Amicus Curiae Brief — Department of Taxation and Finance of NY v. Milhelm Attea & Bros.

\

No. 93-377

ae 14 1998-

IN THE OFFICE OF {HE CLERK

Supreme Court of the United States

October Term, 1993

DEPARTMENT OF TAXATION AND FINANCE OF THE STATE OF NEW YORK AND

JAMES W. WETZLER, COMMISSIONER OF TAXATION AND FINANCE OF THE STATE

OF NEW YORK and the TAX APPEALS TRIBUNAL OF THE STATE OF NEW YORK, State

Campus, Albany, New York,

Petitioners,

against

MILHELM ATTEA & BROS. INC. a/k/a MILHELM ATTEA & BROTHERS, INC., a/k/a

MILHELM ATTEA & BROTHERS, INC., 1509 Clinton Street, Buffalo, New York 14206,

Respondent.

JAMES W. WETZLER, as Commissioner of Taxation and Finance of the State of New York; THE

DEPARTMENT OF TAXATION AND FINANCE OF THE STATE OF NEW YORK and the

TAX APPEALS TRIBUNAL OF THE STATE OF NEW YORK, State Campus, Albany, New

York 12227,

Petitioners,

against

ELIAS H. ATTEA, JR., 6175 Stickler Street, Clarence, New York 14031,

Respondent.

ON WRIT OF CERTIORARI TO THE COURT OF APPEALS

OF THE STATE OF NEW YORK

BRIEF OF THE EMPIRE STATE PETROLEUM

ASSOCIATION, INC. AND THE PETROLEUM MARKETERS

ASSOCIATION OF AMERICA, INC., AS AMICI CURIAE IN

SUPPORT OF THE PETITIONERS

ROLAND, FOGEL, KOBLENZ & CARR

Attorneys for The Empire State Petroleum Association, Inc. and

The Petroleum Marketers Association of America, Inc.

One Columbia Place

Albany, NY 12207

(518) 434-8112

EMILIO A. F. PETROCCIONE

Counsel of Record

USHER FOGEL

Of Counsel

Dated: December 14, 1993

THe Reporrer Company, Inc —Walton, NY |3856—800-252-7181

Syracuse Office, University Building, Syracuse, NY 13202—315-426-1235

NYC Office—™0 Vesey Si., New York, NY 10007—212-732-6978—800-800-4264

(3564—1993)

i.

Table of Contents

Page

Pe ee eeieeecens |

Ec ccvecocecesesecccecsessee

Interest of the Amici Curiae............ccccccceee 2

Statement of the Case ..........ccceees wise. ©

Summary of Argument ...... Keevavdenevenes “see @

PI Soto b ddneeeNKs ns baeewnedeseuseesedeus 7

I. Significant Public Policy Implications Warrant a

Reversal of the Order of the Court of Appeals .. 7

Il. The Court of Appeals’ Decision is in Conflict with

the Decisions of This Court Permitting States to

Impose Minimal Burdens on Indian Traders to

Prevent the Avoidance of Tax by Non-Indian Pur-

chasers of Products From Indian Retailers...... 11

ee ee ee

TABLE OF AUTHORITIES

Page

CASES:

Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163

(IDS) on vcvccvscveseccecsseuuee inne 11

Herzog Brothers Trucking, Inc. v. State Tax Commis-

sion, 69 N.Y.2d 536 (1987) and 72 N.Y.2d 720

(CIDER). . cccccccveccvccccccensenenennee 7, 11, 12

Matter of New York State Department of Taxation and

Finance v. MacLeod, 168 A.D.2d 802 (3d Dept.

IDDG) oc cccccccccscececesceh une n aun 4

Milhelm Attea and Brothers, Inc.v. Department of Tax-

ation and Finance, 164 A.D.2d 300 (3d Dept.

Moe v. Confederated Salish and Kootenai Tribes, 425

UB. 463 (IFTED. « vcccveccseusneeu 6, 12, 13

Oklahoma Tax Commission v. Citizen Band Pot-

owatomi Indian Tribe of Oklahoma, 498 U.S. 505

CEIDDE). o coccccccecececesstse enn passim

Warren Trading Post Co. v. Arizona Tax Commission,

SOO U.S. GBS (19GS). . .cccccccscvcsssesens 11, 13

Washington v. Confederated Tribes of Colville Reser-

vation, 447 U.S. 134 (1980)............... passim

Oe ee

ili.

STATUTES:

Indian Trader Law (25 U.S.C. §261)............... 15

REGULATIONS:

I oss occ ccceecessccceses 7

ET 4,7

No. 93-377

IN THE

SUPREME COURT OF THE UNITED STATES

OcTOBER TERM, 1993.

e

DEPARTMENT OP TAXATION AND FINANCE OP THE STATE OF

New YORK AND JAMES W. WeETZLER, COMMISSIONER OF

TAXATION AND FINANCE OF THE STATE OF NEw Yor«K and

the TAX APPEALS TRIBUNAL OP THE STATE OF NEw

YorK, State Campus, Albany, New York,

Petitioners,

against

MILHELM ATTEA & Bros. INC. a/k/a MILHELM ATTEA &

BROTHERS, INC., a/k/a MILHELM ATTEA & BROTHERS,

INc., 1509 Clinton Street, Buffalo, New York 14206,

Respondent.

e

JAMES W. WETZLER, as Commissioner of Taxation and Fi-

nance of the State of New York; THE DEPARTMENT OF

TAXATION AND FINANCE OF THE STATE OF NEw YorK and

the TAX APPEALS TRIBUNAL OF THE STATE OF NEW

York, State Campus, Albany, New York 12227,

Petitioners,

against

“IAS H. ATTEA, Jr., 6175 Stickler Street, Clarence,

New York 14031,

Respondent.

ON WRIT OF CERTIORARI TO THE COURT OF APPEALS OF

THE STATE OF NEW YORK

2

Brief of the Empire State Petroleum Association, Inc.

and the Petroleum Marketers Association of America,

Inc. as amici curiae in support of the Petitioners

Preliminary Statement

This brief is filed on behalf of the Empire State Petroleum

Association, Inc. (ESPA) and the Petroleum Marketers As-

sociation of America, Inc. (PMAA) as amici curiae in sup-

port of Petitioners on the review of this matter following

this Court’s granting of a Writ of Certiorari to the Court of

Appeals of the State of New York by Order dated November

1, 1993. The consents of all parties to the filing of this brief

were obtained and have been filed with the Clerk of the

Court.

Interest of the Amici Curiae

The Empire State Petroleum Association, Inc. is a New

York not-for-profit trade association representing approxi-

mately 450 individual-member companies engaged in sup-

plying and marketing refined petroleum products and re-

lated services to consumers throughout the State of New

York.' ESPA’s membership is predominantly comprised of

independent wholesale and retail distributors of gasoline,

diesel fuel, heating oil, and other petroleum based products.

ESPA members who are engaged in motor fuel distribution

or who own or operate retail service stations, particularly in

the Certral and Western regions of New York State, com-

pete with Indian retailers for the sale of motor fuels to non-

Indians. ESPA dealers and service station operators collect

and remit to the State Department of Taxation and Finance

‘Neither ESPA nor PMAA has any parent or subsidiaries to list

pursuant to Rule 29.1.

3

motor fuel taxes on the sale of products to consumers. In

contrast, Indian retailers refuse to pay these taxes on sales of

motor fuel products to non-Indians although such taxes are

lawful and are required to be collected. Consequently, In-

dian retailers enjoy a tremendous price advantage on the

sale of their products, a price advantage with which

petroleum marketers cannot compete.

PMAA is a not-for-profit federation of forty-four state

and regional trade organizations (including ESPA) repre-

senting more than ten thousand independent petroleum mar-

keters throughout the United States. Collectively, these mar-

keters distribute approximately half of the gasoline and

sixty percent of the diesel fuel consumed annually in the

United States.

PMAA notes that the unfortunate tax avoidance trend

which has sharply impacted petroleum marketers in New

York, is starting to spread to other parts of the country.

Marketers in many parts of the country have complained of

having to compete with tax free sales of motor fuel to non-

Indians on Indian reservations. Consequently, this Court’s

decision on the effort by the State of New York to ensure

equitable collection of state taxes, will certainly have rele-

vance well beyond the boundaries of New York State,

thereby affecting PMAA’s members.

ESPA’s and PMAA’s purpose in filing this brief is to

bring to the Court’s attention matters of significant public

importance which will not be presented by the parties.

Specifically, the outcome of this case will not only deter-

mine the validity of the state’s cigarette tax regulations, but

—

4

will also impact upon similar motor fuel tax regulations, and

ultimately the competitive viability of the associations’

members. In addition, the amici believe that the case has

widespread implications concerning the state’s ability to

balance delicately the sovereign rights of an Indian nation

with its own lawful right to collect taxes on sales to non-

Indians, and the effect of such efforts by the state upon

competing businesses, ihe public and the local economies.

The cigarette tax scheme under scrutiny in this case (20

NYCRR Parts 335.6 and 335.7)? was designed to alleviate

tax evasion which occurs on the sale of cigarettes on Indian

reservations to non-Indians. The regulations are nearly iden-

tical to motor fuel tax regulations of the Department (20

NYCRR Parts 414.6 and 414.7) which were likewise cre-

ated to prevent the tax-free sales of motor fuel. The tax

schemes were simultaneously prepared, published for public

comment and promulgated. Both sets of regulations became

effective in November of 1988.

The similarity between the two schemes has been recog-

nized by the New York courts. In Matter of New York State

Department of Taxation and Finance v. MacLeod, 168

A.D.2d 802 (3d Dept. 1990) the Appellate Division held

that New York’s motor fuel tax scheme was invalid based

upon its own previously issued opinion in this case involv-

ing the very cigarette tax regulations at issue here. See,

Milhelm Attea and Brothers v. Taxation and Finance, 164

A.D.2d 300 (3d Dept. 1990). Consequently, this Court's

decision on the validity of the cigarette tax scheme will

2In December of 1990, these regulations were renumbered without

any substantive change. Former numbering is used here to avoid confu-

sion in reviewing the state court opinions.

ee

5

directly affect the related motor fuel regulations and ulti-

mately the economic viability of motor fuel marketers.

The failure of Indian retailers to collect state taxes on

sales to non-Indians not only deprives New York of tax

revenue to which it is lawfully entitled, but oppresses com-

petition and harms legitimate operators who collect state

and local taxes on motor fuels and cigarettes. A gallon of

gasoline costing $1.25 can be sold without state taxes for 32

cents less. A carton of cigarettes without state taxes is over

five dollars cheaper. With these illegal price “discounts”,

competing businesses continue to lose non-Indian patronage

to Indian retailers who openly market the sale of their tax-

free products. The loss in motor fuel tax revenue has been

estimated by the State to be $35 million annually (see,

Petition for Writ of Certiorari dated August 31, 1993, p. 12,

footnote 5). This is only a fraction of the loss in motor fuel

sales that would otherwise be made by non-Indian busi-

nesses who collect taxes.

The motor fuel and cigarette tax schemes were crafted by

the department to provide for the fair and equitable applica-

tion and collection of state taxes on sales to non-Indians. In

doing so, the regulations do not curtail the sale of tax-free

products to Indians on reservations and only place minimal

recordkeeping requirements upon Indian traders. If upheld,

the state can prevent pervasive tax evasion while simul-

taneously restoring a fair, open and competitive environ-

ment to the retail motor fuel market.

The parties to this matter are properly concerned with

establishing their legal points as to the validity of the Court

of Appeals’ June 10, 1993 Opinion. ESPA and PMAA,

however, respectfully request that the Court also give con-

6

sideration to the broader public policy aspects of this case.

This brief is submitted with the intention that it will assist

the Court by bringing these matters to its attention.

Statement of the Case

ESPA and PMAA respectfully incorporate by reference

the Statement of the Case us set forth in the Petitioners’

brief.

Summary of Argument

The New York Court of Appeals Order should be re-

versed for two reasons. First, the Court of Appeals’ June 10,

1993 opinion conflicts with this Court’s prior opinions in

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

463 (1976), Washington v. Confederated Tribes of Colville

Reservation, 447 U.S. 134 (1980), and most recently, Okla-

homa Tax Commission v. Citizen Band Potowatomi Indian

Tribe of Oklahoma, 498 U.S. 505 (1991). These decisions

recognized the right of states to impose minimal burdens on

Indian traders to prevent tax avoidance by non-Indian pur-

chasers of products from Indian retailers. It was the Pot-

owatomi case which this Court ordered the Appellate Divi-

sion to consider on remand of this matter (A17-A18). In

addition, ESPA and PMAA believe that matters of signifi-

cant public importance, which go beyond the state’s lawful

right to collect taxes on sales of products to non-Indians,

warrant a reversal of the Court of Appeals’ order (A1-A2).

Specifically, whether and by what method the state can

lawfully prevent tax avoidance by non-Indians will signifi-

cantly impact the economic viability of competing busi-

nesses, and possibly that of surrounding communities as

well.

7

ARGUMENT

Significant Public Policy Implications Warrant a Re-

versal of the Order of the Court of Appeals

As noted above, ESPA and PMAA are concerned with the

validity of motor fuel tax regulations (20 NYCRR 414.6 and

414.7) which are similar to the contested cigarette tax regu-

lations under review here. This Court’s decision will natu-

rally determine the legal status of the motor fuel regulations

promulgated by the state to prevent motor fuel tax evasion

by non-Indians.

Without question, the state is entitled to payment of taxes

on sales of taxable products sold by Indians to non-Indians

and may even regulate Indian retailers on reservations to

collect such taxes. Potowatomi, 498 U.S. 505, 512. It is the

method of securing the collection and payment of those

taxes that has proven difficult.

Attempts to enlist the aid of Indian retailers or Indian

nations have not been successful, and prior regulations have

been struck down by the New York Court of Appeals (Her-

zog Brothers Trucking, Inc. v. State Tax Commission, 69

N.Y.2d 536 [1987] and 72 N.Y.2d 720 [1988]). In response,

the state carefully designed cigarette and motor fuel tax

regulations that provide for the fair application and collec-

tion of state taxes solely on sales to non-Indians while only

minimally burdening Indian traders. (20 NYCRR 414.6 and

414.7—motor fuel; 20 NYCRR 335.6 and 335.7—<ciga-

rettes). In New York, ESPA has long supported the develop-

8

ment and implementation of an equitable motor fuel tax

scheme which ensures that members of industry and con-

sumers pay their proportionate share of taxes and that no

one is permitted to avoid taxes illegally. Nonetheless,

without these regulations, the avoidance of tax will continue

unabated to the detriment of the state, its businesses, and its

citizens.

The avoidance of tax on the sales of cigarettes and motor

fuels is a serious problem. The state reports annual tax

revenue losses of approximately $65 million in cigarette

taxes and approximately $35 million in motor fuel taxes

because of reservation sales to non-Indians.3

The temptation for non-Indians to purchase motor fuel

products from a reservation is considerable given the price

discrepancy when taxes are not charged on the sale. A

gallon of gasoline which costs a $1.25 includes approxi-

mately 50 cents in taxes, of which 32 cents are attributable

to state taxes. A gallon of diesel which costs $1.35 includes

approximately 60 cents in taxes, of which 35 cents are

attributable to state taxes. A 32 or 35 cents-per-gallon price

advantage is a margin against which petroleum marketers

cannot compete.*

Since many state highways and roads traverse reserva-

tions, there are numerous easily accessible motor fuel distri-

3Even these figures may be underestimated. As the petition for

Writ of Certiorari noted, the estimate is based only on those suppliers

who responded with data. (See Petition, p. 12, fn. 5.)

“Petroleum marketers further suffer in damage to their reputation.

Despite widespread publicity, ESPA reports that many consumers erro-

neously believe that the honest marketer is overcharging the customer

in the sale of motor fuel products.

9

bution sites offering tax-free sales of cigarettes and motor

fuels. Those members of ESPA who operate retail gasoline

service stations within reasonable proximity of Indian reser-

vations, and those members who distribute and supply mo-

tor fuel and other products to those service stations, are

suffering economic losses from the tax-free sales made on

motor fuel products sold on Indian reservations to non-

Indians. According to ESPA, some of its members have

been forced out of business, while others are in jeopardy of

following the same course. Some have downsized due to

considerable loss of business. Distributors and service sta-

tion operators cannot compete with Indian retailers who do

not collect and pay state taxes and who aggressively and

openly market this fact to customers.

The harmful economic impact attendant to this tax avoi-

dance problem is not limited to service station dealers. The

loss or downsizing of retail service station dealers en-

genders further wide ranging detrimental economic im-

pacts. The closing or downsizing of retail stations engenders

the loss of a needed public service, decreases competition

among service station operators and limits the choice of

products, services, and retail establishments available to the

consumer. The closing of service stations also results in

significant revenue losses to the surrounding region, and an

increase in unemployment of workers. Thus, the avoidance

of tax has a direct and immediate adverse impact upon the

surrounding counties, towns, villages and other political

subdivisions of the state.

The adverse effects of these tax-free sales also impact

businesses and communities throughout the state, not merely

the areas near the reservations. Since tractor trailers typically

can carry over 200 gallons of fuel, they can, for

10

example, fill up with tax-free motor fuel on a reservation in

Western New York and have sufficient fuel to travel to

Boston and return without refueling, bypassing all the sta-

tions and truck stops along the way. Understandably, those

operators and adjacent communities would suffer economic

losses.

ESPA and PMAA respectfully submit that this Court’s

decision will not only impact upon sales of motor fuels and

Cigarettes, but ultimately any other product which is or

could be sold on reservations to non-Indians. Without doubt,

other Indian nations and entrepreneurs in New York State‘

and throughout the nation, will monitor this Court’s deci-

sion. An affirmance of the Court of Appeals’ order nullify-

ing the state tax regulations will essentially permit tax eva-

sion to take place throughout the State of New York and

encourage additional tax evasion nationwide with respect to

many products and services, besides cigarettes and motor

fuel, which are taxed by each state.

‘Indian reservations are located throughout the state, including

Northern New York and Long Island, as well as Central and Western

New York.

11

Il.

The Court of Appeals’ Decision is in Conflict with the

Decisions of This Court Permitting States to Impose

Minimal Burdens on Indian Traders to Prevent the Avoi-

dance of Taxes by Non-Indian Purchasers of Products

From Indian Retailers

Relying mostly on its previous opinions in Herzog Brothers

Trucking, Inc. v. State Tax Commission, 69 N.Y.2d 536 (1987)

and 72 N.Y.2d 720 (1988) and broad language from this

Court’s opinion in Warren Trading Post Co. v. Arizona Tax

Commission, 380 U.S. 685 (1965), the New York Court of

Appeals found New York’s cigarette tax regulations invalid

under a rigidly applied preemption test because the Respond-

ents are Indian traders (A7). In essence, the Court of Appeals’

decision holds that Indian traders are endowed with automatic

and absolute immunity from even the most minimal burdens

created by state tax regulations designed to collect taxes from

non-Indian purchasers. However, as this Court noted in Cotton

Petroleum Corp. v. New Mexico, 490 U.S. 163, 176 (1989):

“Questions of pre-emption in the [area of Indian af-

fairs] are not resolved by reference to standards of pre-

emption that have developed in other areas of the law,

and are not controlled by ‘mechanical absolute concep-

tions of state or tribal sovereignty.’ [Citation omitted. }

Instead, we have applied a flexible pre-emption anal-

ysis sensitive to the particular facts and legislation

involved. Each case ‘requires a particularized exam-

ination of the relevant state, federal and tribal inter-

ests’ ” (Citation omitted] (Emphasis supplied).

It is respectfully submitted that in reviewing the challenged

regulations, the Court of Appeals did not perform such an

12

examination balancing state, federal and tribal interests, but

rather adhered to its prior Herzog determinations which are in

direct conflict with this Court’s decisions in Moe, Colville and

Potowatomi.

Moreover, the Court of Appeals placed undue emphasis

upon the language of Warren Trading Post which stated that

Congress has preempted the field of Indian trading on reserva-

tions. In doing so, it failed to apply this Court’s subsequent

opinions in Moe, Colville, and Potowatomi, and instead, con-

tinued to invoke its rigid and erroneous view of the applicable

legal standard.

In Moe, this Court validated a State of Montana tax scheme

which required Indian tribal retailers to collect a state sales tax

imposed upon non-Indian purchasers of cigarettes. Balancing

the competing sovereign interests, this Court found:

“The State’s requirement that the Indian tribal seller

collect a tax validly imposed on non-Indians is a mini-

mal burden designed to avoid the likelihood that in its

absence non-Indians purchasing from the tribal seller

will avoid payment of a concededly lawful tax . . . this

burden is not, strictly speaking, a tax at all. . . [w]e see

nothing in this burden which frustrates tribal self-

government, [citations omitted] or runs afoul of any

congressional enactment dealing with affairs of reser-

vation Indians . . .”

Moe, 425 U.S. at 483.

Significantly, in Moe, this Court distinguished Warren

Trading Post primarily on the ground that the Arizona tax was

a gross income tax imposed upon the on-reservation sales by

the Indian trader to the reservation Indians. This Court recog-

ote ae ee

i. ee ee ee ae

13

nized that the legal impact of the Arizona tax fell upon the

Indian trader with the economic burden of such tax affecting

both the Indian trader and the Indian tribe while in Moe, the

economic impact of the Montana tax rested on the non-Indian.

425 U.S. at 482.

This Court confirmed the Montana tax scheme requiring

pre-collection by both Indian traders and reservation Indian

retailers of the cigarette tax imposed upon non-Indian pur-

chasers. As the Moe opinion noted, “[w]ithout the simple

expedient of having the retailer collect the sales tax from non-

Indian purchasers, it is clear that wholesale violations of the

law by the latter class will go virtually unchecked.” 425 U.S.

at 482. Thus, after weighing state, federal and tribal interests,

the Court permitted the state to require the Indian proprietor to

add state tax to sales made to non-Indians.

This balancing approach was subsequently applied in Col-

ville where this Court approved the State of Washington's

Cigarette tax laws which imposed obligations upon the opera-

tors of tribal smokeshops to assist in the collection of tax on

non-Indian purchases and prevent the avoidance of tax by non-

Indians on such purchases. The Indian retailers, who were also

licensed Indian traders, were required to purchase and affix

tax stamps to cigarette packages intended for sale to non-

Indians and to meet regulatory record-keeping requirements

pertaining to such sales.®

6The Colville opinion also confirmed this Court's prior decision in

Moe stating that state excise and sales taxes on cigarettes could be

collected on non-Indian purchases made on Indian reservations. 447

U.S. at 151. Indian retailers, therefore, could be required to collect such

taxes on their sales to non-Indians.

14

Perhaps most significant was that in Colville this Court

recognized and validated a state’s power to seize shipments

of unstamped cigarettes traveling to the reservation from

out-of-state suppliers even though the tribal businesses were

“concededly exempt from state taxation, [and] no state tax

is due when the cigarettes are in transit."” 447 U.S. at 161.

This Court continued:

‘We find that Washington's interest in enforcing its

valid taxes is sufficient to justify these seizures.

Although the cigarettes in transit are as yet exempt

from state taxation, they are not immune from sei-

zure when the Tribes, as here, have refused to fulfill

collection and remittance obligations which the State

has validly imposed. It is significant that these sei-

zures take place outside the reservation, in locations

where state power over Indian affairs is considerably

more expansive than it is within reservation bound-

aries. [Citation omitted] By seizing cigarettes en

route to the reservation, the State polices against

wholesale evasion of its own valid taxes without

unnecessarily intruding on core tribal interests.”

Colville, 447 U.S. at 161-162.

In Colville, this Court foresaw with prescient clarity the

very problems now faced by non-Indian retailers in New

York:

“It is painfully apparent that the value marketed by

the smokeshops to persons coming from outside is

not generated on the reservation by activities in

which the Tribes have a significant interest. [cita-

tions omitted] What the smokeshops offer these cus-

15

tomers, and what is not available elsewhere, is solely

an exemption from state taxation. The Tribes assert

the power to create such exemptions . . . If this

assertion were accepted, the Tribes could . . . open

chains of discount stores at reservation borders, sell-

ing goods of all descriptions at deep discounts and

drawing custom from surrounding areas.”’

Colville, 447 U.S. at 155.

This Court also reviewed the issue of federal preemption in

a broader context and examined all the pertinent federal Indian

statutes, including the Indian Trader Law (25 U.S.C. §261 et

seq.). Based upon its review, this Court concluded:

“The Indian Trader statutes, 25 U.S.C. §261 ef seq.,

incorporate a congressional desire comprehensively to

regulate businesses selling goods to reservation Indians

for cash or exchange [citing Warren Trading Post}, but

no similar intent is evident with respect to sales by

Indians to nonmembers of the tribe.””

Colville, 447 U.S. at 155-156.

The Colville opinion demonstrates that the conclusion of the

Court of Appeals below (i.e., that the Indian Trader Laws

automatically place every trader beyond state regulatory

authority) is in error. This is further and explicitly illustrated

by this Court’s holding in Potowatomi.

In conformance with its prior decisions in Colville and Moe,

this Court held in Potowatomi that the Indian tribe’s sovereign

immunity did not prevent the State of Oklahoma from taxing

cigarette sales to non-Indians at the tribal store. Furthermore,

16

this Court reaffirmed the principle that the tribe has an obliga-

tion to assist in the collection of validly imposed state taxes on

such sales. 498 U.S. at 512. While this Court explicitly recog-

nized that Indian sovereign immunity could bar the State of

Oklahoma from pursuing a lawsuit directly against the tribe

for the tax imposed, it noted that there existed adequate alter-

nate remedies to the state. Among the remedies specifically

enumerated was the collection of the state tax from cigarette

wholesalers:

“There is no doubt that sovereign immunity bars the

State from pursuing the most efficient remedy, but we

are not persuaded that it lacks any adequate alterna-

tives. We have never held that individual agents or

officers of a tribe are not liable for damages in actions

brought by the State. See Ex parte Young, 209 U.S. 123

(1908). And under today’s decision, States may of

course collect the sales tax from cigarette wholesalers,

either by seizing unstamped cigarettes off the reserva-

tion, (Colville, supra, 447 U.S. at 161-162), or by

assessing wholesalers who supplied unstamped ciga-

rettes to the tribal stores, City Vending of Muskogee,

Inc. v. Oklahoma Tax Commission, 898 F.2d 122

(CAI0 1990)” (Emphasis added).

Potowatomi, 498 U.S. at 514.

This Court obviously recognized that vendors engaged in

trade with Indian tribes on reservations are not

automatically absolved or immune from complying with

duly promulgated state tax regulations intended to ensure

tax payment for sales made to non-Indians. In addition, the

State is empowered to use such traders to assure that the

proper taxes are, in fact, collected and remitted. The imposi-

17

tion of such a duty upon vendors trading with Indians is a

minimal burden permissible under the balancing of federal,

state, and Indian interests.

The Court of Appeals opinion improperly attempted to

distinguish Potowatomi on a ground neither considered nor

mentioned in any of this Court’s opinions. Specifically, the

Court of Appeals stated that the remedies listed in Pot-

owatomi “‘might somehow be used to retroactively collect

taxes unpaid on past sales” (All) but did not permit the

state to exercise prospective regulatory authority over In-

dian traders. This distinction does not appear in this Court’s

Potowatomi decision, and neither is it logical. Whether a

state possesses the right to place minimal burdens upon an

Indian trader will not be altered or influenced by the fact

that such burden is prospective or retroactive.

The Court of Appeals further ruled that even if minimal

burdens were permissible, the instant tax regulations impose

“significant’’ burdens which require their invalidation

(A11-A12). This point is clearly in error. In Colville, this

Court approved recordkeeping requirements which were

more pervasive and expansive than the burdens imposed

under the New York regulations.

18

Absent a reversal of the Court of Appeals order, the

avoidance of tax in contravention of principles of sound

public policy and federal law will continue and likely ex-

pand, both in New York State and nationwide. This should

not be permitted since, as this Court has stated:

“We do not believe that principles of federal Indian

law, whether stated in terms of pre-emption, tribal

self-government, or otherwise, authorize Indian

tribes thus to market an exemption from state taxa-

tion to persons who would normally do their busi-

ness elsewhere.”

Colville, 447 U.S. at 155.

19

Conclusion

For the reasons stated above, the Court of Appeals Order

of June 10, 1993 should be reversed and the validity of the

state's tax regulations be upheld.

Dated: Albany, New York

December 14, 1993

Respectfully submitted,

ROLAND, FOGEL, KOBLENZ & CARR

Attorneys for the Empire State

Petroleum Association, Inc. and the

Petroleum Marketers Association of

America, Inc.

One Columbia Place

Albany, NY 12207

(518) 434-8112

EMILIO A.F. PETROCCIONE

Counsel of Record

USHER FOGEL

Of Counsel