YAKIMA, Wash. — A fight between the Yakama Nation and the state over a scrapped agreement that allowed tribal gas station owners to buy bulk fuel mostly free of state fuel taxes is now in federal court.

The state filed the lawsuit against the tribe in U.S. District Court in Yakima on Dec. 17, responding to a lawsuit the tribe filed in Yakama Tribal Court. The tribe’s lawsuit came after the state on Dec. 5 terminated an agreement that allowed tribal gas station owners to buy bulk fuel mostly free of state fuel taxes.

In a separate case questioning the legality of the agreements, Automotive United Trades Organization — a nonprofit fuel marketer association — is suing the state in federal court.

The association’s executive director, Tim Hamilton in McCleary, said the agreements give tribes reimbursements on fuel taxes they are not even paying. In those agreements, the tax is passed on to customers.

He alleges that the state will pay to tribes a total of a half-billion dollars over the next 10 years in fuel tax reimbursements. “It’s economic suicide, what’s going on in our state,” he said. “And no other state in the union is like this.”

State Department of Licensing spokesman Brad Benfield said he couldn’t confirm Hamilton’s figures, but that all the fuel tax agreements, with the exception of the Yakamas’, are working fine.

Yakama Tribal Council Chairman Harry Smiskin couldn’t be reached for comment.

For the Yakamas, terminating the agreement means tribal station owners would have to pay the full state fuel tax of 37.5 cents per gallon on all bulk fuel purchased. Under the agreement, tribal station owners only paid the tax on 25 percent of the total amount of bulk fuel they purchased. The tribe’s lawsuit seeks to block the state from assessing the full state tax on tribal station owners.

In response, the state’s lawsuit seeks to have a federal judge overrule the tribal court, force the tribe to pay some $19.4 million in unpaid fuel taxes and uphold the state’s termination of the fuel tax agreement on the grounds that the tribe has failed to follow its required auditing provisions.

Hamilton said the figure the Yakamas owe in fuel taxes is closer to $25 million when considering what should have been paid this year. He also criticizes the state for not taking action sooner over the tribe’s failure to submit audits.

“And they let this go on and on and on until it’s $25 million,” he said. “That’s why (we are) in a full-court press to analyze this. We can intervene in court to protect the consumer’s interest.”

Tribal members are exempt from state fuel taxes on the reservation. But the reservation is a checkerboard of tribal and nontribal land, where tribal gas stations see both tribal and nontribal customers. The state has long argued that non-Indian buyers evade state fuel taxes by shopping at tribal stations, and that the tax exemption gives tribal stations an unfair price advantage. The agreement, formed under a federal consent decree, was an attempt to level the playing field between tribal and nontribal fuel stations.

But the state says the tribe has not submitted required audits of fuel sales spanning from 2007 to present.

Phil Ferolito can be reached at 509-577-7749 or pferolito@yakimaherald.com.