First Nations leaders are threatening to fight the merged sales tax through any means possible unless they're allowed to retain their point-of-sale exemption from the provincial portion of the 13 per cent harmonized sales tax.

"This is where we have to draw our line in the sand," said Grand Council Chief Patrick Madahbee from the Union of Ontario Indians, which represents 42 First Nations.

"Already action is being contemplated out in the communities ... and I think this could be an escalating issue right across the province and right across the country."

Madahbee was one of four chiefs leading a rally at the Ontario legislature to protest a lack of consolations with First Nations when it comes to implementing a tax they say will make many already costly items unaffordable.

The protest blocked traffic on a major downtown Toronto street, later bringing some traffic to a halt as protesters, who numbered in the hundreds, headed down University Ave., south of the provincial legislature.

Ontario Regional Chief Angus Toulouse said First Nations were looking at all possible options to stop the imposition of the new tax and to ensure that his peoples' right to tax immunity is respected.

He has already spoken with First Nations leaders in British Columbia, which is also moving to a harmonized tax model, and has secured their support.

"We're looking at mobilizing our citizens, we're getting ready with our communications, and of course part of that action is getting a legal strategy in place and be ready to have to do battle on that front," Toulouse said.

Aboriginal Affairs Minister Brad Duguid said the province supports demands for a point-of-sale exemption for First Nations and is urging Ottawa to get behind the move.

Premier Dalton McGuinty has written to Prime Minister Stephen Harper to ask him to grant the exemptions, he added, and will consider provincial alternatives to ease the new tax burden if Ottawa refuses to help.

"We will do everything we possibly can to urge the federal government to see it our way," Duguid said.

"I don't, for the life of me, understand why they do not."

The chiefs said they appreciated Ontario's efforts. But they said the province should have had those consultations while negotiating the deal with the federal Conservative government to harmonize the eight per cent provincial sales tax with the five per cent goods and services tax -- not after the fact.

"We're seeing another classic example of federal and provincial Ping-Pong, of the two jurisdictions passing responsibility back and forth," Madahbee said.

"If the political will was there to include these as the requirements for exemptions, it should have been done."

NDP Leader Andrea Horwath called McGuinty's latest move a "shield" aimed at trying to hide the province's own lack of action.

"If this government was serious about aboriginal treaty rights, they would have made sure they were consulting with the chiefs," she said.

"McGuinty should have done the right thing from Day 1."