“De-Buffering” the Tax Commission’s Sales Tax “Buffer”

You might be wondering what the word “De-Buffering” means in the title of this article. You might be thinking that it’s not a word and I just made it up. You might also be thinking that I could have used a different word or words to say what I really mean. You are correct.

Or, you might not have noticed the word at all until I pointed it out and just trusted your intuition that it means something like “to remove a buffer.” If so, I caution you about trusting the word I am putting in front of you because it might not really mean what you think it does. After all, I’m a lawyer and engaging in semantics is one of my many tools.

Take for instance, the conversations regarding the Tax Commission’s proposed amendments to the tax regulations. People, including Council Delegates, have been referring to the proposed increase in the sales tax range as a “buffer.” You can listen to the discussion yourself on the Navajo Nation Council’s YouTube channel. The video is called “Winter Sessions (Day 3), 24th Navajo Nation Council (1/26/22) via Teleconference.” And in case you’re wondering, the legislation that proposes changing the sales tax range is Legislation No. 0111-21. You might also be interested in the Tax Commission’s other proposed amendments to the tax regulations, Legislation No. 0112-21, which impose harsh penalties on taxpayers for non-compliance and increase existing penalties.

First, let me save you all a lot of time here and break down what the word “buffer” means. There are a few definitions, but the most common definition that people probably think of when they hear about this sales tax “buffer” is: something that shields, mitigates, reduces, protects, or lessens the impact of something else. So, my question to the Tax Commission is: in increasing the sales tax range, i.e. creating this “buffer,” what are you trying to reduce the impact of?

From listening to the Council meeting, it sounds like what you’re really trying to do is create an OPTION, not a buffer, to tax small businesses like mine in the event that you need money to do something. I’ll use the example from the Council meeting. You want to undertake a broadband project and need funding. So, you tax small businesses like mine to pay for it and then give the project to your tribal enterprise NTUA who will then contract with outside companies like Verizon instead of Navajo-owned businesses. Yes, I have seen NTUA’s broadband plans and proposed contractors.

Let’s stop calling this proposed amendment a “buffer,” and call it what it really is: the option to squeeze the little men and women who run businesses, so the government has money to play with. The Tax Commissions is arguing that they are not raising the sales tax rate itself and that doing so would require approval from the Council and President. This is like Russia claiming that its troops are just taking a “stroll” in Belarus. Why would the Tax Commission go through all this legislative trouble if they do not plan on increasing the sales tax rate at some point in the future?

Just to note, the sales tax rate in Arizona is 5.6%. In New Mexico, the sales tax rate, called a gross receipts tax, is as low as 5.125%. In Utah, the state sales tax rate is 4.85%. Navajo Nation currently imposes a 6% sales tax. Under the current tax regulations, the sales tax range is 2-6%, so Navajo Nation is charging the maximum amount of sales tax that it can under the regulations. And they want us to believe that the sales tax rate won’t increase? That it’s just a “buffer”?

Here are the options that small businesses have when it comes to paying sales tax. They can either increase the price of their products and services which means losing customers, or they can pay the sales tax themselves from their own revenues which would mean earning less profit in the end. Maybe if the Tax Commission officials ran businesses themselves, they would understand this; and, instead of trying to figure out ways to increase taxes, they might also consider the economic benefits that could be had from REDUCING taxes.

This whole concept of taxes is a Bilagáana concept. It comes from the old monarchies in Europe that collected taxes from the peons. Whenever the kings and queens wanted to build lavish castles, host parties for the elite, or have feasts, they would increase taxes on their already exhausted peons and work them harder. They would threaten them with penalties if they did not comply. Does this sound familiar? Díí doo Diné k’ehji da. Ei Bilagáana binitsahakees dóó Bilagáana binahat’á.

Instead of taxing the already small tax base in Navajo Nation, the Nation should be looking at ways to streamline its government operations to reduce costs. Get rid of paper filing. Get rid of that policy of requiring people to pay by money order. Get rid of the USPS mailing stuff. What is Navajo Nation going to do if the U.S. Postal Service goes under? It’s on its last legs right now. The Nation needs to invest in electronic and online systems. Indeed, it’s a large investment, but it will undoubtedly pay off down the road. Investing in the future has always been the Navajo way.

Give people an incentive to set up businesses on the Navajo Nation. More businesses on the reservation means a larger tax base. Right now, these tax amendments are de-incentivizing businesses from operating on the Navajo Nation.

In the previous years, my law office, which is registered in the Navajo Nation, has been getting calls from companies and entrepreneurs asking about doing business in the Navajo Nation. One of the main questions they ask in determining whether to set up shop on the Navajo Nation is: what are the taxes like out there? How I answer that question will depend on whether the Council passes these tax amendments.

Joseph Austin
Owner and Managing Attorney of the Law Office of Joseph Austin, Esq.