FARGO - Just before the Dakota Access oil pipeline protest brought thousands of visitors to the Standing Rock Sioux Reservation, many businesses there started collecting a 5 percent sales tax.
Standing Rock Tax Director Karol Two Bears said imposing the tax was not a shrewd move meant to cash in on the vast protest camps that swelled over the summer on and near the reservation, which continued to grow into the fall. The tax, which went into effect July 1, had actually been in the works for years, she said.
North Dakota lawmakers approved the tax in 2015, and the tribal council did the same in May 2016. The tax is much like the state's 5 percent sales-and-use tax collected elsewhere in North Dakota, and Standing Rock was the first tribe in the state to impose it, said Myles Vosberg, director of the state's Tax Administration Division.
In July, August and September, the tax brought in close to $3.8 million, about $3 million (80 percent) of which goes to the tribe and the rest (20 percent) goes to the state, according to state records. Collection amounts from October to the present have not yet been released.
However, this revenue stream for the reservation, which struggles with poverty and unemployment, will end March 7 because of a dispute between tribal and state officials over the rules on collecting the "use" part of the sales-and-use tax.
Two Bears said the dispute centers around the tribe's objection to the requirement that businesses owned by the tribal government, like Prairie Knights Casino, must pay the use tax on items purchased for their own use and not for resale, such as office furniture. "That is just additional money that our businesses are going to have to spend," she said. "We would rather that use tax stay within the reservation."
Two Bears pointed out that state-owned businesses like the Bank of North Dakota and the North Dakota Mill and Elevator do not have to pay a use tax.
Vosberg, the state official, conceded this point. But he said his division, which administers the sales-and-use tax on the tribe's behalf, collects the use tax from tribal government businesses because that's part of the agreement between the tribe and state.
"We had to follow the law," he said.
Two Bears said the state does not share with the tribe the amounts of sales tax individual businesses collect. Consequently, she says, she can't determine how much of the tribe's sales tax revenue is protest-related, so she shied away from saying the imposition of the tax was fortunate timing for the reservation.
Two Bears said she knows anecdotally that a number of reservation businesses, like the casino's hotel, restaurant and convenience store, have benefited from the influx of environmental and American Indian rights activists opposed to the pipeline's construction, as well as law enforcement officers and news reporters. She said many of the 20 to 25 physical businesses on the reservation have seen more walk-in traffic.
"Businesses have seen some increased revenue from the protest camp, but not to the extent that it's been overwhelming," she said.
Two Bears said the tribe intends to put the sales tax proceeds toward community development and infrastructure projects. Meanwhile, a cleanup of the protest camp is underway as the threat of flooding looms, and the tribe has asked the few hundred remaining protesters to go home.
The Standing Rock Sioux Reservation straddles North and South Dakota. And Two Bears said the South Dakota half has collected sales tax for over 20 years. But because the North Dakota half just started doing so, there's no baseline for comparison when trying to use the sales tax collections to determine the protest's economic impact.
On the North Dakota side of the reservation, businesses not owned by tribe members have for years been collecting a relatively small amount of sales tax from nonmember customers. In the third quarter of 2015 (July through September), the tax brought in just $146,527 from nonmembers, according to state records.
But during the third quarter of 2016, when member-owned and nonmember-owned businesses started collecting the tax from all customers, the collection amount soared to close to $3.8 million. In the same quarter, collections of roughly $3.8 million were also seen in Griggs and Nelson counties, which each have a smaller population than the North Dakota side of the reservation, known as Sioux County, state records show.
Burleigh, Morton counties
Sales tax data from counties near the reservation does not paint a clear picture of economic benefits related to the protest. In Morton County, where many protesters camped just north of the reservation, sales tax collections dipped 8 percent in the third quarter of 2016, compared with the same quarter in 2015. Bismarck's Burleigh County saw an 11 percent drop. Statewide, there was a 20 percent decline, state records show.
The retail sectors in Bismarck and Mandan each experienced a 6 percent drop in sales tax collections in the third quarter of 2016. The hotel and restaurant sector in Bismarck had a decrease of 3 percent, while Mandan saw a 2 percent uptick, state records show.
North Dakota officials said sales tax data for individual businesses is confidential. They also said they don't have data on the amount of fuel sold at non-reservation gas stations. But because of an agreement between the tribe and state, there is public data on how much fuel was sold at reservation gas stations.
In September 2016, when the population of the protest camp climbed into the thousands, gas sales went up at most of the gas stations on the North Dakota half of the reservation, compared with September 2015. For instance, gas sales at the Prairie Knights Casino rose 39 percent, and at Hawk's Corner, owned by Standing Rock Chairman Dave Archambault, sales jumped 171 percent, according to state records.
Phone messages left for Archambault were not returned.