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American Indian Law. Class 6 Taxation and Economic Development. Federal Statutes Impacting Trade. Trade and Intercourse Acts We’ve discussed mostly land issues b ut see, Indian Trader Statutes Tax statutes Don’t tax tribal income derived from lands

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american indian law

American Indian Law

Class 6

Taxation and Economic Development

federal statutes impacting trade
Federal Statutes Impacting Trade
  • Trade and Intercourse Acts
    • We’ve discussed mostly land issues
    • but see, Indian Trader Statutes
  • Tax statutes
    • Don’t tax tribal income derived from lands
    • Provide tax incentives for locating on tribal lands and employees in impact zones
  • Indian Reorganization Act
    • Section 17 corporations
tribal tax authority
Tribal Tax Authority
  • Tribes retain inherent authority as governments to tax certain activities
    • Unquestioned sales/severance tax on trust lands
    • Consent-based on some fee lands
    • But not necessarily “exclusive” tax authority
      • Double taxation concerns complicate/frustrate
state taxing authority
State Taxing Authority
  • Unless delegated by Congress, states generally lack taxing authority in Indian country
  • Exceptions for fee lands
    • State property tax where restrictions on alienation are lifted, and
    • where the legal incidence of tax does not fall on tribe
sovereign immunity
Sovereign Immunity
  • Tribes enjoy same level of sovereign immunity as state and federal governments
    • Even when acting in business and not governmental capacity
  • Waivers of sovereign immunity can come by
    • Tribe
    • Congress
moe decision 1976
Moe Decision 1976
  • States can’t tax sales to “Indians” (changed to “members” in Colville decision)
  • Upheld state tax to non-Indians who purchase on-reservation cigs
  • taxes applied to non-Indian consumers are valid even if they adversely affect or even eliminate Indian business with non-Indians
  • States may impose “minimal burdens” on Indian business to collect taxes (ie collect and remit)
unresolved issues after moe
Unresolved Issues After Moe

Can tribes tax non-Indians?

If so, do the tribal taxes bar state taxes?

Do the state taxes infringe on tribal sovereignty?

Must the state credit the tribal taxes?

tribes can tax non members
Tribes Can Tax Non-members

tribes retain all sovereign powers that have not been ceded in treaty, abrogated by statute or divested by implication

Power to tax is fundamental attribute of sovereignty

Never ceded in a treaty. Never abrogated in a statute. Never implicitly divested.

tribal taxes do not bar state taxes
Tribal Taxes Do Not Bar State Taxes

All smokeshops offer is an exemption from state tax, nothing in federal Indian law authorizes tribes to market a tax exemption

There is no indication that Congress intended to preempt state taxes of non-Indians. The treaties and a variety of federal statutes protect and promote tribal self-government and economic development, but nothing in these would preempt state taxation of non-Indians

state taxes do not unduly infringe on tribal sovereignty
State Taxes Do Not Unduly Infringe on Tribal Sovereignty

Weigh the various state and tribal/federal interests involved in taxation

Is the state tax directed at off-reservation value

Does the tax payer receives state services?

Double taxation (tribal and state) poses no legal conflict and in fact evinces that tribes are not infringed upon. They are still free to tax everyone.

the state is not required to credit tribal tax
The State Is Not Required to Credit Tribal Tax

If there is no evidence that lack of credit would place smokeshops at a competitive disadvantage to retailers elsewhere, state tax ok

Indian Commerce Clause arguably requires states to give a credit so long as the tribe and state are taxing the same thing. This way states interest is protected but Indian stores not placed in disadvantage.

white mtn apache v bracker
White Mtn Apache v. Bracker

State tax:

motor carrier license tax and

excise (use fuel tax)

Imposed on:

subcontractor transporter

white mtn v bracker
White Mtn v. Bracker
  • Analytical approach: State authority within Indian country is barred by either of two “Independent but related” barriers:
    • Preemption, and
    • Infringement on tribal sovereignty
    • Note: while either one stands alone theoretically, the court focuses on preemption
bracker preemption 3 part test
Bracker Preemption 3 Part Test

Is there a comprehensive federal scheme?

If so, does the state tax interfere with it?

If so, is the state tax nonetheless justified by state services?

comprehensive federal scheme
Comprehensive Federal Scheme
  • Factors that contribute to meeting the standard:
    • Statutes
    • Detailed regulations
    • Day-to-day BIA supervision
    • Who provides services (builds roads, fire, ambulance, etc)
interference with federal scheme
Interference with Federal Scheme
  • In Bracker, the court points to three factors:
    • Assessment of state taxes could result in the reduction of tribal revenues and in reduced profitability
    • Tribal revenues pay in large part for sustained-yield management mandated by federal law.
    • Economic burden of taxes will ultimately fall on the tribe
legal incidence of the tax
Legal Incidence of the Tax
  • per se legal incidence rule
    • If the legal incidence of the tax falls on the tribe or tribal members, state taxation is preempted
    • If it falls on nonmembers, then go through the other parts of the test (federal regulatory scheme)
federal regulatory scheme
Federal Regulatory Scheme
  • If there is a federal scheme at play:
    • is there a comprehensive federal scheme
    • would state tax interfere,
    • is the state tax justified by service
  • If there is no federal scheme then:
    • does the state have a valid interest that outweighs the those of the federal government and the tribe?
  • Lawsuit? Against the tribe - sovereign immunity. Against the individual Indian retailer? Yes, but in the tribal court most likely
  • Seizure of shipments? Yes, but must take place off reservation
  • Collection from wholesalers?
    • legal incidents?
collection from wholesalers
Collection from Wholesalers
  • It’s over-inclusive
    • Taxes sales to Indians which state cannot do
    • Have to structure tax system accordingly