe is allowed to operate without paying state taxes.

“It's completely wrong, and (the tribe) is wrong for doing this,” Wyatt said.
He said the state hasn't appeared to be interested in pursuing the tribe for failing to pay gas taxes since the tribal station opened about six years ago.
“The only other recourse might be at the federal level,” Wyatt said.
The Red Earth station was closed for nearly two months but reopened on May 17.

Bonner said the station has been under fire despite its efforts to meet laws it must adhere to on the reservation and its donations of “a lot of money to the sheriff's department, the fire department, ambulances, schools.”
“Our business is not prospering like everyone thinks it is,” Bonner said.
“We're in trouble. I don't understand why every time we start making a move forward, somebody starts downgrading what we're doing.”
Bonner said the Red Earth Travel Center and casino has created more than 170 jobs.

“We created over 172 jobs. It's not like we're doing something wrong, and we're not asking anyone for anything,” Bonner said. “We pay our way. We're just doing business.”

State taxes do apply to tribes
In recent months, the state Board of Equalization has sought public input — including that of tribal members — to update Publication 146, said Anita Gore, BOE spokeswoman.

The publication, titled “Sales to American Indians and Sales on Indian Reservations,” details how sales taxes and personal property taxes are applied regarding American Indians and sales on Indian reservations.
Gore pointed to the most recent draft of the publication, which states “there are no special exemptions from the state's motor vehicle or diesel fuel taxes related to the fuel sales in Indian country.”

The Morongo Travel Center off Interstate 10, for example, charges all applicable local, state and federal taxes, said Michael Fisher, a spokesman for the Morongo Band of Mission Indians.

In a recent legal opinion, the Board of Equalization determined that tribes that import fuel into the state must pay both sales and excise taxes on the fuel.
Indian retailers must collect and remit to the board's use tax on sales of gas and diesel fuel on the reservation whether it is to Indians or non-Indians who do not reside on the reservation, board officials said.

Other states such as Washington have wrestled with the issue.
Washington lost a court battle in 2006 when the court ruled that tribes, as sovereign nations, did not have to pay the state gas tax.

Then, in a move to head off future court disputes, the governor and legislature signed an agreement requiring Washington to pay the tribes back 75 percent of the gas tax.

Still, Washington state is attempting to recoup about $11 million in unpaid gas taxes from the Yakama Nation after it failed to submit audit reports for several years that are required to differentiate sales to tribal members from nontribal members.

Taxes add about 60 cents per gallon
Wyatt said it's unfair that California businesses that pay the state taxes must go up against unfair competition, especially at a time when the state and counties desperately need the money.

“It's completely wrong, and they (the tribe) are wrong for doing this,” Wyatt said.

Rieger said regular unleaded gas costs him about $3.29 per gallon plus freight charges, excluding taxes. Add about 60 cents in taxes, and Rieger is selling his gas at cost when charging $3.89.

If Rieger were to sell gas for less than what it costs him, he'd be fined by the state, he said. But he admits he has considered trying it to match the tribal station's price.

“I don't know if it's a good idea, but it may call attention to this,” Rieger said.
Reed Sellers, owner of Sellers Petroleum in Imperial, said he ran into problems with the Torres Martinez tribe while supplying the gas station several years ago. Now Sellers said the state is attempting to collect about $28,000 in taxes from his firm.

Sellers said his company provides wholesale fuel to other tribes that pay state taxes.

“When somebody comes in and undercuts like (the Torres Martinez tribe) is, that just kills everybody,” Sellers said.

“They can under-price their competition by 30 cents a gallon and still make money. And these stations are working on 5, 8, 10 cents a gallon margin.”
Sellers said gas stations stay competitive with gasoline prices to draw customers who purchase items in their stores. “That's where they make their money,” Sellers said.

Sellers and Rieger said Red Earth's supplier — fuel wholesaler First American Petroleum — is bringing in gas from Nevada.

First American Petroleum is licensed as a tribal business in Washington state under the Yakama Indian Nation.

Robert Ramsey, founder and CEO of First American Petroleum, did not return phone calls or respond to questions in email.

Rieger estimated it may cost the tribal station about 10 cents more a gallon to ship it in from Las Vegas, but the tribe saves about 60 cents or so by not paying taxes, Rieger said.

“We pay 35.3 cents per gallon sales tax to the state of California and another 11 cents in an add-on sales tax. It's 2.75 percent of whatever you sold the fuel for,” Rieger said.

There also are underground storage fees of about 2 cents a gallon and a Superfund fee of a tenth of a cent per gallon that Rieger and other station owners must pay.