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Non-Indian customers must pay, lawsuit says

HELENA - The state Revenue Department has gone to court, attempting to force a tribally owned resort to again collect the state lodging tax from customers.

A complaint filed in District Court at Polson asks a judge to order the KwaTaqNuk resort, on Flathead Lake, to assess the tax on non-Indian customers. The complaint says officials of the Confederated Salish and Kootenai Tribes should be ordered to stop telling the resort that it should not collect the tax.

The tribe is violating state law by not imposing the 4 percent tax and turning the money over to the state, the suit says.

Ranald McDonald, attorney for the tribes, declined to comment on the complaint.

The suit represents a battle between tribal sovereignty and state taxing authority.

The tribes maintain sovereign Indian nations are not required to collect taxes for the state without first negotiating an agreement. The state contends the law does not impose a tax on the tribes or tribal members, but requires that the tax be collected from non-Indian customers of all lodging businesses.

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The tribes collected the tax in the past, depositing the collections in escrow. In 1997, the tribes reached a settlement with the state and remitted $245,155.

Since July 8, 1997, the tribes have refused to collect the tax at the 112-room KwaTaqNuk in Polson. The tribal council directed the resort to halt collections, and the state got notice of that action in October 1997.

The accommodations tax, also known as the bed tax, goes to the state Commerce Department. It distributes 25 percent of the money to Montana's seven tourism regions, including one known as Glacier Country, which takes in the Flathead area. The rest is used for statewide tourism promotions and related work.

Created in 1987, the tax brings in about $10 million a year statewide.

Named in the suit are S&K Developments Inc., the tribal business operating the resort; Jay Lehman, resort manager; and members of the tribal council.

Filing of the suit came a month after the state began blacklisting KwaTaqNuk as a business that state employees should boycott while on government business, because of the unpaid taxes.

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