Respondents Brief — White Mountain Apache Tribe v. Bracker

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SWE. 2AANNT LU 1Vi 2 tel

Supreme Court, U . 4

FILED

DEG MA 1919

puceacs RODAK, JR., CLERK

In The

Supreme Court of the United States

October Term, 1979

No. 78-1177

WHITE MOUNTAIN APACHE TRIBE, ét al.,

Petitioners,

Vv.

ROBERT M. BRACKER, et al.,

Respondents.

ON WRIT OF CERTIORARI TO THE

ARIZONA COURT OF APPEALS, DIV. ONE

BRIEF FOR RESPONDENTS

ROBERT K. CORBIN

Attorney General

IAN A. MACPHERSON

Assistant Attorney General

ANTHONY B. CHING

Solicitor General

State Capitol—West Addition

1700 West Washington

Phoenix, Arizona 85007

Telephone: (602) 255-4681

Attorneys for Respondents

TABLE OF CONTENTS

Page

INDEX OF CASES AND AUTHORITIES ................. i

PET IIIT <ssidatsstnsdsiinvisnctavevsnnsinnsivianinenitsenteienaiions 1

SUMMARY OF ARGUMENT .........ccccssessessssssseseeseeee 2

FTE E sechectenintiinnnetntsncapaentmiaienneinininn 3

NONE OF THE FEDERAL LAWS OR REGULA-

TIONS IN QUESTION PREEMPT THE STATE

TAXES HEREIN

A. Established doctrines of federal preemption of

state laws as articulated by this Court confirm

that the state taxes herein have not been

DEOCUIEOE, cccccccccorssecssccescees \asabiaetbdianquidicpntmicioanes 3

B. The federal laws and regulations relied upon

by the Petitioners are concerned with a field

of activity other than state taxes levied upon

non-Indian log-haulers on reservations. ........... 6

TE Ue Wciiininiinaipenalinaiiiielaianniiiaiantenvinnins 13

THERE IS NO IMPERMISSIBLE INFRINGE-

MENT UPON TRIBAL SELF-GOVERNMENT

Te TU siasniieineiescitnicisisibiinictamniniincineniiiniaiidinbnininliination 18

WARREN TRADING POST COMPANY V. ARI-

ZONA STATE TAX COMMISSION IS NOT

CONTROLLING

a 18

B. The legislative history of the Hayden-

Cartwright Act and the Buck Act supports the

levy of the taxes herein. .................ccscccsssseseseseees 19

CERT RAPES conesecensesintivviemacisnanaveansssenencannaeenvensenetanentees 30

EAI EE stsaninienetnesceseresennniietmveenennasoranennienmnennsessuintens A-1

AUTHORITIES

CASES:

Agua Caliente Band of Mission Indians v. County

of Riverside, 442 F.2d 1184 (9th Cir. 1971), cert.

denied, 405 U.S. 933 (1972), rehearing denied,

i ID sittieiescticieaccanscrcedancvincrnsecseseseece

Agua Caliente Band of Mission Indians v. County

of Riverside, 306 F.Supp. 279 (C.D. Cal. 1969) ...

Alabama v. King & Boozer, 314 U.S. 1 (1941) .........

Alward v. Johnson, 282 U.S. 509 (1931) .......... eee

Atkinson v. Tax Commission, 303 U.S. 20 (1938) ...

Bryan v. Itasca County, 426 U.S. 373 (1976) ...........

Burks v. Lasker, US. ,99S.Ct. 1831 (1979).

Central Machinery Company v. State of Arizona,

USSC Doc.No. 78-1604, October Term, 1979 ......

Chief Seattle Properties, Inc. v. Kitsap County, 86

Wash.2d 7, 541 P.2d 699 (1976) ...........scssseseeeeeeee

DeCanas v. Bica, 424 U.S. 351 (1976) ........ccceeseeeees

Department of Revenue v. Hane Construction Co.,

Inc., 115 Ariz. 248, 564 P.2d 932 (Ct.App. 1977) .

Diamond National Corp. v. State Board of Equali-

zation, 425 U.S. 268 (1976) .........csscsscssceseseseseeees

Douglas v. Seacoast Products, Inc., 431 U.S. 265

ola ie alia nctaansienanasiobeeiachoaseeneentseene

Exxon Corp. v. Governor of Maryland, 437 U.S.

i a acesedtintnennanenionnie

First Agricultural National Bank of Berkshire

County v. State Tax Commission, 392 U.S. 339

aaa ha sacle addsecdteenanenndesereantgatnennsgeneonne

Florida Lime & Avocado Growers, Inc. v. Paul, 373

aa anlseanbatoneeennions

Fort Mojave Tribe v. San Bernardino County, 543

F.2d 1253 (9th Cir. 1976), cert. denied, 430 U.S.

EEE

G.M. Shupe, Inc. v. Bureau of Revenue, 89 N.M.

UIE OEE GEO sncnccnhvscsccssscccencerroccsccsesesense

Goldstein v. California, 412 U.S. 546 (1973) ............

Page

AUTHORITIES

Gurley v. Rhoden, 421 U.S. 200 (1975) ......eeessseees 9,17

H.P. Welsh Co. v. New Hampshire, 306 U.S. 79

CID siictiireivicnss Raita ists moosielecissitccsisteenintnsiatenee 5

Head v. New Mexico Board of Examiners in Opto-

metry, 374 U.S. 424 (1963) .......cccsscerensecseseeeesees 5

Hicks v. Miranda, 422 U.S. 332 (1975) .....cscceeeeees 15

Huron Portland Cement Co. v. City of Detroit, 362

Te BI iccecuitcaidcvassctencinictoremninninlassnnivicnnpenes 5

In re Humboldt Fir, Inc., 426 F. Supp. 292 (N.D.

CE BOTT inecnhcnciecpscccseeccwnbsneniion shetiisenebincensehiiancnsons 7

In the Matter of the State Motor Fuel Tax Liabil-

ity of A.G.E. Corp., 273 N.W.2d 737 (S.Dak.

I iscicacsnty ascnihiciininiceiaebsielsiiabidounichaipiaamenusaeibsiaanss 9,16

James v. Dravo Contracting Co., 302 U.S. 134

CID ci aicinsiieiinticcsntsilesciesdatinnderesaiteisatiahniitintnigesinniie 9,17,25

Kahn v. Arizona State Tax Commission, 16 Ariz.

App. 17, 490 P.2d 846 (1971), appeal dismissed,

BTA UG, GEE CIDTS) cncsvncseccsvecsescenscsssevesesecsnsessesveansees 16,28

Kelly v. Pittsburg, 104 U.S. 78 (1881) .....eesesesesesees 23

Kelly v. Washington, 302 U.S. 1 (1937) «eee: 5

Kern-Limerick, Inc. v. Scurlock, 347 U.S. 110

I nh icicaleerantiosnasaianansesicealipiacenaresonannnaeia 17

Makah Indian Tribe v. Tax Commission, 72

Wash.2d 613, 434 P.2d 580 (1967), appeal dis-

missed, 393 U.S. 8 (1968) ........ce008 sosseesesseeessneeeeen 16

McClanahan v. State Tax Commission of Arizona,

SED FEB, BG IGT ID eicenccccicictssccsnsiesnspscesapisvcrencees 2,passim

Merrill Lynch, Pierce, Fenner & Smith, Inc. v.

Ware, 414 U.S. 117 (1975) .........cccccccccsccccrcccssseresees 5)

Mescalero Apache Tribe v. Jones, 411 U.S. 145

II acids Seeactcntebisenisannsolaeleiccetabiinehainiiantlanidilevemnneansianpies 15

Mintz v. Baldwin, 289 U.S. 346 (1933) ......ccceceeeees 5

Moe v. Confederated Salish and Kootenai Tribes,

425 U.S. 463 (1976) ....cccccccccccssscscsccscssccccsscccceseecsersees 14,16,29

iii

AUTHORITIES

CASES: Page

Montana Catholic Missions v. Missoula County,

200 U.S. 118 (1906) ............ ee sdiadsldaheuteleiaeadensisch 15

New York State Department of Social Services v.

Dublino, 413 U.S. 405 (1973) ......cccccccoccoscoscorscessees 4,10

Ray v. Atlantic Richfield Co., 435 U.S. 151 (1978) . 4

Rice v. Santa Fe Elevator Corp., 331 U.S. 218

ET sk isscibiccclaceesianintbbabichichdinicahes nin nelsplbbiniciediebssaneeblanainics 5

Rockbridge v. Lincoln, 449 F. 2d 467 (9th Cir.

SE sa iiinitdaaelh nib ienib oad sects attncedbdariatenidcd coat deat eiadain 19

Sanders v. Oklahoma Tax Commission, 197 Okla.

285, 169 P. 2d 748 (1945), cert. denied, 329 U.S.

IE piccadactesareisdiichalictaslenaiia ta taatial ld ionisiateiiaceniioscns 21,23

Schwartz v. Texas, 344 U.S. 199 (1952) wo. 4

Silas Mason Company v. Tax Commission, 302

re NUNIT sictinhii Shika tiacditinnidipiniciaieaebeniiasindiadiniess 25

Silver v. New York Stock Exchange, 373 U.S. 341

RR cabieteaseacecpsncs Nika Aliant inte ei ible gsi anitideienininonbias 5

State of Washington v. Confederated Bands. and

Tribes of the Yakima Indian Nation,

YB. FR BCL. TAD IBIS) oonsesenesessssnccosscrcsene 15

Superintendent v. Commissioner, 295 U.S. 418

I Sachs hases edited alias dectaaaecuenbtelasdhchtnisnioiedians 9

Thomas v. Gay, 169 U.S. 264 (1898) wc ecpeecseeeeeees 15,23

United States v. Carver, 260 U.S. 482 (1923) .......... 15

United States v. County of Fresno, 429 U.S. 452

SIE TTT cones cine edd ccd deisdesaibta ach lddenitemchuaniaibabilaganhscodadinniadienenes 9

Utah & Northern Ry. Co. v. Fisher, 116 U.S. 28

RESET STEELY ARPA Snr OC oe OT 15

Wagoner v. Evans, 170 U.S. 588 (1898) .............:00 15,23

Wallis v. Pan American Petroleum Corp., 384 U.S.

3 RERE LI eMe ne Sra ee ay re Oo 4

Warren Trading Post Company v. Arizona State

Tax Commission, 380 U.S. 685 (1965) ............ 3,passim

Williams v. Lee, 358 U.S. 217 (1959) ......... 2,12,13,17,30

AUTHORITIES

CASES: Page

Winkler Trucking Co. v. McAhren, 60 Ariz. 225,

133 P.2d 787 (1068). ...:csévccedinadeaaeneians 23

UNITED STATES CONSTITUTION

Article 1, Sec. 8, Clause 3 (Commerce Clause) .... 9,13

Article 6, Sec. 2 (Supremacy Clause) .........:.:e0 4,13

STATUTES:

United States Code

4US.C. § 104 (Section 10, Hayden-Cartwright

Act) . ..c<cossinesssiipiensinaeniaaaaaneaannael 2,passim

§§ 105-110 (54 Stat. 1059: Buck Act) .... 2,passim

ee 20,24,28

(en 24,27,28

§ 110(@) .....ccsscossssesseosscssnisnentenetansevsseniniosonsss 24,27

25 U.S.C.§§ 261 et S€q. .....ccccccscccccesosseasecssessseveesseserseess 17

§ 261 .....coccsacesosesnessiensessssunsssuassnnnsainaunreinnaitss 29

§ 264 ......ccrecsnssssssseesntessinisisunninsbasnhiansnaasenieres 29

§ 4.13 .....nuicconsesssisnniinsnne 6,7

CODE OF FEDERAL REGULATIONS

25 C.F.R. Part VOD .nccsvvesssesciisincasieiiedanainneniaien 7

TGR ...:cccesncinianssanialiiasansiipsaaeaaialiaitas 23

2G ....ciscsounsiisisenaiassiaalaaaaaualaiainibaias 29

25 C.F.R. Section 141.16¢):..:nsssscusmmssesnmnanaarenss 6

TOLD .cccossissssssesenenneninanien 5

142. Med (39 sicrabeeeeeees 6

141. Bia) BP csichitetieerinn 6

141. Sha) 6@ ccciseneeies 6,7

14O1.B .ccorcscovcssssecnipsnnsontebenstonasunovevete 7

241.11 ..cocccscscstsabsccssmustnacuneesesnedaesnee 7

B4D.YG cccoccesccsssoscdsvesstedecsinssesemerebecen 7

941.16 .ccccsccsstvisoneinectsommnenntestonen 6,7,11,13

AUTHORITIES

CODE OF FEDERAL REGULATIONS Page

UNE. shclaiaLdasdbnikeebentsevedsosishinianstnanies 7

INTE cisdiitenransdeiniostenennsnndetsaandisecsis 23

ST thithdlahidaseiatinasnchintaieeciuiisanctdaesines 19

ARIZONA REVISED STATUTES

Sr 2,29

RN i, ss cscssnsnenssccanvevecsvcusiscnoon 23

} 40-641 oe. isis ancadenhininaieediesibciasoneunteenbeneveseuneimheses 2,30

SEITIIIT IIIT SITE: ject nadanosiianpeeibicciebenseebeeniahecsapsoneseniigahs 18

MISCELLANEOUS AUTHORITIES

House Conference Committee Report No. 2902,

74th Cong., 2nd Sess. (June 1, 1936) ...........000 22

80 Congressional Record 6913 (House Confer-

RIT tila ori sa idlinienhcaddideeiai aon leatakceameninennnconenens 22

84 Congressional Record 6737 (HR 6687) ............ 24,25

84 Congressional Record 10098 ..........:csccesecesseeees 24

Senate Report No. 1625, 76th Cong., 3rd Sess.

EE ent SEES Oe 25

Federal Aid Highway Act of 1936 ...........cccecceeeee 22

INTERIOR DEPARTMENT OPINIONS

ERIC EE 15

Tis sapebdesgnesanonsnns 22

REG a eo 9,15,28

OTHER

Note, “The Preemption Doctrine”,

75 Colum. L..Rev. 623 (1975) .........cccccsscssscsssessseeees 5

F.Cohen, “Handbook of Federal Indian Law,”

U.S. Dept. of Interior (1945) ..... ce eeeeeseeeeeeees 19,22

“Hearing on HR 6687, Before a Subcommittee of

the Senate Committee on Finance” (76th Cong.,

3rd Sess., April 23, 1940) ...........csscssscsssssssesesseeers - 3

In The

Supreme Court of the United States

October Term, 1979

No. 78-1177 a

WHITE MOUNTAIN APACHE TRIBE, et al.,

Petitioners,

Vv.

ROBERT M. BRACKER, et al.,

Respondents. :

ON WRIT OF CERTIORARI TO THE

ARIZONA COURT OF APPEALS, DIV. ONE

BRIEF FOR RESPONDENTS

INTRODUCTION

The Respondents have no fundamental quarrel with the

Statement of the Case submitted by the Petitioners Pine-

top Logging Co. (hereinafter “Pinetop”) and White

Mountain Apache Tribe (hereinafter “WMAT”), with a few

notable exceptions.

First, while the Statement of the Case is “... rich in de-

tail ...” (Brief for Petitioners, p. 5), in some respects it

occasionally makes legal arguments instead of factual reci-

tations and contains some inaccuracies, albeit most likely as

a result of typographical errors. For example, at p. 8, the

Petitioners reference 1971 as being the year wherein the net

profit from all WMAT tribal enterprises was $1,667,091, of

which $1,508,713 was derived from its Fort Apache Timber

Company (hereinafter “FATCO”) operations. The correct

year is 1973, not 1971. (See App. 15).

Moreover, the Petitioners frequently characterize Pine-

top as being an “agent” of the tribe rather than an

“independent contractor.” The Petitioners’ characteriza-

tions of Pinetop as being an “agent” are inconsistent with

its contentions in the Petition for Writ of Certiorari (Pet.,

p. 6) and with its verified complaint in the Arizona pro-

ceedings (Pet.App., p. 5a (lix)). Pinetop’s operations as a

log-hauling contractor are conducted pursuant to various

contracts executed between Pinetop and FATCO and are

approved by, if not actually drafted by, the Bureau of In-

dian Affairs (hereinafter “BIA’’) (A.9-10, 17).

In an attempt to address the issues raised by the Peti-

tioners, as well as those of the United States as amicus

curiae, in a unified fashion, the Respondents will treat the

arguments of both in a single brief.

SUMMARY OF ARGUMENT

It is the Respondent state officials’ positior that the Ari-

zona use fuel tax (Ariz. Rev. Stat. § 28-1552; Pet.App. 60a-

6la) and the Arizona motor carrier tax (Ariz. Rev. Stat.

§ 40-641; Pet.App. 63a-64a) are properly applied to the

non-Indian, independent log-hauling contractor, Pinetop

Logging Co., and that these state taxes are preempted by

neither the federal statutes governing Indian reservation

forestry programs nor the federal regulations promulgated

to implement said statutes.

Moreover, these state taxes constitute neither an in-

fringement of Indian tax immunities nor a threat to Indian

self-government under either Williams v. Lee, 358 U.S. 217

(1959) or McClanahan v. State Tax Commission of Arizo-

na, 411 U.S. 164 (1973). On the contrary, there is nothing in

either of those cases to suggest that Congress intended to

preempt these state taxes or to grant tax immunities to a

non-Indian independent log-hauler who has entered into

contracts such as those existing between Pinetop and

WMAT.

Finally, the legislative history of both the Hayden-

Cartwright Act (4 U.S.C. § 104) and the Buck Act (4 U.S.C.

§$§ 105-110), when viewed in connection with the Mc-

Clanahan case, demonstrates that these state taxes are

properly imposed and that this Court’s decision in Warren

Trading Post Company v. Arizona State Tax Commission,

380 U.S. 685 (1965) stands as no obstacle to the continued

levy of the taxes upon Pinetop.

Accordingly, the lower court’s judgment should be af-

firmed.

NONE OF THE FEDERAL LAWS OR REGULATIONS

IN QUESTION PREEMPT THE STATE TAXES

HEREIN

A. Established doctrines of federal preemption of

state laws as articulated by this Court confirm

that the state taxes herein have not been

preempted.

If there be a single, major thesis discernable in the Brief

for Petitioners, as well as in that of the United States as

amicus curiae, it is this: the purportedly all-pervasive, com-

prehensive and exclusive federal scheme dealing with

Indian reservation forestry operations ousts the states of

jurisdiction to tax non-Indian contractors with whom either

the Indians or the Bureau of Indian Affairs (BIA) may con-

tractually deal in connection with the accomplishment of

the various forestry operation objectives. The depth of the

preemption, so the contention goes, is such that there is

absolutely no room left within which such state laws — re-

gardless of either the magnitude of their economic effect or

the nature of their substantive legal incidence — may con-

tinue to operate. An examination of the viability of this

premise therefore seems appropriate.

To begin with, concepts of federal preemption, while oc-

casionally traceable to various ancillary constitutional

provisions, have as their common source Article 6, Section 2

of the Constitution: the Supremacy Clause. DeCanas v.

Bica, 424 U.S. 351, 356 (1976); Florida Lime & Avocado

Growers, Inc. v. Paul, 373 U.S. 132, 141-152 (1963). While

this section mandates that federal enactments shall be the

supreme law of the land, there remains for examination the

reach and scope of the federal law vis a vis potentially con-

flicting or inconsistent state laws.

Accordingly, this Court has stated that constant vigilance

is necessary to insure that the application of state law poses

“... no significant threat to any identifiab!e federal policy

or interest ...,” Burks v. Lasker, _ USS. , 99 S.Ct.

1831, 1838 (1979), quoting Wallis v. Pan American Petro-

leum Corp., 384 U.S. 63, 68 (1966), that the actual or

asserted clash between the state and federal law “... be of

substance and not merely trivial or insubstantial ... ,”” New

York State Department of Social Services v. Dublino, 413

U.S. 405, 423 n.20 (1973) and that, since preemption of a

state law “... is not lightly to be presumed ... ,” Dublino,

supra at 413 quoting Schwartz v. Texas, 344 U.S. 199, 202-

203 (1952), it can occur only when the relationship between

the state and federal laws is “. .. absolutely and totally-con-

tradictory and repugnant ... ,” Goldstein v. California, 412

U.S. 546, 553 (1973).

In this regard, while a substantial, actual and irreconcil-

able conflict between federal law and state law may, upon

the facts of individual cases, provide a basis for preemption,

Ray v. Atlantic Richfield Co., 435 U.S. 151 (1978); Douglas

v. Seacoast Products, Inc., 431 U.S. 265 (1977), this Court

has repeatedly expressed its reluctance to infer federal

preemption of state laws in the absence of a clear and un-

mistakable manifestation of such intent by Congress.

Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 132

(1978); DeCanas v. Bica, supra at 357-358 n.5; Merrill

Lynch, Pierce, Fenner & Smith, Inc. v. Ware, 414 U.S. 117,

127 (1975).' Thus, where Congress manifests its intention

to circumscribe its regulation and thereby preempt a lim-

ited area, state laws which properly exist and operate

beyond the federal sphere are not “... forbidden or dis-

placed ...,” Kelly v. Washington, 302 U.S. 1, 10 (1937).

With this backdrop of information, the limits of the in-

quiry in the case sub judice come more sharply into focus.

If, as Pinetop, WMAT and the United States contend,

there is contained within the federal laws and regulations

herein a clearly manifested congressional intent to forbid

these state taxes as constituting a significant, substantial

and repugnant threat to Indian forestry operations, the dis-

pute is at an end, the Petitioners and amicus curiae are

right and the lower court ruling should be reversed. Howev-

er, unless such a specific intent is found, these state taxes

should be permitted continued operation. The Petitioners’

advocation of a rule of inferred preemption under Warren

Trading Post Co. v. Arizona State Tax Commission, 380

U.S. 685 (1965), Brief for Petitioners, p. 21, must therefore

be scrutinized against the backdrop of preemption cases

decided by this Court subsequent to Rice v. Santa Fe Ele-

' This reluctance — with some notable exceptions (e.g., Rice v.

Santa Fe Elevator Corp., 331 U.S. 218 (1947)) — has continued for many

years and has been articulated in a wide variety of cases. See, e.g. Head

v. New Mexico Board of Examiners in Optometry, 374 U.S. 424 (1963);

Silver v. New York Stock Exchange, 373 U.S. 341 (1963); Huron Port-

land Cement Co. v. City of Detroit, 362 U.S. 440 (1960): H.P. Welsh Co.

v. New Hampshire, 306 U.S. 79 (1939); Mintz v. Baldwin, 289 U.S. 346

(1933). See also, generally, Note, “The Preemption ee 75

Colum.L.Rev. 623 (1975).

vator Corp., 331 U.S. 218 (1947). An examination of the

federal provisions alleged by the Petitioners to be control-

ling reveals that the rule of inferred preemption so sought

is not only unavailable, it is nonexistent.

B. The federal laws and regulations relied upon

by the Petitioners are concerned with a field of

activity other than state taxes levied upon non-

Indian log-haulers on reservations.

As Pinetop and WMAT exhaustively contend,’ the

objective of the federal laws and regulations is multifaceted.

However, 25 C.F.R. § 141.3 sets forth the major goals of the

forestry program as to both allotted and unallotted Indian

forest lands. Among these objectives are the preservation of

the forest lands in a perpetually productive state through

the application of “... sound silvicultural and economic

principles to the harvesting of the timber ...” (25 C.F.R.

} 141.3(a) (1)), the development of these forests to the end

that the Indians will receive the “stumpage value’ of the

timber as well as “... whatever profit it is capable of yield-

ing ...” (25 C.F.R. § 141.3(a) (3))* and the sale of Indian

timber “‘... in open competitive markets in accordance with

good business practices .. .” (25 C.F.R. § 141.3(a) (4)).

* . The United States so asserts as well, but more succinctly.

* “Stumpage value” is defined in 25 C.F.R. § 141.1(c) as the “...

value of uncut timber as it stands in the woods.”

‘ Pinetop and WMAT improperly equate the concept of “whatever

profit” a commercial enterprise is capable of yielding with the somewhat

dissimilar notion of “... entire financial benefit ...” of such an opera-

tion. See Brief for Petitioners, pp. 17, 46-47. By this contention the

Petitioners seem to suggest that any costs of Pinetop which in one fash-

ion or another affect FATCO’s maximum imaginable profit are

forbidden. The apparent justification for this argument is that, without

regard to the magnitude of the economic burden of Pinetop’s taxes con-

tractually borne by FATCO, their source (a state tax on a non-Indian) as

opposed to their nature (one among a multitude of costs borne by the

non-Indian) renders them impermissible. Such a contention is at odds

with several other relevant federal provisions. See, e.g., 25 U.S.C. § 413

and 25 C.F.R. § 141.18 providing for the deduction of reasonable admin-

istrative expenses from the gross proceeds of tribal timber sales.

Pinetop, WMAT and the United States dwell at some

length in their respective briefs over additional silvicultural

and related aspects of these forestry provisions.° But

when all is said and done, the image that emerges is not one

compelling the conclusion that Congress intended to pro-

hibit the imposition of these taxes. On the contrary, the

picture is one of a federal objective of protecting the Indian

forest resource while recognizing — rather than ignoring —

that the tribal forestry operations do not exist in a vacuum,

free of any and all external influences which might, in one

way or another, indirectly and/or trivially affect the ulti-

mate mode of the program and/or its result. See Arguments

II, III, infra.

In this regard, the regulations contemplate not the reali-

zation of the highest imaginable profit, viz., the gross

economic benefit. Rather, they envision the existence of the

tribal program as a part of its larger existence in society as

a whole. Significantly, there is no discernable intent to set

prices for the timber (subject to 25 C.F.R. § 141.3(a) (4)) or

to forbid the recovery of costs by contractors who deal with

the Indians or the BIA on their behalf. On the contrary,

quite the opposite appears to have been intended. See, e.g.,

25 U.S.C. § 413; 25 C.F.R. § 141.18. Under these circum-

stances, the basis for the Petitioners’ reliance on Warren

becomes obscure.

5 Such additional aspects include, for example, cutting restrictions

(25 C.F.R. § 141.5), bid requirements (25 C.F.R. § 141.11), bonds (25

C.F.R. § 141.14), fire protective measures (25 C.F.R. § 141.21) and so on.

Similar, though not identical considerations characterize the provisions

of 25 C.F.R. Part 142. However, cf. United States Amicus Curiae Brief,

p. 17, n.12, suggesting that 25 C.F.R. Part 142 might not apply to

FATCO lumber sales. The Petitioners (but not the United States) cite Jn

re Humbolat Fir, Inc., 426 F. Supp. 292, 296 (N.D. Cal. 1977) (see Brief

for Petitioners, p. 46 n.31) in support of their position. The case is with-

out materiality herein as the issue involved tribal rights as a creditor in

bankruptcy court rather than state taxation of a non-Indian dealing with

a tribal enterprise.

This is not to suggest, however, that because the tribal

operation, FATCO, has seen fit to deal with a non-Indian

logging contractor such as Pinetop, that, for that reason,

the taxes in question are not preempted and may continue

in operation. Rather, the point is simply that the federal

sphere of concern is not invaded through the application of

these taxes. If the contrary were the case, Congress could

have easily spoken its intent by prohibiting all state occa-

sioned expenses — not just the taxes here in question —

which might affect a non-Indian log-hauler’s ability to

complete its contractual obligations for the tribe and/or the

BIA for a consideration as close to a gratuity as possible.

Such an objective, of course, is neither practical nor de-

sirable: if a non-Indian with whom the Indians or the BIA

may deal by way of contract is prohibited from reimbursing

himself for his costs, whether they be in the form of labor

expenses, equipment expenditures or similar “overhead”, he

may refuse to deal with either. But this circumstance can in

no way serve as rational justification for the extrapolated

conclusion that the non-Indian’s contractual attempt to

seek recompense for one of his costs operates, nunc pro

tunc, to eliminate the source of the cost itself.

For example, if Pinetop and FATCO had structured their

relationship so that the log-hauling contracts had been

between Pinetop and the BIA, the latter conducting the

negotiations for FATCO and/or WMAT under its asserted

plenary powers to control Indian forestry operations, would

the economic burdens of the state taxes as levied herein

upon Pinetop have been impermissible? Moreover, would

the economic burdens of the state taxes levied upon Pine-

top with respect to which there is no protest have been

similarly prohibited?’ If consistency is to characterize

Pinetop’s theory, then the answer must be that these ex-

* Pinetop states that it kept accurate records of the mileage it tra-

versed on state highways within the Fort Apache Indian Reservation and

that the state taxes “... allocable to those uses have been paid without

protest ...” (Brief for Petitioners, p. 13).

penses are similarly forbidden, for they decrease the “...

entire economic benefit ...” by increasing the costs to the

BIA, thereby creating the potential for the deduction of

greater sums from the gross receipts from timber sold under

25 C.F.R. § 141.18. Under decisions of this Court such as

United States v. County of Fresno, 429 U.S. 452 (1977),

Gurley v. Rhoden, 421 U.S. 200 (1975), and James v. Dravo

Contracting Co., 302 U.S. 134 (1937),’ the economic bur-

dens of the taxes, when contractually “passed on” to this

federal agency (BIA), would not be preempted. Cf. In The

Matter of State Motor Fuel Tax Liability of A.G.E. Corp.,

273 N.W.2d 737 (S.Dak. 1978), citing with approval Depart-

ment of Revenue v. Hane Construction Co., Inc., 115 Ariz.

243, 564 P.2d 932 (Ct.App. 1977), the former case being

cited and discussed by the United States as amicus curiae

(United States Amicus Curiae Brief, p. 21, n.13) in an at-

tempt to distinguish it from the instant case.

While the foregoing discussion may at first glance appear

to have more relevance to questions involving infringement

and Commerce Clause theories, under Article 1, Sec. 8,° it

is also germane to the issue of preemption. As heretofore

noted, the determination as to whether or not a federal

enactment preempts state law turns upon a number of var-

ied yet interrelated factors. These considerations include

analyses of whether the purportedly forbidden state law

constitutes a significant threat to an identifiable federal

policy’ or whether its effect is trivial or insubstantial in-

sofar as the integrity of the preempted federal sphere is

7 See, also, 58 I.D. 562, 566 (1943), discussing the relationship be-

tween the decision in Superintendent v. Commissioner, 295 U.S. 418, 421

(1935), and the appropriate resolution of the question of whether or not

the economic burdens of state taxes which increase the cost to the Fed-

eral Government of goods purchased for the Indians render the levy of

the taxes upon a non-Indian vendor invalid in the first place: the conclu-

sion was that they do not so invalidate the tax.

* See, Arguments II, III, infra.

* Burks v. Lasker, supra, 99 S.Ct. at 1838.

concerned.’ In this regard, and by way of illustrative ex-

ample, a brief analysis of one discrete aspect of the various

arguments advanced by Pinetop, WMAT and the United

States may prove enlightening.

Both Pinetop and WMAT contend that the two taxes in

question, levied by state law upon the non-Indian taxpayer,

Pinetop, and by that entity characterized as a business cost

to be contractually “passed on’ to FATCO,''§ are

preempted and prohibited because, among other reasons,

the magnitude of their economic burden (purportedly some

$9,000 on an annual average) is speculative and “... not

grounded in the evidence of record ...,” the actual eco-

nomic effect assertedly being “... many times greater than

the state court was willing to acknowledge.”"*» The United

States as amicus curiae adopts the same position, observing

somewhat critically that the assumed $9,000 figure was

viewed by the Arizona courts as being a de minimus bur-

den."

However, an examination of the record will reveal that

for example, in 1973, actual figures do exist and, indeed, are

derived in toto from verified allegations and affidavits

made by Pinetop and WMAT. In 1973, Pinetop paid under

protest Arizona (1) use fuel taxes in the sum of $5,018.97

and (2) motor carrier taxes of $2,770.61." The Chairman

of the White Mountain Apache Tribal Council, Fred Ban-

ashley, avowed that, during that same one-year period, the

0 New York State Department of Social Services v. Dubling, supra,

413 US. at 423, n.20.

'' These costs are “shifted” by Pinetop to FATCO as a normal inci-

dent of contractual negotiation: there is no requirement of state law that

the legal liability for these taxes be shifted over to or the tax itself col-

lected from either FATCO, WMAT or the BIA. Thus, quite properly,

there is no serious contention by either Pinetop, WMAT or the United

States that the legal incidence of these taxes — as opposed to the con-

tractual economic incidence — falls upon any entity other than Pinetop.

2 Brief for Petitioners, pp. 16, 45.

'S United States Amicus Curiae Brief, p. 23.

'* See (1) Pet. App., p. 2a and (2) Record on Appeal, Plaintiffs’ Ex-

hibits “A” and “B”, Item 15, pp. 15a, 15b.

FATCO operations generated a net profit of $1,508,713 out

of a total net profit from all WMAT tribal enterprises of

$1,667,091."

From the foregoing, basic arithmetic reveals that, during

1973, the ratio of Pinetop’s use fuel tax, motor carrier tax

and combined use fuel/motor carrier tax to FATCO’s and

WMAT?’s total net profits ranged, respectively, from a high

of 0.52% to a low of 0.17%.'* Stated otherwise, the maxi-

mum calculable economic impact that both of these taxes

had upon FATCO’s and/or WMAT’s net profits for that

year amounted to some one-half of one percent. By way of

comparison, the minimum administrative charge which

could be levied upon the gross receipts to FATCO from

timber sales pursuant to 25 C.F.R. § 144@8 would have

been 5% of said gross, or at least some ten times higher

than the highest percentage possible under the foregoing,

actual figures.

The Respondents would respectfully suggest that these

contractually assumed costs are something less than that

which could reasonably be expected to “... [bleed] the

White Mountain Apache Tribe’s timber program of too

much of its financial strength and ... [bring] it ‘to its

knees’. ” Cf. Brief for Petitioners, pp. 45-46. The State

15 See Banashley affidavit, (App. p. 15). In an apparent typographical

error, Pinetop and WMAT erroneously assert (Brief for Petitioners, p. 8)

that these figures relate to the year 1971; Mr. Banashley’s affidavit es-

tablishes that the correct year in question is 1973, not 1971.

‘6 Viz.: 1 (A) Pinetop use fuel tax/FATCO net profit:

0.003327

(B) Pinetop use fuel tax/all WMAT net profit:

0.003011

2 (A) Pinetop motor carrier tax/FATCO net profit:

0.001836

(B) Pinetop motor carrier tax/all WMAT net profit:

0.001662

3 (A) Pinetop combined (1 + 2) / FATCO net profit:

0.005163

(B) Pinetop combined (1 + 2) / all WMAT net profit:

0.004673 ;

would further note that it does not urge that the insubstan-

tiality of the economic burden of a non-Indian’s tax

contractually borne by an Indian constitutes, by itself, jus-

tification for the levy of the tax to begin with. However,

where the magnitude of that burden, however calculated,

never exceeds some one-half of one percent of the net profit

of the Indian enterprise purportedly crippled by that cost,

it is somewhat incongruous to suggest, as do Pinetop and

WMaAT, that, upon those grounds, the tax constitutes a

substantial threat to the accomplishment of the federal

objectives and/or infringes upon the Indians’ right of self-

government under Williams v. Lee, 358 U.S. 217 (1959).

Finally, while more will be said about the case in subse-

quent sections of this brief, the decision in Warren Trading

Post Company v. Arizona State Tax Commission, 380 U.S.

685 (1965) is not only legally and factually distinguishable

from the present dispute, the rationale of that case fails to

support the conclusion that the state use fuel and motor

carrier taxes herein are preempted. Warren was decided

upon the grounds that a non-Indian, federally licensed In-

dian trader was so pervasively regulated by federal law that

his business activities could not be subjected to the Arizona

transaction privilege tax. The tax, this Court held, would

impose burdens upon the trader or the Indians in addition

to those prescribed by Congress or the tribes. The resultant

effect, the decision held, would be to impermissibly disrupt

the federal objective of protecting Indians from unfair or

unreasonable price depredations at the hands of the trad-

ers.

In the present case, the federal objective is quite differ-

ent, emphasizing protection of the forest resource and

promotion of tribal forestry programs in a context recogniz-

ing the role of non-Indian contractors in effectuating this

goal. The law and regulations relied upon by Pinetop,

WMAT and the United States contain no ascertainable

intention to either insulate non-Indians from nondiscrimi-

natory state taxes or shield Indians or the BIA from each

and every cost which might somehow touch the forestry

—_

“wr

operation. Indeed, 25 C.F.R. § 141.18 indicates that just the

opposite was intended by Congress. See also App., p.17,

wherein Pinetop’s contract establishes its responsibility for

taxes.

The holding in Warren, therefore, is not controlling in

the present case. As the analysis of the Warren reasoning

set forth hereafter will demonstrate, these state taxes of-

fend neither Article 6, Section 2 (the Supremacy Clause)

nor Article 1, Section 8, Clause 3 (the Commerce Clause).

While the federal tribal forestry programs seek to protect

the physical well-being of the timber as well as attempt to

foster whatever economic benefits the sale of the forest

products may, within the context of Anglo-American socie-

ty, generate for the Indians, there is no identifiable

congressional intent to preempt state laws which may affect

non-Indian contractors retained to assist in the endeavor.

Accordingly, the state taxes in question should not be

declared superseded and the Arizona Court of Appeals’

judgment to this effect should be affirmed.

THERE IS NO IMPERMISSIBLE INFRINGEMENT

UPON TRIBAL SELF-GOVERNMENT

The corollary to the Petitioners’ argument that the state

laws in question have been preempted is the assertion that,

under Williams v. Lee, 358 U.S. 217 (1959), their continued

operation will violate the doctrine that, absent governing

acts of Congress, state laws should not be permitted to in-

fringe upon the right of reservation Indians to make their

own laws and be ruled by them. The kindred assertion is

made that, under McClanahan v. State Tax Commission of

Arizona, 411 U.S. 164 (1973), the imposition of these taxes

upon Pinetop, a non-Indian, results in an infringement

upon the right of FATCO and WMAT, Indian entities, to

self-govern because of the adverse effect occasioned by the

contractual assumption of their economic burden by

FATCO. It is the State’s position that not only is the Peti-

tioners’ parade of horribles composed of largely , illusory

concerns, even if actual effects of these taxes are felt by

FATCO or WMAT, they do not infringe upon any right of

self-government otherwise enjoyed by the Indians.

At this point, and by way of prefatory explanation, it is

the Respondents’ position that the issues herein are far

more subtle, complex and difficult to resolve than suggested

by the briefs of Pinetop, FATCO or the United States. Reli-

ance upon generalized notions of federal preemption and

the holding in Warren, it is respectfully submitted, are in-

sufficient, standing alone, to support a thorough, objective

and rational solution to the dispute. Thus, a somewhat de-

tailed documentation of the cases and other authorities

believed to validate the Respondents’ arguments is deemed

required. While the Respondents have attempted to limit

the following discussion, they remain committed to the

proposition that the correct analysis of the problem necessi-

tates the detailed examination to follow.

Accordingly, and in this regard, this Court has frequently

invalidated state taxes which, by the terms of the state stat-

utes themselves — as distinguished from the terms of

contractual agreements (express or implied) existing be-

tween Indians and non-Indians with whom they deal —

place the direct legal incidence and liability for the tax

upon the Indian.’ Just as frequently, however, the Court

7 See, e.g., Bryan v. Itasca County, 426 U.S. 373 (1976); Moe v. Con-

federated Salish and Kootenai Tribes, 425 U.S. 463 (1976); McClanahan

v. State Tax Commission of Arizona, supra.

has upheld the imposition of state taxes which are confined

in their legal, as opposed to economic incidence, to non-

Indians."*

Moreover, in a wide variety of cases which have come

before this Court seeking review by way of certiorari or

appeal, only to have certiorari denied or the appeal dis-

missed for want of a substantial federal question,'’® lower

court rulings upholding the levy of state taxes upon non-

Indians have been allowed to stand despite certain resul-

tant adverse economic ramifications, either actual or

potential, to reservation Indians or Indian tribes or

‘8 See, e.g., Moe v. Confederated Salish and Kootenai Tribes, supra;

Montana Catholic Missions v. Missoula County, 200 U.S. 118 (1906);

Wagoner v. Evans, 170 U.S. 588 (1898); Thomas v. Gay, 169 U.S. 264

(1898); Utah & Northern Ry. Co. v. Fisher, 116 U.S. 28 (1885). Indeed,

where the state tax is applied to activities beyond the limits of Indian

reservations, general, non-discriminatory state taxes may be directly

imposed upon Indians. Mescalero Apache Tribe v. Jones, 411 U.S. 145

(1973); 57 I.D. 124, 126 (1940); 58 I.D. 562, 567 (1943).

'® While the denial of certiorari is not to be viewed as an expression

of opinion on the merits of a case, United States v. Carver, 260 U.S. 482

(1923), the dismissal of an appeal for want of a substantial federal ques-

tion is to be viewed as a ruling on the merits. Hicks v. Miranda, 422 U.S.

332, 344 (1975). But see State of Washington v. Confederated Bands

and Tribes of the Yakima Indian Nation, _ US. _, 99 S.Ct. 740,

749-750 n.20 (1979).

bands.” And the same result is reflected in various state

court decisions where review by this Court was sought by

neither the non-Indian taxpayer, the Indians with whom it

dealt nor the federal agency involved on behalf of the Indi-

ans.”'

The rules articulated in these cases — involving ques-

tions of the taxability of non-Indians who deal with Indians

— are, from a conceptual tax standpoint, indistinguishable

from the many decisions of this Court upholding the impo-

sition of state taxes (chiefly business excise privilege or

sales taxes) upon non-Indian persons or entities who deal

with the ultimate sovereign in this nation, the United

States of America. These cases, in clear and unambiguous

terms, establish that, where the legal incidence of a state

tax is imposed upon a business entity which thereafter con-

tractually “shifts” the economic burden or cost of the tax to

*” See, e.g., Fort Mojave Tribe v. San Bernardino County, 543 F.2d

1253, 1255-1256 (9th Cir. 1976), cert. denied 430 U.S. 983 (1977); Agua

Caliente Band of Mission Indians v. County of Riverside, 442 F.2d 1184,

1186-1187 (9th Cir. 1971), cert. denied, 405 U.S. 933 (1972), rehearing

denied 405 U.S. 1033 (1972), motion for leave to file second petition for

rehearing denied, 409 U.S. 901 (1972); Kahn v. Arizona State Tax

Commission, 16 Ariz.App. 17, 18-21, 490 P.2d 846, 847-850 (1971), ap-

peal dismissed (want of substantial federal question) 411 U.S. 941 (1973)

(Brennan, Douglas, JJ., dissenting with opinion, 411 U.S. at $41-944);

Makah Indian Tribe v. Tax Commission, 72 Wash.2d 613, 615-617, 434

P.2d 580 581-582 (1967), appeal dismissed (want of substantial federal

question) 393 U.S. 8 (1968). In this regard, and with respect to the Moe

decision, see also the discussion of the adverse economic consequences

actually or potentially borne by Joseph Wheeler, the Indian cigarette

merchant, in the Appellee/Cross-Appellants’ Opening Brief, USSC Doc.

Nos. 74-1656 and 75-50, October Term, 1975, p.23, n.26. It is unclear

from either the District Court’s opinion or this Court’s opinion in Moe

whether Mr. Wheeler was a federally licensed Indian trader. See Confed-

erated Salish and Kootenai Tribes v. Moe, 392 F.Supp. 1297, 1311 (D.

Mont. 1975).

* See, e.g., In the Matter of the State Motor Fuel Tax Liability of

A.G.E. Corp., supra; Department of Revenue v. Hane Construction Co.,

Inc., supra; G. M. Shupe, Inc. v. Bureau of Revenue, 89 N.M. 265, 550

P.2d 277 (1976); Chief Seattle Properties, Inc. v. Kitsap County, 86

Wash.2d 7, 541 P.2d 699 (1976).

DP gw 1

the United States, the tax does not constitute an imper-

missible infringement upon or interference with the

sovereign immunity from state taxation enjoyed by the

United States.”

The effect of the foregoing decisions insofar as the proper

resolution of the case sub judice is concerned is to demon-

strate that the question of interference with tribal rights of

self-government under Williams and/or infringement of

reservation Indian immunities from state taxation (as dis-

tinguished from insulation from the costs of such taxation

engendered by contract doctrines) under McClanahan are

confusing and complicated. Neither Pinetop, WMAT nor

the United States accord to the foregoing decisions of this

Court or the principles espoused therein any more than the

most abbreviated consideration. Instead, the decision in

Warren is relied upon by Pinetop and WMAT (Brief for

Petitioners, passim) and the United States (United States

Amicus Curiae Brief at 9, 10, 19, 21-22 n.13) to such a

depth that, in the words of the Brief for Petitioners, p. 25,

the case is “... so strikingly similar to this one that it over-

shadows all other precedents.’ (Footnote omitted.)

Accordingly, a somewhat detailed inquiry into the rationale

underlying Warren, as evidenced by the legislative histories

of the Indian trader’s statutes (25 U.S.C. §) 261, et seq.),

the Hayden-Cartwright Act (4 U.S.C. § 104), the Buck Act

*” This contractual “shifting” is to be carefully distinguished from

situations where the state law mandates the collection of the tax from

the customer or vendee of the business, in which latter event the tax

becomes, for federal purposes, a vendee liability and impermissible vis a

vis purchases by the United States or its instrumentalities. See, e.g.,

Diamond National Corp. v. State Board of Equalization, 425 U.S. 268

(1976), citing First Agricultural National Bank of Berkshire County v.

State Tax Commission, 392 U.S. 339, 346-348 (1968). Cf. Kern-Limerick,

Inc. v. Scurlock, 347 U.S. 110, 123-124 (Black, J., dissenting (with con-

currence by Warren, C. J. and Douglas, J.)), 124-127, (Douglas, J.,

dissenting, (with concurrence by Warren, C.J., and Black, J.)) (1954).

*% See, e.g., Gurley v. Rhoden, supra; Alabama v. King & Boozer, 314

U.S. 1 (1941); James v. Dravo Contracting Co., supra; Alward v. John-

son, 282 U.S. 509 (1931).

(4 U.S.C. §§ 105-110), as well as the precedent and opinions

relied upon in the decision, is necessary. Such an examina-

tion, the Respondents would submit, will support the

conclusion that not only do these state taxes fail to in any

way infringe upon WMAT’s right of self-government, it will

reveal specific congressional authority supporting the levy

even if infringement would have otherwise been found.

III

WARREN TRADING POST COMPANY V.

ARIZONA STATE TAX COMMISSION

IS NOT CONTROLLING

A. Introduction

This Court has held that the Arizona transaction privi-

lege tax (Ariz. Rev. Stats. §§ 42-1301 et. seq.) cannot be

imposed upon a federally licensed Indian trader engaged in

the business of Indian trading with Indians on an Indian

reservation. Warren Trading Post Company v. Arizona

State Tax Commission, 380 U.S. 685 (1965). To permit the

taxes, the opinion states, (380 U.S. at 691) would be to

“... put financial burdens on appellant or the Indians

with whom it deals in addition to those Congress or

the tribes have prescribed, and .. . thereby disturb and

disarrange the statutory plan Congress set up in order

to protect Indians against prices deemed unfair or un-

reasonable by the Indian Commission.”

This language articulates the concern in terms of prices

and additional financial burdens rather than in terms of state

taxes qua taxes. In this respect, the statement is consistent

with the long-standing congressional design to protect and

shield the Indians on reservations from the economic depre-

dations they might otherwise actually or potentially suffer at

the hands of unscrupulous traders.** Such a concern to pro-

tect reservation Indians from unfair or unreasonable prices,

however, is not synonymous with an objective to prohibit li-

censed Indian traders from seeking reimbursement for their

costs plus a profit. Indeed, the Code of Federal Regulations

suggests that just the opposite was intended by Congress.

See, e.g., 25 C.F.R. § 252.55 providing for price monitoring

and control as well as recovery of the trader’s costs plus a“...

reasonable markup.”

It is the Respondents’ position, therefore, that the proper

inquiry, insofar as the decision in Warren is concerned, is

whether or not, in the context presented, Congress intended

to either infer or imply a preemption of state use fuel

and/or motor carrier taxes as applied to non-Indian con-

tractors who deal with Indians pursuant to federaiiy-

approved contracts. The concern is two-fold, requiring first

a resolution of the question of the scope of the federal

scheme: is it, in reality, so all-pervasive that, like a giant

magnet, it draws within its influence all matters, direct and

indirect, which may be perceived to affect the federal objec-

tive in any way? The answer to this question is set forth in

Argument I, supra. The remaining inquiry focuses on the

Hayden-Cartwright Act (4 U.S.C. § 104) and the Buck Act

(4 U.S.C. §§ 105-110).2°

B. The legislative history of the Hayden-

Cartwright Act and the Buck Act supports the levy

of the taxes herein.

In connection with their theory that the Hayden-

_* Warren, supra, 380 U.S. at 689 n.4. See, also, F. Cohen “Handbook

of Federal Indian Law” (U.S. Department of Interior 1945) at 348 n.2

detailing the various congressional enactments bearing upon this subject.

Cf. Rockbridge v. Lincoln, 449 F.2d 567 (9th Cir. 1971) outlining some of

the concerns.

** Pinetop and WMAT discuss the Buck Act in connection with an

attempt to avoid the operation of the Hayden-Cartwright Act at pp. 56-

60 nn. 34, 35, Brief for Petitioners. The United States as amicus curiae

also discusses the Buck Act in connection with the Hayden-Cartwright

Act, United States Amicus Curiae Brief, pp. 21-22 n.13.

Cartwright Act does not apply to Indian reservations, Pine-

top and WMAT argue (Brief for Petitioners, p. 58 n.35)

that the legislative history of the Buck Act, as well as foot-

note 18 in Warren, establish that no intent to extend the

provisions of the former Act is discernable from the Com-

mittee Reports and flour debates relating to the legislation.

The Petitioners’ argument is that, since this Court stated in

Warren that the Buck Act did not apply to Indian reserva-

tions, and since the 1940 amendment by the Buck Act of

§ 10 of the Hayden-Cartwright Act (now codified at 4

U.S.C. § 104) purportedly “... integrated into the Buck Act

...” said § 10, the conclusions set forth in footnote 18 of

Warren require the result that § 10 of the Hayden-

Cartwright Act (i.e., 4 U.S.C. § 104) is similarly inapplicable

to Indian reservations.”

To support this contention, Pinetop and WMAT cite by

an “accord” prefatory signal this Court’s decision in

McClanahan, 411 U.S. at 176. Pinetop and WMAT then

express interest in the purported fact that, in McClanahan,

this Court

“... cites 4 U.S.C. § 104 as being part of the Buck Act

- an accurate characterization in light of the Hayden-

Cartwright Act’s amendment by and integration into

the more comprehensive Buck Act.” (Emphasis

added).

In point of fact, however, the correct citation to the statute

at which the codification of the Buck Act begins is 4 U.S.C.

§ 105 rather than 4 U.S.C. § 104.?” An examination of the

official reporter reveals that, contrary to the beliefs of Pine-

top and WMAT, this Court held that

* See Brief for Petitioners, p. 58 n.35.

” See the Official United States Reports, Vol. 411, page 176 and

compare with either of the two major commercial parallel reporter ser-

vices, 93 S.Ct. at 1264 and 36 L.Ed.2d at 138.

“... Congress’ intent to maintain the tax exempt sta-

tus of reservation Indians is especially clear in light of

the Buck Act, 4 U.S.C. § 105 et seq., which provides

comprehensive federal guidance for state taxation of

those living within federal areas.” (Emphasis added).

In their zeal to demonstrate that § 10 of the Hayden-

Cartwright Act (4 U.S.C. § 104) does not apply to Indian

reservations, Pinetop and WMAT have instead generated

several compelling indications suggesting that it does so

apply.

First, the Petitioners have shown that, whatever interpre-

tation this Court has placed upon the Buck Act in either

the McClanahan or Warren® decisions, the Hayden-

Cartwright Act had a different legislative history. Any ques-

tioning of the contention, therefore, that the Buck Act does

apply to Indian reservations would not affect the applica-

bility of the Hayden-Cartwright Act. Stated otherwise,

while this Court in Warren has stated for various reasons

that, in its opinion (380 U.S. at 691 n.18), the Buck Act

does not apply to Indian reservations, it has not opined

upon the applicability of the Hayden-Cartwright Act. How-

ever, cf. Sanders v. Oklahoma Tax Commission, 197 Okla.

285, 169 P.2d 748 (1946), cert. denied, 329 U.S. 780 (1946)

holding, inter alia, that § 10 of the Hayden-Cartwright Act,

4 U.S.C. § 104, applied within two federal areas (a fleod

control dam region and an aircraft plant) notwithstanding

the fact that the fuel in question was not consumed upon

public highways. See n. 20, supra.

Thus, by referencing the McClanahan case, Pinetop and

WMAT have supplied the information which, under their

theory, compels the conclusion that the use fuel and motor

carrier taxes herein apply to Pinetop on the Fort Apache

Reservation.

*® Warren correctly cites the Buck Act as being codified at 4 U.S.C.

§§ 105-110. See 380 U.S. at 691 n.18.

; Second, and of somewhat greater significance, the Peti-

tioners’ underlying argument — apart from reliance upon

McClanahan — that the Hayden-Cartwright Act does not

apply on Indian reservations is at odds with the holding in

57 I.D. 129. There, after a thorough and “... searching

analysis of the problems presented, ...” the Solicitor of

the Interior Department held that while state taxes did not

apply to sales of gasoline for direct use by the Menominee

Tribe in the actual operation of the tribal lumber mill, the

taxes did apply to sales of gasoline to employees of the mill

and/or the general public, whether Indian or non-Indian.

See 57 L.D. at 137-140.

In order to arrive at this conclusion, the opinion specifi-

cally considered the question of whether or not the phrase

“United States military or other reservations” contained in

\ 10 of the Hayden-Cartwright Act evinced a congressional

intent to apply the legislation to Indian reservations. In

concluding that such, indeed, was the intent of Congress,

the opinion noted that the legislative history demonstrated

an intent to deal with Indian reservation roads under the

Federal Aid Highway Act of 1936: The opinion noted, 57

I.D. at 139:

“Moreover, when the amendment in question!*) was

introduced, the agencies enumerated did not include

licensed traders and filling stations! The addition

of these agencies by the conference committee!) indi-

cates an intent to broaden the application of the

statute, and the reference to “licensed traders” is par-

ticularly suggestive of Indian reservations. These

indications, while slight, are sufficient to give ground

: 57 LD. 129 is cited in the brief of the United States (United States

Amicus Curiae Brief, p. 21 n.13), but not in the Brief for the Petitioners.

* See, F. Cohen “Handbook of Federal Indian Law” (U.S. Depart-

ment of Interior 1945) at 264.

* 49 Stat. 1521, § 10 of the Hayden-Cartwright Act.

* This is correct. See 80 Cong. Rec. 6913 (May 8, 1936).

* See House Conference Committee Report No. 2902, 74th Cong. 2d

Sess. (June 1, 1936).

siicsincaleilll

aie dt IO ed

iid ons

for considering the broad language of the statute as

including Indian reservations.” (Emphasis added)

Accordingly, it is the Respondents’ position herein, based

upon the foregoing, that the Hayden-Cartwright Act was

intended by Congress to apply to Indian reservations to

permit the application of the taxes here in question to the

fuels used by Pinetop (as distinguished from the FATCO

sawmill near Whiteriver, Arizona)** in connection with its

log-hauling operations.*°

* See Pet. App., 4a.

** Throughout their brief, the Petitioners repeatedly arsert that these

taxes are impermissible because the tribal and BIA roads are purportedly

neither built, maintained nor repaired by the State. The suggestion is

thus created that Pinetop should not be subjected to the taxes because

they are not expended to build, repair or maintain the BIA and tribal

roads it uses and it is thus inappropriate to charge them for assertedly

non-existent benefits. However, the General Manager of Pinetop, Mr.

Carpenter, stated that, while he was not personally aware of any instance

where state equipment or personnel had been so used, it was possible

that such may have occurred. See Carpenter Depo., pp. 72-73. Further-

more, Pinetop concedes that it uses state highways that traverse the Fort

Apache Indian Reservation and that as to that portion of its travels, it

has paid the subject taxes without protest. Brief for Petitioners, p. 13.

See also Carpenter Depo., area map exhibit.

Neither the allegation nor the fact, if established, that one subjected

to state taxes does not share equally in benefits or services from the state

is sufficient grounds for invalidating a tax upon him. Wagoner v. Evans,

170 U.S. 588, 592 (1898); Thomas v. Gay, 169 U.S. 264, 278 (1898); Kelly

v. Pittsburg, 104 U.S. 78, 81-82 (1881). This “benefits/burdens” issue is a

matter of state law which has been conclusively resolved against Pine-

top’s contention. See Winkler Trucking Co. v. McAhren, 60 Ariz. 225,

133 P.2d 757 (1943) holding, with respect to motor carrier taxes, that the

tax applies to the gross receipts even if they include income attributable

to travel occurring off of public highways. It is the State’s position, of

course, that the roads in question herein are public highways within the

meaning of Ariz. Rev. Stat. § 40-601 (A) (11). See Pet. App., pp. 62a-63a;

see also 25 C.F.R. § 162.8 (a) mandating “... free public use ...” of all

roads eligible for construction and maintenance with federal funds under

25 C.F.R. Part 162 (Roads of the Bureau of Indian Affairs); Sanders v.

Oklahoma Tax Commission, 197 Okla. 285, 169 P.2d 748 (1945), cert.

denied, 329 U.S. 780 (1946). ]

Third, the Petitioners’ reliance, albeit misplaced, upon

McClanahan as bearing upon the relationship between the

Buck Act and the Hayden-Cartwright Act necessitates a

somewhat closer examination of that holding insofar as its

analysis of the Buck Act is concerned. As previously seen,

the opinion specifically states that the Buck Act, 4 U.S.C.

}) 105 et seq., constitutes a clear manifestation of Congress’

intent to shield reservation Indians from the imposition of

the direct legal incidence of state taxes“ and that the Act

“... provides comprehensive federal guidance for state

taxation of those living within federal areas.” 411 U.S.

at 176.

Through the enactment of the Buck Act, 54 Stat. 1059

(1940), specific congressional authority was granted to the

states to impose and collect various taxes within “federal

areas” as that term is defined in 4 U.S.C. § 110(e). In this

regard, although authority to impose and collect state sales,

use and income taxes exists by virtue of 4 U.S.C. §{ 105 and

106, 4 U.S.C. § 109 specifically exempts “... any Indian not

otherwise taxed.” An examination of the legislative history

of the Buck Act will reveal. substantial evidence of a con-

gressional intent to provide for a complete allocation of

taxing authority with respect to “federal areas” in an at-

tempt to dispel the confusion and ambiguity then existing

with respect to the taxation of persons and/or transactions

occurring therein.

In 1939, Representative Frank H. Buck of California,

first introduced legislation to provide for the application of

state sales and use taxes in those areas where the federal

government “... may have jurisdiction.” See H. R. 6687,

76th Cong., Ist Sess., 84 Cong.Rec. 6737 (1939). Although

this legislation passed in the House of Representatives (see

84 Cong.Rec. 10093), it did not survive through the Senate.

The following year, the Senate Finance Committee made

* The issue in McClanahan — unlike that in Warren — was

whether a Navajo Indian on her own reservation was subject to the direct

levy of the Arizona income tax. See McClanahan, 411 US. at 166.

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various amendments to the bill to add state income taxes,

to exempt sales by instrumentalities of the United States,

and to exempt the imposition of state taxes, whether sales,

use, or income, upon reservation Indians. See S.Rep.No.

1625, 76th Cong., 3rd Sess. (1940); Hearing on H.R. 6687

Before a Subcommittee of the Senate Committee on Fi-

nance, 76 Cong., 3rd Sess., (April 23, 1940) (hereinafter

‘“Hearing”). After this hearing, H.R. 6687 was passed by

both houses of Congress (October 9, 1940: 54 Stat. 1059)

and, following its re-enactment and codification in 1947,

became the present 4 U.S.C. §§ 105-110.

A report which had been prepared by Congressman Buck

for the April 23, 1940 hearing articulated the purpose of

the Act, Hearing, supra, pp. 3-4:

“Recent decisions of the Supreme Court of the United

States in the cases of ... [cases omitted], ® while

opening the way for the application of certain nondis-

criminatory State taxes on Federal areas, except

insofar as those taxes may constitute a burden upon

the United States, have not clearly indicated the exact

extent of state authority in this respect.

“Divergent views being expressed by taxpayers and

taxing authorities makes [sic] it evident that prolonged

and expensive litigation will be required to clarify the

law on the subject if the limits of State authority with

respect to the various types of Federal areas are to be

established through judicial decisions. This litigation.

and the period of uncertainity which will necessary

[sic] exist pending final decisions by the United States

Supreme Court may, however, be avoided through

Congressional action, a precedent for which is to be

%* The cases to which Congressman Buck referred were James v.

Dravo Contracting Company, supra, Silas Mason Company uv. Tax

Commission, 302 U.S. 186 (1937), and Atkinson v. State Tax Commis-

sion, 303 U.S. 20 (1938).

found in an Act of Congress approved June 16, 1936,

amending Section 10 of the Hayden-Cartwright Act

(49 Stat. 1521; 23 U.S.C.A., § 55a) relating to State

motor vehicle fuel taxes.

“A minor problem presented with respect to the appli-

cation of State sales taxes on Federal areas involves

the responsibility for such taxes of post exchanges,

ship-service stores, commissaries, licensed traders, and

other similar agencies operating on Federal areas.”

(Emphasis added).

The question of whether or not the grant of taxing au-

thority under consideration should apply to Indian

reservations was thus specifically considered. In fact, Rep-

resentative Buck stated (Hearing, p. 2) that, in his personal

experience, a problem existed with respect to taxes on sales

‘“... at commissaries, licensed traders, [sic] and other

similar agencies. We had some bad situations with re-

gard to these licensed traders. There are licensed

traders on certain reservations, for instance, at Palm

Springs, Calif., you [sic] have your reservation line

right down the street, and on one side of the street you

have merchants who are paying sales taxes, and on the

other side you have licensed traders who are not pay-

ing any sales tax on identically the same types of

goods.” (Emphasis added)

With regard to Congressman Buck’s statement, see Agua

Caliente Band of Mission Indians v. County of Riverside,

306 F.Supp. 279, 281 (C.D.Cal. 1969). (subsequent case his-

tory omitted: see n.20, supra), establishing that the Agua

Caliente Indian Reservation exists on a checkerboard pat-

tern in the area of Palm Springs, California. This Court

may take judicial notice of the geographic fact that the only

federal reservation in the vicinity of Palm Springs, Califor-

nia is the Agua Caliente Indian Reservation.

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At the April 23, 1940 hearing, however, the United

States Department of the Interior took a position that In-

dian reservations should be excluded from the reach of the

Buck Act. See letter from E. K. Burlew, Acting Secretary of

the Interior, March 13, 1940, Hearing, supra, pp. 39-40. In

that letter, the Interior Department argued in favor of the

so-called ‘“LaFollette Amendment” which provided that

“ . this act [i.e., the Buck Act] shall not affect existing law

relating to taxation on Indian reservations.”

The ultimate form of 4 U.S.C. § 109, however, followed

the position urged by Representative Dempsey of New

Mexico. See, Hearing, supra, pp. 18-20. His position was

that the Buck Act should exempt /ndians, but not Indian

reservations, his view being that:

‘“. [W]e have no desire to tax the Indians. They are

exempt from taxation in our state, but we do not be-

lieve that because a man establishes a store on Indian

lands competing with a store outside, the store inside

should be exempt from all axation, and the store out-

side should pay.”

As the foregoing legislative history demonstrates, the

concern of the legislators was not over whether or not the

Buck Act should apply to Indian reservations, but rather

whether the Buck Act should authorize the levy of the di-

rect legal incidence of state sales, use or income taxes upon

reservation Indians. Indeed, the rejection of the LaFollette

Amendment in favor of the position advocated by Repre-

sentative Dempsey is conclusive proof that Congress

considered Indian reservations to be “federal areas” within

the purview of what eventually became 4 U.S.C. § 110(e). It

also demonstrates that Congress continued to support an

objective of shielding reservation Indians from the direct

legal incidence of state taxes, but did not intend to shield

non-Indians — including licensed traders — from such tax-

ation if they were located within a particular type of federal

area, an Indian reservation.

Returning, therefore, to the decision in McClanahan, the

Court’s ruling that the Buck Act provided comprehensive

federal guidance for state taxation of those living within

federal areas is clearly correct with respect to the particular

federal area within which Rosalind McClanahan lived, the

Navajo Indian Reservation. However, if an Indian reserva-

tion is a “federal area” for purposes of 4 U.S.C. § 109

should it not also be a “federal area” for purposes of 4

U.S.C. §§ 105 and 106? Unless the answer to this question

is “yes,” at this juncture something of a disparity may ap-

pear to exist between the conclusion in footnote 18 in

Warren and the Court’s subsequent ruling in McClanahan.

In this regard, it is noteworthy that a total of eight briefs

and/or memoranda filed by the parties and various amici

curiae in the McClanahan case urged the uniform position

that the Buck Act was either specifically, implicitly or im-

pliedly applicable to Indian reservations."

It is the Respondents’ position, based upon tke foregoing,

that the conclusion reached in 58 I.D. 562, 563 (see Warren,

380 U.S. at 691 n.18) is inconsistent with the legislative his-

tory of both the Hayden-Cartwright Act and the Buck Act.

Even if Pinetop were a licensed trader (which notion even

the United States Amicus Curiae Brief rejects, p. 11, n.9), it

should not be able to claim sanctuary upon the theory that

** These briefs were filed in the McClanahan case, USSC Docket No.

71-834, October Term, 1971: (1) Appellant’s Supplemental Brief in Op-

position to Appellee’s Motion to Dismiss or Affirm; (2) Brief for

Appellant; (3) Reply Brief for Appellant; (4) Memorandum for the

United States as Amicus Curiae; (5) Brief for the United States as Ami-

cus Curiae; (6) Brief of the Navajo Tribe of Indians, as Amicus Curiae, in

Support of Jurisdictional Statement; (7) Brief of Montana Inter-Tribal

Policy Board as Amicus Curiae; (8) Brief for Amicus Curiae, National

Congress of American Indians in Support of Appellant. In this regard,

compare the similar although not identical position adopted by the

United States as amicus curiae in Kahn v. Arizona State Tax Commis-

sion, 16 Ariz. App. 17, 490 P.2d 846 (1971), appeal dismissed (want of

substantial federal question), 411 U.S. 941 (1973) (Brennan, Douglas,

JJ, dissenting with opinion, 411 U.S. at 941-944), Memorandum for

hee _ as Amicus Curiae, USSC Doc. No. 71-1263, October Term,

72, p. 5.

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the Fort Apache Indian Reservation is not a “federal area.”

As this Court observed in McClanahan and as the parties

and amici curiae therein (save the State of Arizona) argued,

the Buck Act was intended by Congress to apply to Indian

reservations.”®> The Respondents agree with the proposi-

tion that there is no intent expressed in the Buck Act to

permit the direct application of State taxes (i.e., the visita-

tion of the legal incidence of said taxes) to reservation

Indians. There is, however, a clear expression of intent by

the Congress to extend the Buck Act to “licensed traders”

on a particular species of federal area, viz., Indian reserva-

tions.

An interpretation such as this will bring consistency to

the decisions in the Warren and McClanahan cases and

will be completely harmonious with this Court’s decision in

Moe v. Confederated Salish and Kootenai Tribes, 425 U.S.

463 (1976). There, this Court held that where the legal in-

cidence of a state tax fell upon an Indian, it was

impermissible. However, where the legal obligation for the

tax fell upon a non-Indian, it was upheld notwithstanding

the facts that (1) the vendor was an Indian, (2) the vendor

was an Indian seemingly clearly engaged in the business of

Indian trading on an Indian reservation (see 25 U.S.C.

§§ 261, 264; 25 C.F.R. Part 251), and (3) the vendor Indian

demonstrated or alleged that adverse economic ramifica-

tions would unavoidably be placed upon him by mandate of

state law (i.e., the Montana “pre-collection” requirement:

see Moe, 425 U.S. at 482) as a result of the imposition of

the taxes upon his non-Indian custemers.””

Accordingly, for the foregoing reasons it is the Respon-

dents’ position that both the Hayden-Cartwright Act (with

respect to the Arizona use fuel tax, Ariz. Rev. Stat. } 28-

1552) and the Buck Act (with respect to the Arizona motor

%° A similar but more extensive discussion of this result is contained

in the Brief of the Appellee in Central Machinery Co. v. State of Arizo-

na, USSC Doe. No. 78-1604, October Term, 1979 (argued in tandem with

the case herein).

carrier tax, Ariz. Rev. Stat. § 40-641) are properly applied

to the non-Indian, independent log-hauling contractor,

Pinetop Logging Co. Rather than being preempted under

the rationale of Warren, these state taxes neither invade

the federal sphere of federal tribal forestry management

nor do they infringe upon any right of self-government en-

joyed by the White Mountain Apache Tribe.

CONCLUSION

As is true with respect to most questions involving the

perplexing area of Indian law, answers are not always easily

discernible. However, in the present case, the Respondents

would respectfully submit that a thorough, candid and

objective examination of the issues presented must lead to

the conclusion that the Hayden-Cartwright Act and the

Buck Act are the precise species of governing acts of Con-

gress referenced in Williams v. Lee, supra. The decision of

the Arizona Court of Appeals was correct when rendered

and remains correct now. Accordingly, the decision should

be affirmed.

Respectfully submitted,

Rospert K. CorsBin

Attorney General

Ian A. MACPHERSON

Assistant Attorney General

ANTHONY B. CHING

Solicitor General ~

State Capitol

West Addition - 2nd Floor

1700 West Washington

Phoenix, Arizona 85007

Telephone: (602) 255-4681

Attorneys for Respondents

December, 1979

A-1

APPENDIX

4 U.S.C. § 104. Tax on motor fuel sold on military or other

reservation[;] reports to state taxing authority.

(a) All taxes levied by any State, Territory, or the Dis-

trict 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, sa 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.

clude Guam.

4 U.S.C. § 105. State, and so forth, taxation affecting

federal areas; sales or use tax

(a) No person shall be relieved from liability for payment

of, collection of, or accounting for any sales or use tax lev-

ied by any State, or by any duly constituted taxing

authority therein, having jurisdiction to levy such a tax, on

the ground that the sale or use, with respect to which such

tax is levied, occurred in whole or in part within a Federal

A-2

area; and such State or taxing authority shall have full ju-

risdiction and power to levy and collect any such tax in any

Federal area within such State to the same extent and with

the same effect as though such area was not a Federal area.

(b) The provisions of subsection (a) shall be applicable

only with respect to sales or purchases made, receipts from

sales received, or storage or use occurring, after Decem-

ber 31, 1940.

4 U.S.C. § 106. Same; income tax

(a) No person shall be relieved from liability for any in-

come tax levied by any State, or by any duly constituted

taxing authority therein, having jurisdiction to levy such a

tax, by reason of his residing within a Federal area or re-

ceiving income from transactions occurring or services

performed in such area; and such State or taxing authority

shall have full jurisdiction and power to levy and collect

such tax in any Federal area within such State to the same

extent and with the same effect as though such area was

not a Federal area.

(b) The provisions of subsection (a) shall be applicable

only with respect to income or receipts received after

December 31, 1940.

4 U.S.C. § 109. Same; exception of Indians

Nothing in sections 105 and 106 of this title shall be

deemed to authorize the levy or collection of any tax on or

from any Indian not otherwise taxed.

4 U.S.C. § 110. Same; definitions

As used in sections 105-109 of this title—

(e) The term “Federal area” means any lands or premises

held or acquired by or for the use of the United States or

any department, establishment, or agency of the United

States; and any Federal area, or any part thereof, which is

located within the exterior boundaries of any State, shall be

deemed to be a Federal area located within such State.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.