Federal Recent Developments

American Indian Law Review Volume 20 | Number 1 1-1-1995 Federal Recent Developments Follow this and additional works at: https://digitalcommons.law.ou.edu/ailr Part of the Indian and Aboriginal Law Commons Recommended Citation Federal Recent Developments, 20 Am. Indian L. Rev. 245 (1995), https://digitalcommons.law.ou.edu/ailr/vol20/iss1/8 This Recent Development is brought to you for free and open access by University of Oklahoma College of Law Digital Commons. It has been accepted for inclusion in American Indian Law Review by an authorized editor of University of Oklahoma College of Law Digital Commons. For more information, please contact . FEDERAL RECENT DEVELOPMENTS UNITED STATES SUPREME COURT TAXATION: Legality of Motors Fuels and Income Taxes Within Indian Country Oklahoma Tax Commission v. Chickasaw Nation, 115 S. Ct. 2214 (1995) The Chickasaw Nation appealed a ruling by the United States District Court for the Eastern District of Oklahoma, which had granted the State of Oklahoma the power to impose several state taxes against the Tribe and its members. The Tenth Circuit Court of Appeals reversed the district court's ruling and held that without congressional authorization, the State could not impose a motor fuels tax on fuel sold by the Tribe at its retail stores situated on trust land and that the State could not tax the wages of tribal members employed by the Tribe but residing beyond Indian country.' The Supreme Court of the United States granted the State's petition for certiorari. This case concerns the taxing authority of the State of Oklahoma over the Chickasaw Nation (the Tribe) and its members. The Court considered two questions: whether Oklahoma may impose a motor fuels excise tax upon fuel sold by Chickasaw Nation retail stores located on tribal trust land and whether Oklahoma may impose a state income tax upon members of the Chickasaw Nation who are employed by the Tribe but who live outside Indian country.2 The Chickasaw Nation, a federally recognized Indian tribe, contended that Oklahoma's fuels tax was levied on tribal retailers, not on distributors or consumers, and therefore was violative of the respect due to the Chickasaw Nation's sovereignty. The Tribe maintained that the State could not collect its fuels tax at tribal convenience stores without explicit congressional permission. The Tribe's contention of tax immunity is supported by the Court's ruling in Montana v. Blackfeet Tribe3 in which the Court held, "the Constitution vests the Federal Government with exclusive authority over relations with Indian tribes. In recognition of the sovereignty retained by Indian tribes even after formation of the United States, Indian tribes and individuals generally are exempt from state taxation within their own territory."4 1. Chickasaw Nation v. Oklahoma Tax Comm'n, 31 F.3d 964 (10th Cir. 1994) 2. Oklahoma Tax Comm'n v. Chickasaw Nation, 115 S. Ct. 2214 (1995). 3. Montana v. Blackfeet Tribe, 471 U.S. 759 (1985). 4. Id. at 764. Published by University of Oklahoma College of Law Digital Commons, 1995 AMERICAN INDIAN LAW REVIEW [Vol. 20 Also citing Montana v. Blackfeet Tribe, the State of Oklahoma maintained that the Chickasaw Nation was not inevitably but only "generally" immune from state taxation! Oklahoma asserted that even if the legal incidence of the fuels tax falls on the Tribe as retailer, no tax immunity should be allowed because the State's interest in supporting the levy is compelling when compared with the Tribe's insubstantial interest. Furthermore, the State contended, the state tax would have no effect on tribal governance and selfdetermination. Thus, Oklahoma asserted, a balancing test approach would be appropriate - balancing the state and tribal interests. In the alternative, the State contended that the legal incidence of the tax did not fall on the retailers. Additionally, the State asserted for the first time that even if the tax were impermissible on other grounds, taxation of this type was authorized under the Hayden-Cartwright Act of 1936.6 The State asserted that the Act expres;ly authorized States to tax motor fuel sales on "United States military or other reservations." Oklahoma maintained that the word "reservation" encompassed Indian reservations. The Court dispensed with the State's late assertion of the HaydenCartwright Act as permitting state levies on motor fuels sold on Indian reservations, and refused to entertain the argument.7 Because the State made no reference to the Hayden-Cartwright Act in the courts of first and second instance, and did not mention the 1936 legislation in its petition for certiorari, the Court declined to address the question of statutory interpretation. The Court held that "as a court of review, not one of first view, we will entertain issues withheld until merits briefing 'only in the most exceptional cases.' This case does not fit the bill."8 5. Il. 6. 4 U.S.C. § 104 (1994). Section 10 of the Act reads in pertinent part: (a) All taxes levied by any State, Territory, or the District of Columbia upon, with respect to, or measured by, sales, purchases, storage, or use of gasoline or other motor vehicle fuels may be levied, in the same manner and to the same extent, with respect to such fuels when sold by or through post exchanges, ship stores, ship service stores, commissaries, filling stations, licensed traders, and other similar agencies, located on United States military or other reservations, when such fuels are not for the exclusive use of the United States. Such taxes, so levied, shall be paid to the proper taxing authorities of the State, Territory, or the District of Columbia, within whose borders the reservation affected may be located. (b) The officer in charge of such reservation shall, on or before the fifteenth day of each month, submit a written statement to the proper taxing authorities of the State, Territory, or the District of Columbia within whose borders the reservation is located, showing the amount of such motor fuel with respect to which taxes are payable under subsection (a) for the preceding month. Id. 7. Chickasaw Nation, 115 S.Ct. at 2219. 8. Id. at 2219 (citing Yee v. Escondido, 503 U.S. 519, 535 (1992)). https://digitalcommons.law.ou.edu/ailr/vol20/iss1/8 No. 1] FEDERAL RECENT DEVELOPMENTS 247 The Court then turned to the State's call for a balancing test to determine whether the State's exaction was permissible. Weighing the relevant state and tribal interests, Oklahoma urged that the balance tilted in the State's favor. To support this claim, Oklahoma emphasized that the fuel sold was used almost exclusively on state roads, imposing a very substantial burden on the State but no burden at all on the Tribe.' As evidence that the levy did not reach any value generated by the Tribe on trust land, the State pointed to the fact that the fuel was neither produced nor refined in Indian country, and was generally sold to non-tribal members. The Court (...truncated)