CONCERNING TRIBAL TAXES
IN INDIAN COUNTRY
by Thomas P. Schlosser
Morisset, Schlosser, & Jozwiak
THOMAS P. SCHLOSSER.
Mr. Schlosser represents Tribes in
fisheries, timber, water, energy, cultural resources, contracting, tax and
federal breach of trust. He is a director of Morisset, Schlosser, & Jozwiak,
where he specializes in federal litigation, natural resources, and Indian
tribal property issues. He is also
frequently involved in tribal economic development and environmental
regulation. In 1970s, Tom represented
tribes in the Stevens’ Treaty Puget Sound fishing rights proceedings. Tom has a B.A. from the
Case synopses are reprinted or derived from Westlaw with permission of Thomson‑West. For purposes of this paper, the presenter has revised the synopses.
A. TRIBAL TAXING AUTHORITY BEFORE 1978.
In the first 200 years of the United States of America, judicial decisions on the nature of Indian tribal powers adhered to three fundamental principles: (1) an Indian tribe possesses, in the first instance, all the powers of any sovereign state; (2) conquest renders the tribe subject to the legislative power of the United States, terminating the external power of the tribe but not affecting the internal sovereignty of the tribe; and (3) except where expressly qualified, full powers of internal sovereignty are vested in Indian tribes and their duly constituted organs of government. F. Cohen, Handbook of Federal Indian Law 230-35 (R. Strickland ed. 1982).
From the earliest days, Indian
tribes were recognized as “distinct, independent, political communities.” Worcester v.
The establishment of permanent reservations for most surviving Indian tribes in the mid‑1800s produced several rulings on the civil jurisdiction of tribal governments over nonmembers, in particular, taxing power.
In Maxey v. Wright, 54 S.W. 807 (Ind. Terr. Ct. App.), aff’d, 105 Fed. 1003 (8th Cir. 1900), the right of a tribe to levy a tax upon nonmembers of the tribe, attorneys practicing in federal court and residing on the reservation, was held to be an essential attribute of tribal sovereignty. The Court said: “[I]n the absence of express contradictory provisions by treaty, or by statute of the United States, the Nation (and not a citizen) is to declare who shall come within the boundaries of its occupancy, and under what conditions.” 54 S.W. at 809.
Morris v. Hitchcock, 194 U.S. 384 (1904), arose within the Chickasaw
The Court concluded that the Curtis Act was intended “to permit the continued exercise, by the legislative body of the tribe, of such a power as is here complained of, subject to a veto power in the President over such legislation as a preventive of arbitrary and injudicious action.” The Court thus upheld the permit tax on livestock within the Chickasaw Reservation whether or not the livestock owners lawfully possessed parcels of land in towns and cities in the Reservation.
The Attorney General had issued a
similar opinion, 23 Ops. Atty. Gen. 528 (1900); see also
7 Ops. Atty. Gen. 174, 177-78 (1855), with respect to the right of the
Cherokee Nation to impose an export tax on hay grown within the limits of the
reservation. The opinion of the Attorney
General suggested that tribal authority to impose such a tax would remain “even
if the shipper was the absolute owner of the land on which the hay was raised.”
This was approved by the Supreme Court
in Morris v. Hitchcock, 194
The Creek Nation won a similar case, Buster v. Wright, 135 Fed. 947, app. dismissed, 203 U.S. 599 (1906). In that case non‑tribal members contended that the sale of lots to them and the incorporation of cities and towns within Creek territory, as authorized by Congress, segregated the town sites and lots from the territory of the Creek Nation and deprived the Creeks of governmental jurisdiction to impose a permit tax on the privilege of trading within the Creek Nation. The Court said:
jurisdiction to govern the inhabitants of a country is not conditioned or
limited by the title of the land which they occupy in it, or by the existence
of municipalities therein endowed with power to collect taxes for city purposes,
and to enact and enforce municipal ordinances. Neither the
135 Fed. at 952.(
In 1934, Congress authorized tribes to exercise authorities in addition to the “powers vested in any Indian tribe or tribal council by existing law.” 25 U.S.C. ‘sec. 476. That section of the Indian Reorganization Act led to an Interior Department Solicitor, opinion on what powers were vested in tribes by then‑existing law. Margold’s seminal opinion, 55 I.D. 14, 1 Ops. Sol. Int. 445 (Oct. 25, 1934), notes that the powers of Indian tribes can only be answered generally because individual tribes’ authority is affected by special treaties and acts of Congress. Margold found that:
[O]ver all the lands of the reservation, whether owned by the tribe, by members thereof, or by outsiders, the tribe has the sovereign power of determining the conditions upon which persons shall be permitted to enter its domain, to reside therein, and to do business.
While much of Margold’s opinion addresses the authority of tribes over their own members, its discussion of taxes, licensing, and the power to exclude remains important to analysis of tribal civil jurisdiction over nonmembers. See also F. Cohen, Handbook of Federal Indian Law 122, 323 (1945).
Williams v. Lee, 358 U.S. 217 (1959), also made clear that
tribes retained jurisdiction over nonmembers. This case remains a 20th Century landmark
ruling on tribal civil jurisdiction over nonmembers. There, an action by a non‑Indian against
reservation Indians was held to fall within the exclusive jurisdiction of the
Navajo tribal courts. The Court noted
that the transaction occurred on the reservation and said: “The cases in this Court have consistently
guarded the authority of Indian governments over their reservations,” 358
In 1973, however, the Supreme
Court signaled its departure from the doctrine that reserved tribal authority
stemming from inherent sovereignty was plenary, alterable only by express
statute or treaty provision. In McClanahan
v. Arizona State Tax Comm’n, 411 U.S. 164 (1973), the Supreme
Court ruled that
This is not
to say that the Indian sovereignty doctrine, with its concomitant
jurisdictional limit on the reach of state law, has remained static during the
141 years since
This line of
cases was summarized in this Court’s landmark decision in Williams v. Lee,
358 U.S. 217 (1959): “Over the
years this Court has modified [the
cases thus tend to avoid reliance on platonic notions of Indian sovereignty and
to look instead to the applicable treaties and statutes which define the limits
of state power . . . The Indian sovereignty doctrine is
relevant, then, not because it provides a definitive resolution of the issues
in this suit, but because it provides a backdrop against which the applicable
treaties and federal statutes must be read . . . [Indian nations
Indian tribes] “were, and always have been, regarded as having a semi‑independent
position when they preserve their tribal relations; not as States, not as
nations, not as possessed of the full attributes of sovereignty, but as a
separate people, with the power of regulating their internal and social
relations, and thus far not brought under the laws of the Union or of the State
within whose limits they resided.”
B. POST-1978 LIMITATIONS ON TRIBAL AUTHORITY
Federal law on tribal jurisdiction
changed radically in 1978. In Oliphant
v. Suquamish Indian Tribe, 435 U.S. 191 (1978), the Supreme Court
stated: ”[A]n examination of our earlier precedents satisfies us
that, even ignoring treaty provisions and congressional policy, Indians do not
have criminal jurisdiction over non-Indians absent affirmative delegation
of such power by Congress.”
In Oliphant, 435 U.S. 191
(1978), the Suquamish Tribe claimed authority to try non‑Indians not on
the basis of a “congressional statute or treaty provision but by reason of
[its] retained national sovereignty.”
The Court noted a treaty provision
in which the tribe agreed “not to shelter or conceal offenders against the laws
The stunning decision in Oliphant immediately led to arguments that tribes lacked civil jurisdiction as well as criminal jurisdiction over nonmembers within their reservations. Thus far, the United States Supreme Court has refused to fully embrace that approach. However, the Court’s new analysis based on implicit divestiture of tribal authority has been reiterated many times.
Washington v. Confederated
Tribes of the Colville Indian Reservation,
447 U.S. 134 (1980), rejected the State of
[A]uthority to tax the activities or property of non-Indians taking place or situated on Indian lands, in cases where the tribe has a significant interest in the subject matter, was very probably one of the tribal powers under “existing law” confirmed by ‘ 16 of the Indian Reorganization Act of 1934, 48 Stat. 987, 25 U.S.C. ‘ 476.
[A]lthough the Tribes themselves could perhaps pre-empt state taxation through the exercise of properly delegated federal power to do so, cf. Fisher v. District Court, 424 U.S. 382, 390 (1976) (per curiam); United States v. Mazurie, 419 U.S. 544 (1975), we do not infer from the mere fact of federal approval of the Indian taxing ordinances, or from the fact that the Tribes exercise congressionally sanctioned powers of self‑government, that Congress has delegated the far‑reaching authority to pre‑empt valid state sales and cigarette taxes otherwise collectible from nonmembers of the Tribe.
In contrast, the lower court in
The first major restriction of
tribal civil jurisdiction over nonmembers came in 1981 with the decision
in Montana v. United States, 450 U.S. 544 (1981). In
Montana v. United States, 450 U.S. 544 (1981), establishes the benchmark: tribal
jurisdiction over nonmembers exists if one of three tests is met: (1) “express congressional delegation,”
(2) “taxation, licensing, or other means [regulating] the activities of
nonmembers who enter consensual relationships with the tribe or its members,
through commercial dealing, contracts, leases or other arrangements,” or
(3) “conduct of non‑Indians on fee lands within [the] reservation
when that conduct threatens or has some direct effect on the political
integrity, the economic security, or the health or welfare of the tribe.”
By 1989, Montana v. United
States began to be viewed as the
In Merrion v. Jicarilla Apache Tribe, 455 U.S. 130 (1982), the Court upheld a tribal severance tax on oil and gas production on tribal reservation land, concluding that the taxing power is an inherent attribute of tribal sovereignty that has not been divested by any treaty or act of Congress. In a six‑to‑three decision the Court found the tribe’s taxing power in its general authority, as a sovereign, to control economic activities within its jurisdiction and to defray the cost of providing governmental services.
The Court majority and minority divided over the question whether the tribe’s power to tax was derived solely from its power to exclude non‑Indians from the reservation. Petitioners operated under approved long-term leases with the tribe. The Court held that although the tribe had agreed to sell the right to use the land, it had not abandoned its sovereign powers simply by failing to expressly reserve them in a contract. The majority did not rely upon consensual jurisdiction and never cited Montana v. United States. Instead the Court relied upon Washington v. Confederated Tribes of the Colville Indian Reservation, supra. The majority also explained Morris v. Hitchock, Buster v. Wright, and Maxey v. Wright, discussed supra, saying:
These cases demonstrate that a tribe has the power to tax nonmembers only to the extent the nonmember enjoys the privilege of trade or other activity on the reservation to which the tribe can attach a tax. This limitation on tribal taxing authority exists not because the tribe has the power to exclude nonmembers, but because the limited authority that a tribe may exercise over nonmembers does not arise until the nonmember enters the tribal jurisdiction. We do not question that there is a significant territorial component to tribal power: a tribe has no authority over a nonmember until the nonmember enters tribal lands or conducts business with the tribe.
City of Timber Lake v. Cheyenne River Sioux,
10 F.3d 554 (8th Cir. 1993), cert. denied, 114
In Big Horn
Electric v. Adams, 219 F.3d 944 (9th Cir. 2000),
affirming 53 F. Supp. 2d 1047 (D. Mont. 1999), the
Crow Tribe imposed an ad valorem tax on utility property located on power company
rights‑of‑way on the Crow Reservation. The electric company sued officials of the
Crow Tribe, seeking injunctive and declaratory relief against the tribal tax on
the company’s property on a right‑of‑way across tribal lands. The district court determined that the right‑of‑way
was equivalent to fee land owned by nonmembers for purposes of deciding
nonmember governance. The court
determined that the ad valorem tax on the property exceeded the Tribe’s inherent
sovereignty because it was not imposed on the activity which formed the
consensual relationship, the sale of power.
The court stated that Strate and Wilson v.
Marchington had impliedly overruled Blackfeet. Accordingly, the Tribe lacked authority to
impose an ad
valorem tax on rights‑of‑way deemed to be the
equivalent of fee land owned by nonmembers. However, the court also ruled that
the sale of power to customers, about half of whom are tribal members, was
taxable by the Tribe and supported by a consensual relationship within the
Atkinson Trading Co., Inc. v.
Shirley, 532 U.S. 645 (2001),
rejected the Navajo Nation’s claim that inherent sovereignty supported
imposition of a hotel occupancy tax upon nonmembers on non-Indian fee land
within its reservation. The Court
analyzed the first and second
In Atkinson Trading, a non‑Indian hotel proprietor sued members of the Navajo Tax Commission seeking a declaratory judgment that the Navajo Nation had no jurisdiction to impose a hotel occupancy tax on the proprietor’s guests. The New Mexico District Court entered summary judgment in favor of the Commission members. Atkinson Trading appealed. The Court of Appeals held that: (1) district courts in reviewing tribal court decisions on jurisdictional issues should review findings of fact for clear error and conclusions of law de novo; (2) the District Court did not abuse its discretion in finding that Navajo tribal courts were not fundamentally unfair or biased, and that clear error discretion thus should be given to the tribal courts’ findings of fact; (3) the fact that the hotel was situated on fee land did not compel a finding that the Nation lacked jurisdiction over the proprietor’s nonmember guests; (4) the District Court applied the appropriate test for determining whether the proprietor entered into a consensual relationship with the Navajo Nation; and (5) a consensual relationship existed between Nation and guests, such that Nation had inherent jurisdiction to tax. Circuit Judge Briscoe dissented. 210 F.3d 1247 (10th Cir. 2000). On petitions for rehearing, the Court of Appeals split evenly so rehearing was denied.
The Supreme Court’s unanimous opinion rejected the Tenth Circuit’s finding of consensual relationships between the Navajo Nation and the hotel guests or the trading post. The Court stressed that the case involved no claim of statutorily conferred power. Slip op. at 8, n.5. The Court noted that neither the Indian Trader’s Statute, 25 U.S.C. § 261, nor the regulations adopted under that statute, authorized the hotel occupancy tax at issue. Slip op. at 10 and n.10.
Tribal utility taxes were again at issue in a Washington Utilities and Transportation Commission case, Brannan v. Qwest Corporation, (Feb. 2002). The Commission upheld Qwest’s pass‑through of the Lummi Nation’s and Swinomish Tribe’s utility taxes to nonmember customers living within reservation boundaries. The Commission distinguished the tribal utility taxes from those in Atkinson on the basis of the Tribes’ relationship with the utilities. In Willman v. Washington Utilities and Transp. Comm’n, 154 Wn.2d 801 (2005), the Washington Supreme Court reached the same result regarding power and other utility taxes where Yakama Nation taxes were passed through to member and nonmember utility bills. These decisions highlight the importance of thinking “outside of the box,” and like here, working with utilities to impose tribal taxes on nonmembers.
We jump ahead now to more recent court opinions affecting this topic, first from the Supreme Court:
Wagnon v. Prairie Band Potawatomi Nation, No. 04-631, 126
Plains Commerce Bank v.
The Supreme Court reversed the lower court, ruling that the tribal court could not set aside the bank’s sale of fee lands. The Court did not reach the question of the tribal court’s authority over contract breach claims and instead issued a very narrow decision concerning one form of relief granted by the tribal court.
5. Reservation Telephone Cooperative v. Henry, Nos. A4-02-121, A4-02-126, 278 F. Supp. 2d 1015 (D.N.D. Aug. 26, 2003). The Plaintiffs commenced an action against the Three Affiliated Tribes and the Tax Director for injunctive and declaratory relief alleging that a possessory interest tax imposed by the Three Affiliated Tribes cannot be assessed against rights‑of‑way and telephone lines granted and used by the Cooperatives throughout the Fort Berthold Indian Reservation. The district court granted plaintiff’s motions for summary judgment.
6. State of South Dakota v. Mineta, No. CIV. 02-3034, 278 F. Supp. 2d 1025 (D.S.D. Aug. 21, 2003). State brought action against Secretary of Transportation, seeking declaration that the Secretary, who assertedly had taken final action to require the state to require highway contractors to pay, and charge to the state, occupational taxes levied by Indian tribes in connection with construction projects on state highways which traverse Indian reservations, had no such authority, and that the Secretary could not withhold federal highway funds because of state action to not honor and reimburse highway contractors for such tribal occupational taxes. On the Secretary’s motion to dismiss, the district court held that there was no final agency action and the state had suffered no injury, and thus, the action was not ripe for review. Motion granted.
Warbelow’s Air Ventures, Inc. v. Commissioner
of Internal Revenue, No. 02‑73328, 2003 WL 22417080 (9th Cir.
8. Winnebago Tribe of Nebraska v. Kline, No. 02-4070-JTM, 297 F. Supp. 2d 1291, 2004 WL 73284 (D. Kan. Jan. 15, 2004). Indian tribes challenged state’s right to collect motor vehicle fuel taxes from tribally-operated businesses. State moved to dismiss. The district court held that: (1) tribe was not “person” who could sue under § 1983; (2) Eleventh Amendment did not bar suit; (3) Tax Injunction Act did not bar tribes’ suit, but did bar claims by individual tribal members; (4) principles of comity did not warrant dismissal of suit; (5) abstention was not warranted; (6) complaint stated sovereign immunity claim; and (7) suit was not barred by Hayden‑Cartwright Act. Motion granted in part and denied in part.
9. Bercier v. Kiga, No. 31052-0-II, 127 Wn. App. 809, 103 P.3d 232 (Wash. Ct. App. 2004). Bercier appealed the trial court’s dismissal of his declaratory judgment action. He argued he should be exempt from all Washington excise taxes and regulations because, as a member of the Fort Peck Indian Tribe who resides and sells tobacco products on the Puyallup Indian reservation, he is an Indian doing business on Indian trust land, entitled to exemptions under RCW 82.24.260, 82.24 .900, and 82.26.040. Holding that Bercier is not entitled to a tax exemption because he is not enrolled in the Puyallup Tribe on whose land he is doing business, the appellate court affirmed.
11. Mann v. ND Tax Commissioner , Dkt. No. 20040174, 2005 ND 36, 692 N.W. 2d 490 (N.D. 2005). Native Americans brought action against Tax Commissioner and Treasurer for declaratory and injunctive relief against imposition of motor fuels taxes on them on their reservations. The Northwest Judicial District Court issued permanent injunction against collection, dismissed all plaintiffs except one, and denied motions for reconsideration. Appeal and cross‑appeal were taken. The Supreme Court held that: (1) denial of state’s motion for reconsideration was not appealable without certification as final; (2) dismissal of all but one plaintiff without prejudice was not appealable without certification as final order; and (3) decision not to exercise supervisory authority was warranted. Appeals dismissed.
Winnebago Tribe of
Osage Nation v. State of Oklahoma Ex Rel.
Oklahoma Tax Commission, No. 03-5162, 2007 WL 4553668 (10th Cir.
Dec. 26, 2007). Not selected for publication in the Federal
Reporter. The district court
permitted the Osage Nation (Nation) to sue the state of
17. Barona Band of Mission Indians v. Yee, No. 06-55918, __ F.3d __, 2008 WL 2440528 (9th Cir. June 18, 2008). Indian tribe brought action against California State Board of Equalization (SBE), seeking declaratory relief from imposition of state sales tax on construction materials purchased by non‑Indian electrical subcontractor from non‑Indian vendor and delivered to Indian land pursuant to contract for $75 million casino expansion. The district court granted tribe’s motion for summary judgment, and the SBE appealed. The appellate court held that: (1) legal incidence of sales tax fell upon subcontractor and thus tax was not per se invalid as a tax on tribe or its members; (2) sales tax was valid under Bracker preemption analysis; and (3) Indian Gaming Regulation Act (IGRA) did not preempt sales tax. Reversed and remanded.
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