Court rejects tribe’s tax challenge
on Dec 6, 2005 at 9:47 am
The Supreme Court, in the only decision of the day, ruled on Tuesday that the state of Kansas did not act unconstitutionally in imposing a tax on distributors of gasoline that is later sold — and taxed — at service stations on an Indian reservation. The decision was 7-2.
The Court stressed that the tax actually fell upon the non-Indian distributors of motor fuel, before the gasoline was ever shipped onto a reservation for sale by the tribe. In the opinion written by Justice Clarence Thomas, the Court refused to apply the customary balancing test to accomodate the tribe’s sovereign interests while recognizing state taxing authority. That test, Thomas said, does not apply when a tax simply does not fall on tribal activity itself. “Limiting the interest-balancing test exclusively to on-reservation transactions between a non-tribal entity and a tribe or tribal member is consistent with our unique Indian tax immunity jurisprudence,” the opinion said.
“The tax’s legal incidence is on the distributor because Kansas law makes clear that it is the distributor, not the [Indian] retailer, that is liable for the tax,” Thomas wrote. He noted that the Court had upheld state taxes that may affect Indians but are applied outside Indian reservations, and commented: “If a state may apply a nondiscriinatory tax to Indians who have gone beyond the reservation’s boundaries, it may also apply a nondiscriminatory tax where, as here, the tax is imposed on non-Indians as a result of an off-reservation transaction.”
Justice Ruth Bader Ginsburg, joined by Justice Anthony M. Kennedy, dissented, arguing that the Court should have applied the balancing test. Moreover, Ginsburg wrote, “Kansas’ placement of the legal incidence of the fuel tax is not as clear and certain as the state suggests and the Court holds.”
The decision came in the case of Wagnon v. Prairie Band Potawatomi Nation (docket 04-631).
Kansas officials had urged the Court, in deciding the case, to abandon the balancing test for judging state laws that affect Indian tribes. That test comes from the Court’s 1980 decision in White Mountain Apache Tribe v. Bracker. Because of the way the Court resolved the Prairie Band gas tax dispute, however, it did not reach that question.
The Court will have another chance to consider that issue. The state of Kansas has a separate appeal pending, also against the Prairie Band (docket 04-1740). The Tenth Circuit applied the White Mountain Apache test in striking down Kansas’ off-reservation enforcement of its motor vehicle registration and titling laws. The tribe had sought to have the state defer to the motor vehicle registration and licensing provisions under tribal law, even for vehicles driven beyond the reservation’s boundaries. The Court may simply order the Tenth Circuit to reconsider that ruling in the wake of Tuesday’s decision on the motor fuel tax dispute.
