Quapaw Canoe runs into turbulent waters with bills from state tax department
Published: February 21,2014
CLARKSDALE — The only nature tourism business in Mississippi that takes people out in canoes padding the Mississippi River has run into a major logjam that threatens to force it out of business. Quapaw Canoe Company, which builds the large canoes used to take people on educational canoeing trips on the river, has been hit with a tax bill now totaling $41,000 while also running up $20,000 in bills for accountants and attorneys to fight what the business believes is improper taxation.
“I’m not sure if we’ll survive the fight,” said John Ruskey, owner of Quapaw Canoe Company in Clarksdale and in Helena, Ark. “The root of the problem is that there is no place in the Mississippi State Tax Code for us. The federal law says no taxes shall be charged on navigable waters. We have always operated under the assumption that we would be covered under that law and have never charged taxes for our services, although we have for sales and rentals. Now the Mississippi Department of Revenue wants to assess us for taxes on all of our income for the past four years, which now amounts to over $41,000 including interest and penalties.”
Quapaw is even being charged tax on income sources like schools, non-profits and government agencies that are not normally considered taxable. Ruskey is trying to figure out how to resolve this — not only for them, but anyone else following in their footsteps in nature tourism, here and in the rest of the Deep South.
“Whatever we do here is likely to be mimicked in other Southern states,” he said.
States like Utah and Idaho with long traditions of river runners have dedicated whole sections of their tax law in accordance with the federal exemption. States such as Tennessee have honored the federal exemption.
In a state that provides millions in tax incentives to bring new industries and jobs to the state, Ruskey is a bit perplexed at the anti-business attitude of the Mississippi Department of Revenue. Even after he hired accountants and attorneys and went before the department’s Board of Review citing the U.S. Rivers and Harbors Act, the department has remained deaf to arguments about the federal law.
Running the turbulent river is enough of a challenge. It can be dangerous and requires a lot of commitment and planning to do it safely. But this may be a bigger challenge than the ever-changing river.
“We are faced with a possibly insurmountable challenge from a source that has responded with no goodness, no forgiveness, and no attempt to comprehend the nature of who we are and what our business is,” he said. “Situations like this shouldn’t get in the way of developing businesses, especially developing industries like ours, nature tourism. We have a unique slant to it because we are on a river that no one else paddles on and we operate as an education organization. All of our trips involve history, geology and geography. Then we also do a lot of work with the youth of the Mississippi Delta with apprenticeships. We have actually raised a whole generation of paddlers who are now big river paddlers and guides. I’ve personally trained some of them for almost a decade now in the rigors of the quite dangerous Mississippi River.”
The consequences of the battle by this small ecotourism company against the tax department could have impacts far beyond one business. Paddling is the fastest-growing sport in the country. There are currently 24 million paddlers in the U.S., and more people are starting to paddle long distances on the Mississippi River. Mississippi paddler events such as the Bluz Cruz Race in Vicksburg, and Phat Water out of Natchez are increasingly popular.
“The Mississippi River is getting more and more recognized as one of the great outdoor adventures available in this country, as it should be,” Ruskey said.
Ruskey said the Department of Revenue should get on board with what the Mississippi Development Authority is doing to help businesses survive in a very challenging economy.
“From my perspective, it seems unfair,” Ruskey said. “The federal law says you can’t charge taxes on a navigable waterway unless that tax is going back directly into benefiting the business. Personally, my biggest hope is we can get this set right so it paves the way for more businesses like ours to be able to pursue this very healthy endeavor. Everything about paddling is healthy. It is good exercise. People are reconnected to the environment. Study after study shows people who engage in outdoor activities are happier.”
Having the huge tax bill hanging over the head of a business that ended up with only $5,000 in the bank at the end of the year is making it hard for Ruskey to concentrate on the business.
“It is very distracting,” he said. “It has instilled in me a paranoia about being able to continue to make a living. We are a small company. We don’t have a secretary. I answer the phone. I answer the emails. I empty the wastebaskets. I document and research water, weather and geographic conditions, and create a river manual for each trip. It is a very demanding business. It is actually dangerous for our operations to be too distracted. I have to be out as guides for scouts, church groups, school children and others. Their lives are in our hands. I have to focus 100 percent of our attention on safe travel on the Mississippi River.”
The company is currently preparing to appeal the Board of Review denial to the Board of Appeals. If the Board of Appeals also finds against Quapaw, the company can take the next steps afforded taxpayers appealing to the chancery court and, if it doesn’t prevail there, the Mississippi Supreme Court. But each of those steps is very expensive and time consuming.
Ruskey said the long process makes him feel like he is locked up in a glacier. But he is hopeful that, in the end, the right thing will be done for his business and any other ecotourism businesses that sprout up in Mississippi.
“We are the State of Mississippi,” he said. “Our name comes from the great river. Honoring the federal law in our tax code would be just another way to honor our river and its potential for our state.”
The Mississippi Department of Revenue declined comment, and said confidentiality laws prohibit the agency from discussing individual cases.
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