Some Ontario First Nations leaders are urging the federal government to take their treaty rights into account when implementing the harmonized sales tax (HST) in Ontario and exempt them completely from the new tax.

Leaders representing the Association of Iroquois and Allied Indians say they are willing to consider legal action should the new tax, which is due to take effect in Ontario in July 2010, be imposed on aboriginals.

"One sovereign cannot tax another without their consent, and we have never given that consent to any government," said the association's deputy grand chief, Chris McCormick. "It would be in violation of our treaty rights and of the Constitution of Canada."

The association represents about 20,000 of Ontario's roughly 170,000 First Nations people.

The association chiefs have embarked on a lobbying campaign, demanding that First Nations people be fully exempt from the HST, which will be administered by the federal government.

In the three provinces that already have a harmonized sales tax (New Brunswick, Nova Scotia and Newfoundland and Labrador), First Nations have received exemptions.

In Ontario, First Nations are currently exempt from the provincial sales tax (PST) and partially exempt from the goods and services tax (GST).

Ontario chiefs worry that when the HST does come into effect, it will be administered in the same way that the GST is now.

Under current GST rules, goods and services purchased by status Indians on First Nations reserves are exempt, but items bought by status Indians off a reserve must be delivered to a reserve to qualify for a GST exemption.

Federal finance officials confirmed to the CBC that the same rules will apply to the HST, as per the tax exemption rules set out in the Indian Act.

The association is also opposed to getting the tax exemption through a rebate system, which it believes the federal government is considering for the HST, rather than receiving the exemption right away at the point of purchase.

The chiefs say a rebate system will be cost-prohibitive for many First Nations members, particularly those on fixed incomes.

"At the point of sale, you can't afford to purchase things because your spending power is reduced," said Phillips.

"We've been exempt from the tax for decades, and all of a sudden, they are going to tax us?" added McCormick.

The association complains that Ottawa has excluded First Nations from discussions on how to implement the HST.

"When you don't have dialogue, you violate the spirit of that treaty," said Randall Phillips, grand chief of the association. "[First Nations] see this as another attack."

In contrast to Ottawa, the provincial government, the association says, met with First Nations leaders right after it announced the HST in its budget. Provincial officials have also indicated they are open to point-of-sale exemptions.