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

No. 93-377 DEC 15 1993

In The

Supreme Court Of The United States

October Term, 1993

4

DEPARTMENT OF TAXATION AND

FINANCE OF THE STATE OF NEW YORK, et al,

Petitioner

against

MILHELM ATTEA & BROS,., INC., et ail,

Respondent

~~~ —

On Writ Of Certiorari To The Court Of

Appeals Of The State Of New York

>

Amicus Curiae Brief Of The State Of Connecticut In

Support Of Petitioners New York Department Of Taxation

And Finance, Commissioner Of Taxation And Finance, And

Tax Appeals Tribunal Of The State Of New York.

@

RICHARD BLUMENTHAL

ATTORNEY GENERAL

OF CONNECTICUT

* DAVID H. WRINN

Assistant Attorney General

55 Elm Street

PO. Box 120

Hartford, CT 06141-0120

(203) 566-2090

*Counsel of Record

i

‘i

QUESTION PRESENTED

Whether, in order to prevent the avoidance of

tax by non-Indian purchasers of cigarettes from Indian

retailers, the State of New York may require the

retailers’ cigarette suppliers to comply with regulations

limiting the quanticy of tax exempt cigarettes which can

be purchased for resale at reservation outlets to an

amount no greater than the maximum legitimate Indian

consumption of the reservation, and imposing upon the

suppliers minimal burdens relating to record keeping

and reporting.

(1)

. Even lf ment Is Restricted To

TAS CP Ceaen I The Application Of The Federal

Page Indian Trader Statutes Within

Their Proper Sphere, The bony

TABLE OF AUTHORITIES .scsssssssssssssssssssssseseenee iv Score hoatyele Of The

INTEREST OF THE AMICUS CURIAE ,......cccccesseesees 2 Preemptive Effect . ad ae

0

INTRODUCTION & SUMMARY OF ARGUMENT... 3 Sleurette Soles To Now indians On

ABISURGENT .ccccccccsscescssevescusnssessannnenssnnnsniiniiisiaaiiiias 7 Indian Reservations, ........sssseesereeereeeees 17

I. Neither The Existence Nor The SURROGD DINGS _______......cssssssssnnsssnnssssssnssnsnsossososssoqsesssssocees 23

Administration Of The Indian CONCLUSION ToT TTT

Trader Statutes Preempts State

Jurisdiction Over Transactions

Involving Indians And Non-Indians

When Indian Country Or Federally

Supervised Reservations Are Not

FIRVOEVOG, casecsccesssssessesnenennesnnsssisinteinienaniaaaiaaias 7

A. A legal distinction exists

between Indian tribes

recognized by the Federal

Government and_ those

NOL SO TECOMMIZEM, ....sceeseseeseeesereeeeeseees 7

B. The Indian trader

Statutes apply exclusively

to licensing by the

Commissioner of Indian

Affairs within “Indian

country,’ or upon federal

"Tndian reservations,” ........seeseeees 10

C. Preemption analysis in

federal Indian law

necessitates

consideration of the

geographical factOr. ........ccscceeseeees 13

(ii) (inl)

ees

TABLE OF AUTHORITIES

CASES: Page

Catholic Missions v. Missoula County,

gE Ee eee 4n

Central Machinery Co. v. Arizona

Tax Commission, 448 U.S. 160 (1980) .ooccccccccccccce 11, 12

Confederated Tribes of Colville

v. Washington, 446 F.Supp. 1339

5 ER Enna a 21

Cotton Petroleum Corp. v. New Mexico,

ee m0

DeCoteau v. District County Court.

LR 0). ) aa ES 12, l2n

Donnelly v. United States,

Pk ee 12

LaPier v. McCormick. 986 F.2d

ss Ss eee 8. Sn, 15

McClanahan v. Arizona State

Tax Commission, 411 U.S. 164

_ A Ff © £ 19n, 20

Mescalero Apache Tribe v. Jones,

i | SER 1S, 15n, l6n, 19

Milhelm Attea & Bros.,

Inc. v. Department of Taxation

and Finance, 81 N.Y .2d 417, 615

| ___ RRTT e e 17, 17n, 18

Moe v. Confederated Salish

and Kootenai Tribes, 425 U.S.

ee iadattinienbiitiat 6, 14, 19, 20, 20n, 21n

Montana v. Blackfeet Tribe of Indians,

hb) |, lin

Morton v. Mancan,

pS RD lin, 13

Oklahoma Tax Commission v. Citizen

Band Potawatomi Indian Tribe of

Oklahoma, 498 U.S. 505 (1991) ......ccccccccseeeeeeeeeeeeees 17, 19

Oklahoma Tax Commission v. Sac

and Fox Nation, U.S. 113

| __ a nence O Sn, 13, 15n

Organized Village of Kake v. Egan,

ee ek Oe Oe itiittinteernterrnnnnnensesceinceenianel 4, 15, 15n

Ramah Navajo School Board of

New Mexico, Inc. v. Bureau Af

Revenue, 458 U.S. 832 (1982 )........-...c.c:ssesscesssessseesseeeneesneesneenes 20

Thomas v. Gay, 165 U.S. 264 (1898) .......cccccccceeeeeeeeeeeeees 4n

United States v. Antelope,

GBD UD, GO8 CODD ccccnccscscssesscsercescssnssscecscensscscssssnssnssenses 13

United States v. Celestine,

I yy ————————— 12

United States v. Cook, 922 F.2d

1026 (2d Cir.), cert. denied,

(ibis ® 0) a_i 8

United States v. Forty-eight Pounds

of Rising Star Tea, 38 F.400

EE ]3n

United States v. Heath,

Pe OE 8, 15

United States v. John, 437 U.S. 634 (1978). ...ccccccecceeeeeees 8n

(v)

' a

BF Tie © BUG ccccsesccstntenscnnegessornsncsensscsscemscsstonncseaniccsetuion 12

United States v. Martin, 9

RRR LEIS AAR H rae 12n ie Te as UF ITI sniicisenencdennsnnentacseciinnnrnniessdsiastniensensveappadiiidsmadenaith

United States v. McGowan, (LL! atl 5 nae 6, 10, 17

EE 12, 14

RS ok eee eee 11

United States v. Pelican, 1

8 ET a ere TTS 12 | PE oh

United States v. Porter, yk een 11

| ____—EE a R ee aNE ee a ee lon

RED ol Gy | Sy Ene 10

United States v. Sandoval, (

I UI ss ciiiniavricicrninnieonnieanlinn 8, 12, 15 25 U.S.C. § 1758 vesesssssseesseeseenserseensenneensennsennennsenses ”

Warren Trading Post v. i I Bi ii eistiicessitisteestssntinits 13n

Tax Commission, 380 U.S. 8

_ ERR eee 9n, 11, 18, 19n, 20, 20n CF te CIS GB vscictcscenestecnncnenctnsenssssanseansncereesmnenneceins 8, 8n

Washington v. Confederated ge 2 1 ARE Fess anew nn es ne ennE en sr aues 18

Tribes of the Colville 10

Indian Reservation, 447 U.S. 134 ee n

Sanat cinscecittetchitialacmentoaasilniiekteee 6, 19, 20, 21, 21n, 22, 22n

Conn. Gen. Stat. § 47-S9a(D)......cccccccceceeeeeneneenenenenanneens 10

White Mountain Apache 0

Tribe v. Bracker. 448 US. 136 Conn. Gen. Stat. § 47-G6N(D) .........ccceceeceeeseneteneneenenenens 10n

Sara ibisiinkdeacieeininicnnscciinbn Sn, 11, 13, 14, 19, 20, 20n

Conn. Gen. Stat. § 47-65 .............cscsrcerssseccsesersesersesssessesees 10

Williams v. Lee, 7

eee 9n, 11, 19n 20 N.Y.C.R.R. § 335.6(1)(2) ...esceccecseessessessnssneenessnenneeneennen

Worcester v. Georgia, 6 Pet. S15 (1832) coccccccccccccccsscceseese. 9n

OTHER AUTHORITIES

CONSTITUTION, STATUTES AND REGULATIONS Supreme Court Rule 37.5.............0.0.0csscsrerecsserssesssrsessesssese 2

U.S. Const. art. 1, § 8, C1. 3 ccccccssscssssssssssssseesesnssessesssese 3n $3 Fed. Reg. 52,829 (1988) ....csesssssseesssseesnssssennsssesnsee on

PY TT iieeeiaditiniehiiciadtaintihimiarcetieeminnisientinaasiata cc 3n F. Cohen, Handbook of Federal Indian Law,

yy l4n

oe eT 12

(vi) (vii)

| r

No. 93-377

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1993

DEPARTMENT OF TAXATION AND

FINANCE OF THE STATE OF NEW YORK, et ai.

Petitioner

against

MILHELM ATTEA & BROS., INC., et al.

Respondent

On Writ Of Certiorari To The Court Of

Appeals Of The State Of New York

Amicus Curiae Brief Of The State Of

Connecticut In Support Of Petitioners

New York Department Of Taxation And

Finance, Commissioner Of Taxation And

Finance, And Tax Appeals Tribunal Of

The State Of New York.

INTEREST OF THE AMICUS CURIAE

Amicus State of Connecticut by Richard

Blumenthal, its Attorney General, and pursuant to

Supreme Court Rule 37.5, as a state having within its

borders Indian tribes and reservation lands, has an

interest in the outcome of the legal issues presented by

Petitioners in seeking reversal of the decision of the

State of New York's Court of Appeals in this

proceeding. The State of Connecticut has by statute

recognized the existence of five Indian tribes. The

government of the United States has recognized only

one of them. The remaining four have not been

recognized by treaty, statute, or act of the executive

branch through the Department of the Interior's

Bureau of Indian Affairs.

The decision of this Court may directly affect

only the understanding of the reach of the federal

Indian trader statutes regarding state taxing authority

over Indian tribes with whom the federal government

has formal and explicit dealings. Because there are four

tribes which are not federally recognized — in

Connecticut, Connecticut asks this Court to clarify that

the federal Indian trader statutes and this Court's

decision in this case, do not apply to tribes without

federal recognition.

In addition, the regulatory issues arising from the

legal controversy presented by the Petitioners directly

affect the ability of states to ensure that tax exemptions

of whatever legal source that apply to federally

recognized Indian tribes are not applied beyond their

intended scope. Because of the importance of a state's

ability to regulate meaningfully in areas which the

federal government has not chosen to preempt, the

State of Connecticut supports the general view of other

amici states that the decision below must be reversed.

“TION AND SUMMARY OF ARGUMENT

A. Introduction:

The relation of state jurisdiction to the plenary

power of the Congress to legislate on behalf of those

tribes of Indians with which it has entered into a trust

relationship, and to the Indian tribes themselves and

their lands, is a complex legal inquiry.

The Indian nations for the most part once

resided somewhere beyond the farthest reaches of

settlement at the time when Congress first enacted a

series of trade and intercourse acts in furtherance of its

constitutional prerogatives. '/ The once clear lines

demarcating notions of virtually absolute Indian

sovereignty with respect to the jurisdiction of the several

states have evolved over time and in response to

specific circumstances. As Justice Frankfurter wrote in

1/ U.S. Const. art. 1, § 8, cl. 3, authorizes Congress "to regulate

Commerce with foreign Nations, and among the several

States, and with the Indian tribes.” The first trade and

intercourse act passed by the Congress was that of July 22,

1790. 1 Stat. 137.

the case Organized Village of Kake v. Egan,”/ "[t}he

relation between the Indians and the States has by no

means remained constant since the days of John

Marshall.”

One of the changed circumstances, in the

modern era, as newly-founded states surrounded the

Indian country, has been the increased frequency of

contacts between Indians and non-Indians, and the

concomitant legitimacy of state interests in regulating

the affairs of non-Indians in those contacts. And in

respect to such regulation, the taxing power of the State

has-very-often-been the agency of control. Nearly a

century ago, the ability of a territorial government to tax

the personalty of non-Indians within Indian country was

tested in this Court.*/ The analysis of the issue at that

time centered upon whether the assertion of state

jurisdiction was so proximate and direct as to be in

effect the equivalent of a levy upon either the lands or

privileges of the Indians themselves. The modern cases

turn upon principles of federal preemption especially

2/ 369 U.S. 61, 71 (1962).

3/ Thomas v. Gay, 165 U.S. 264 (1898) (tax on personalty

imposed by territorial government of Oklahoma upon cattle

which were grazed by non-Indians on the Osage Indian

reservation); see also Catholic Missions v. Missoula County,

200 U.S. 118 (1906) (tax liability of personalty of non-Indian

missionaries on reservation lands).

adapted to federal Indian law,*/ but continue to address

the same core issue respecting the extent and not

whether state jurisdiction may extend to matters

involving the on-reservation activities of non-Indians.

Finally, it cannot be emphasized too strongly that

the context in which federal preemptive principles

operate in this area is solely in respect to those Indian

tribes for which the federal government affirmatively

has chosen to exercise its plenary constitutional

authority. Federal recognition of Indian tribes and the

government-to-government relationship arising

therefrom is the backdrop against which the prior taxing

cases of this Court have been decided.*/ The instant

case is important because it tests the allowable extent of

the state taxing authority over certain activities of

Indian traders and non-Indians. The question whether

and to what extent that authority may reach tribal

entities having a relationship with the state but not with

the federal government is a collateral issue in this case,

but one of signal importance to states like Connecticut,

4/ White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 143

(1980) ("The unique historical origins of tribal sovereignty

make it generally unhelpful to apply to federal enactments

regulating Indian tribes those standards of preemption that

have emerged in other areas of the law.”)

5/ Most of those cases involved state efforts to tax Indians on

tribal reservations. See McClanahan v. Anzona State Tax

Commission, 411 U.S. 164, 165 n.1 (1973); see also

Oklahoma Tax Commission v. Sac and Fox Nation, __ US.

__, 113 S.Ct. 1985 (1993).

which hosts both tribal categories, federally recognized

and not, within its borders.

B. Summary of Argument:

l. Indian trader statutes are restricted to

activities conducted by Indian traders with the

permission of the federal government within Indian

country upon reservations created by treaty or some

other expression of the federal government such as

Statute or executive order. Accordingly, state cigarette

sales regulation outside of Indian country or in relation

to Indians otherwise unrecognized by the federal

government is presumptively valid.

2. The general preemptive effect of the

Indian trader statutes, 25 U.S.C. § 261 et seq., is not

controlling in the specific area of state cigarette tax

regulation of on-reservation sales. Washington v.

Confederated Tribes of the Colville Indian Reservation,

447 U.S. 134 (1980); Moe v. Confederated Salish and

Kootenai Tribes, 425 U.S. 463 (1976).

3. Other precedent of this Court in the tax

field confirms that a particularized examination of

relevant state, tribal and federal interests must be

undertaken prior to making any determination of the

preemptive effect of the Indian Trader statutes upon

State on-reservation cigarette sales tax regulation.

ARGUMENT

I. Neither The Existence Nor The

Administration Of The Indian Trader

Statutes Preempts State Jurisdiction

Over Transactions Involving Indians And

Non-Indians When Indian Country Or

Federally Supervised Reservations Are

Not Involved.

A. A legal distinction exists

between Indian tribes

recognized by the Federal

Government and those not

so recognized.

The instant case is presented in a fashion which

presumes that the tax regulations of New York's

Department of Taxation and Finance impinge upon

federal prerogatives with respect to relations with all

the Indian tribes in New York; hence, the focus in the

case throughout has been upon federal preemption

generally and the operation of the Indian trader statutes

in particular. Indeed, the regulations at issue embrace

all nine tribal groups extant in New York. See 20

N.Y.C.R.R. § 335.6(b)(2); Pet. App. at A63.°/

Two of these New York tribes are not federally

recognized. That is, there exists no acknowledgment by

6/ "(2) Exempt Indian nation or tribe tor the purpose of this

section means one of the following New York State Indian

nations or tribes: Cayuga, Oneida Indian Nation, Onondage

Nation of Indians, Poospatuck, St. Regis Mohawk, Seneca

Nation of Indians, Shinnecock, Tonawanda Band of Senecas

and Tuscarora Nation of Indians.”

the federal government of any special relationship

Wf Such a

between it and the tribes in question.

determination is, in the ordinary course, made by the

executive branch of the government, and specifically by

the Bureau of Indian Affairs within the Department of

Interior. See 25 C.F.R. Part 83; see also United States v.

Sandoval, 231 U.S. 28, 46-47 (1913): La Pier, 986 F.2d at

305; United States v. Cook, 922 F.2d 1026, 1031

(2d Cir.), cert. denied, 111 S.Ct. 2235 (1991). This

distinction is of no immediate consequence if this Court

concludes that the New York regulations do not

impinge upon an area where federal interests and

legislation leave no room for assertions of any state

jurisdiction. Clearly, if these regulations pose no

significant regulatory burden upon Respondents as

federally licensed Indian traders in their dealings with

and on any federally recognized Indian reservation or

lands, they pose no burden at all from the standpoint of

preemption analysis in dealing with Indians or with

reservations not subject to federal supervision. Cf.

LaPier, 986 F.2d at 305-306, quoting United States v.

Heath, 509 F.2d 16, 19 (9th Cir. 1974) (member of tribe

unrecognized by federal government is outside federal

1/ The two tribes, the Poospatuck and Shinnecock, are not on

the comprehensive list of Indian tribes prepared by the

federal Bureau of Indian Affairs and published most

recently in 1988 at 53 Fed. Reg. 52,829 (1988) and updated.

25 C.F.R. Part 83. See LaPier v. McCormick, 986 F.2d 303,

305 (9th Cir. 1993); see generally United States v. John, 437

U.S. 634 (1978).

criminal jurisdiction in Indian Country, 18 U.S.C.

§ 1153, just as member of “terminated tribe” no longer

considered an “Indian” for the purposes of the exercise

of federal criminal jurisdiction). But if this Court

determines that the Court of Appeals is correct in its

reading of the preemptive effect of the Indian trader

Statues, then the result should be limited to those

geographical areas where Indian traders carry out their

licensed activities, that is, in “Indian country.” Either

outcome needs clarification concerning the relevance of

federal recognition to the present controversy.

Connecticut is sensitive to the reach of the term

, f

” . ” y ” : : oe,

Indian country” or references to “reservation Indians,

8/ The Court in McClanahan stated that its use of the term

“reservation Indians,” see Williams v. Lee, 358 U.S. 217, 220,

(1959), was in recognition of the fact that, although the

Congress most often legislates on Indian matters dealing

with Indian tribes as “collective entities,” these entitics were

comprised of individuals, and that such legislation confers

rights upon individuals. McClanahan, 411 U.S. 164 at 181.

Thus, the (..m “reservation Indians” as employed in this and

other decisions of this Court, see e.g. Warren Trading Post v.

Tax Commission, 380 U.S. 685, 691-92 (1965), is firmly

within the ambit of federal and not state Indian laws. In

Williams, the term “reservation Indians” is discussed with

reference to Chief Justice Marshall's opinion in Worcester v.

Georgia, © Pet. SIS (1832), in which he described Indian

nations as “distinct political communitics, having territorial

boundaries, .. which is not only acknowledged, but

guaranticd by the United States.” Worcester, 6 Pet. SIS at

S57. Therefore, Indians residing upon reservations not

supervised by the United States are not. “reservation

Indians” as that term has been utilized in the decisions of

this Court.

10

because only one of five indigenous Connecticut tribes

has been recognized by the federal government. See 25

U.S.C. §§ 1751-1760 (Mashantucket Pequot Indian

Land Claims Settlement) and § 1758 (extension of

federal recognition); Conn. Gen. Stat § 47-59a(b). The

remaining four tribal groups are “state-recognized”

only,” and three of them have reservation lands

identified by state statute. Conn. Gen. Stat. § 47-63.

In applying these principles, Connecticut must

distinguish between the effect of its revenue laws !”/

upon tribal groups recognized and not recognized by the

federal government. Only in the former case would

preemption analysis be available, and not in the latter.

B. The Indian trader statutes

apply exclusively to licensing

the Commissioner of

Indian Affairs within “Indian

country,” or upon federal

"Indian reservations.”

The Indian trader statutes, 25 U.S.C. § 261 ef

seq., assign to the federal Commissioner of Indian

Affairs "the sole power and authority to appoint traders

to the Indian tribes ....". 25 U.S.C. § 261. Permission

from the commissioner is required of anyone “desiring

9/ Section 47-66h(b) of Connecticut's General Statutes states

that nothing in the state law chapter dealing with Indians

"shall be construed to confer tribal status under federal law

on the indigenous tribes named in section 47-59%a ....”

10/ Connecticut revenue laws include the regulation of cigarette

sales. See Conn. Gen. Stat. § 12-285 et seq.

to trade with the Indians on any Indian reservation ....”

25 U.S.C. § 262; see Williams v. Lee, 358 U.S. 217 at 218.

The President of the United States is authorized to

proscribe trade or the introduction of goods “into the

country belonging to any Indian tribe ...." 25 U.S.C.

§ 263. Trading without a license by any non-Indian

residing “in the Indian country, or on any Indian

reservation as a trader ...” is subject to the assessment of

a penalty. 25 U.S.C. § 264; see Central Machinery Co. v.

Anzona Tax Commission, 448 U.S. 160, 163 (1980);

White Mountain Apache, 448 U.S. 136 at 152; Warren

Trading Post, 380 U.S. 685 at 688-90. The close

regulation of Indian trading is designed by the federal

government to be protective of the Indians. 25 U.S.C.

§ 262; Central Machinery, 448 U.S. at 165; Warren

Trading Post, 380 U.S. at 691. Protection was afforded

by limiting the contacts of non-Indians with the tribes,

something only possible when the federal government

had undertaken supervision of the lands upon which the

Indians were located.

The term “reservation” in the Indian trader

Statutes refers to Indian reservations belonging to

federally recognized tribes enjoying the special status

11/

afforded them under federal law In Central

11/ See Morton v. Mancan, 417 US. 535, SS1 (1974), speaking of

“the unique legal status of Indian tribes under federal laws

and upon the plenary power of Congress, based on a history

(footnote cont d)

12

Machinery, this Court began its discussion by noting that

the Gila River Farms Indian Tribe “is federally

recognized and is governed by a constitution adopted

pursuant to the Indian Reorganization Act [and] ...

conducts farming operations on tribal and individual

trust land within the Gila River Reservation, which was

established in Arizona by the Act of Feb. 28, 1859, ch.

66, 11 Stat. 333, 401." Central Machinery, 448 U.S. at

161.

Although historically an Indian “reservation”

might not have been synonymous with the term Indian

country as employed in the earliest pronouncements of

the Congress, United States v. Celestine, 215 U.S. 278,

284-87 (1909), nevertheless, the present statutory

definition of Indian country, 18 U.S.C. § 1151,'7/is

inclusive. DeCoteau, 42 U.S. 425 at 427; see also United

States v. McGowan, 302 U.S. 535, 538-39 (1938); United

States v. Pelican, 232 U.S. 442, 449 (1914); United States

v. Sandoval, 231 U.S. 28 at 37, 37n. and 46; Donnelly v.

(footnote cont'd from previous page)

of treaties and the assumption of a ‘guardian-ward’ status,

to legislate on behalf of federally recognized Indian tribes.”

See also Montana v. Blackfeet Tribe of Indians, 471 U.S. 759,

764-65 (1985).

12/ The statute defines the federal government's criminal

jurisdiction over Indians. The decisional law has made the

definition applicable to discussions of the reach of state civil

jurisdiction over federally recognized Indian reservations.

DeCoteau v. District County Court, 420 U.S. 425, 427 n.2

(1975).

13

United States, 228 U.S. 243, 269 (1913).'°/ This Court

has continued to construe that definition broadly.

Oklahoma Tax Commission, 113 S.Ct. at 1991.

Therefore, the terms "reservation" and "Indian country”

are bound up with each other and with the Indian trader

Statutes in a context that is exclusively federal in

character. I4/

C, Preemption analysis in

federal Indian law

necessitates consideration

of the geographical factor.

Federal Indian law is largely territorial in nature.

Thus, the discussion of state, tribal and federal interests

in the context of state assertions of authority has always

considered the geographical nexus posed by the

existence of terms like “Indian country,” since these

terms arise exclusively out of Congress’ plenary power

to regulate affairs with Indian tribes and the tribes’

Status as a “separate people with their own political

institutions.” See Morton v. Mancari, 417 U.S. 535;

United States v. Antelope, 430 U.S. 641, 646 (1977). In

13/ Of. United States v. Martin, 14 F. 817, 822-23 (1883) ("Ever

since the phrase “Indian Country” found its way into the

federal legislation, it has been used to signify not only a

place or tract of country actually occupied by Indians, but

also a tract so occupied by the, and set apart or designated

as exclusively for their use, under and by the authority of the

United States.”)

14/ See e.g. United States v. Forty-eight Pounds of Rising Star

Tea, 38 F. 400, 401 (C-C_N_D. Cal. 1889), construing RS.

§ 2133 (25 U.S.C. § 264).

14

White Mountain Apache, this Court has remarked that

"there is a significant geographical component to tribal

sovereignty, a component which remains highly relevant

to the preemption inquiry; though the reservation

boundary is not absolute, it remains an important factor

to weigh in determining whether state authority has

exceeded the permissible limits.” White Mountain

Apache, 448 U.S. 136 at 151 and at 143, citing Moe, 425

U.S. 463 at 475. This factor, as well as canons of

construction unique to preemption analysis and

favorable to the tribes, see McClanahan v. Arizona State

Tax Commission, 411 U.S. 164 at 174-75, relate solely to

the assertion of jurisdiction by a state on the one hand,

and federally recognized tribes and the federal

government on the other. In cases where no similar

conflict arises the geographical factor is not a bar to

state jurisdiction. See McGowan, 302 U.S. 535 at

§39,!/

Different considerations apply to tribal groups

outside the recognition of the federal government and,

hence, outside Indian country by definition, or outside

the scope of the term “reservation Indians,” in the usage

of this Court. These entities are fully within state

1S/ "The mere fact that the locus of an event is on an Indian

reservation docs not prevent the exercise of state

jurisdiction where the parties involved are not Indians and

the subject matter of the transaction is not of federal

concern.” F. Cohen, Handbook of Federal Indian Law, 121

(ist ed. 1942).

1S

jurisdiction, notwithstanding the fact that their members

may be Indians in an anthropological or ethnohistorical

sense. LaPier, 986 F.2d 303 at 306; Heath, 509 F.2d 16

at 19; see also Sandoval, 231 U.S. 28. Similarly, the

activities of non-reservation Indians or those not

dwelling in Indian country have been held by this Court

to fall within state jurisdiction. Organized Village of

Kake v. Egan, 369 U.S. 60 at 62.'°/ Also, the activities

of reservation Indians outside of Indian country are

largely within the jurisdiction of the states. Mescalero

Apache Tribe v. Jones, 411 U.S. 145, 148 (1973): Kake.

369 U.S. 60 at 75,17/

16/ See Oklahoma Tax Commission, 113 S.Ct. at 1992

(McClanahan presumption against state taxing authority

applics to all Indian country, and not just’ formal

reservations.”) This Court in McClanahan described this

situation - “the extent of federal pre-emption and residual

Indian sovereignty in the total absence of federal treaty

obligations or legislation” - as “something of a moot

question,” “since in almost all cases federal treaties and

statutes define the boundaries of federal and state

jurisdiction.” McClanahan, 411 U.S. 164 at 172 n&. The

question may be moot when viewed from the federal

perspective, but it is otherwise from the state perspective,

when formalized dealings exist or are possible with tribal

groups and their lands which are altogether outside the

federal sphere.

17/ “State authority over Indians is yet more extensive over

activities ... not on any reservation.” Kake, 369 US. at 75.

In Mescalero Apache, this Court stated that “Jalbsent

express federal law to the contrary, Indians going beyond

reservation boundarics have generally been held subject to

(footnote cont d)

16

Accordingly, since any preemption challenge to

New York's cigarette law regulations implicating the

Indian trader statutes must be limited to Indian country,

or, reservation Indians officially under the supervision

of the federal government, the validity of those

regulations vis-a-vis any non-recognized tribal groups or

reservation lands remains unaffected and presumptively

assured. The ability of such states as Connecticut,

therefore, to control the commercial activities of

non-Indians on the reservation lands of state

acknowledged tribes is a fortiori not subject to

preemption by the Indian trader statutes.

(footnote cont'd from previous page)

non-discriminatory state law otherwise applicable to all

citizens of the State.” 411 U.S. at 148-49 and cases cited.

Importantly, the Court in Mescalero Apache stated that this

principle was “as relevant to a State's tax laws as It Is to Its

criminal laws ....". /d. at 149. In Mescalero Apache this

Court upheld New Mexico's nondiscriminatory gross

receipts tax as applied to an off-reservation ski resort

operated by the Mescalero Apache Tribe. See also United

States v. Porter, 22 F.2d 365 (1927) (personalty owned by an

Indian and held outside the reservation subject to taxation

by the state).

17

Il. Even If Argument Is Restricted To The

Application Of The Federal Indian

Trader Statutes Within Their Proper

Sphere, The Court Of Appeal’s Decision

Is Flawed By A Superficial Analysis Of

The Preemptive Effect Of Those Statutes

Upon State Regulation Of Cigarette Sales

To Non-Indians On Indian Reservations.

The Court of Appeals conducted a preemption

analysis of the validity of the New York cigarette tax

regulations in relation to the existence of the federal

Indian trader statutes, 25 U.S.C. § 261 et seq., following

this Court's remand of this case to New York's

Appellate Division “for further consideration in light of

Oklahoma Tax Commission v. Citizen Band Potawatomi

Indian Tribe of Oklahoma, 498 U.S. [505, 111 S.Ct. 905,

112 L.Ed.2d 1112)" Milhelm Attea & Bros., Inc. v.

Department of Taxation and Finance, 81 N.Y .2d 417, 599

N.Y.S.2d 510, 615 N.E.2d 994, 996 (1993). The

resulting decision misapplies Potawatomi and reads

overbroadly the preemptive effect of the Indian trader

Statutes upon the particular object and means of

regulation at issue.

The plaintiffs in the Attea case argued that New

York's cigarette tax regulations / as applied to them

were invalid, because they impinged upon an area of the

law relegated solely to regulation by the government of

1X/ The mechanics of New York's regulations were summarized

by the Court of Appeals in Section I of its opinion. Attea &

Bros., 8) N.Y.2d 417, 615 N.E.2d 994 at 995-96.

18

the United States. For this proposition they raised the

federal Indian trader statutes as a bar to state

regulation of their cigarette sales on New York's Indian

reservations. Significantly, the regulations at issue

would not have affected sales by wholesalers of

unstamped cigarettes to Indians for consumption by

Indians on their reservations. They were designed to —

effect collection of the excise tax from wholesalers for

cigarettes sold on the reservations to non-Indians.

Nevertheless, the Court of Appeals agreed that the

Indian trader statutes acted as an absolute bar to New

York's attempt to prevent the circumvention of the tax

by non-Indians who made cigarette purchases from

retail outlets located on the reservations.

The Court of Appeals cited this Court's decision

in Warren Trading Post v. Tax Commission, 380 U.S. 685,

as support for its conclusion that the Indian trader

statutes and regulations of the Commissioner of Indian

Affairs duly promulgated thereunder, 25 C.F.R. § 140,

were, in the words of the Warren Trading Post court,

“all-inclusive” and provided “no room" for the

imposition of additional burdens upon such traders by

state laws. Attea & Bros., 615 N.E.2d 994 at 996, quoting

Warren Trading Post, 380 U.S. 685 at 690.

The State of Connecticut agrees with the

Petitioners that the Court of Appeals has interpreted

overbroadly the preemptive effect of the Indian trader

statutes as articulated in Warren Trading Post. The

position that the New York court has taken assumes

19

that Indian traders are entirely exempt from state

revenue regulation. Not only is that position

considerably undercut by the decisions in Potawatomi.

Washington vy. Confederated Tribes o f Colville

Reservation, 447 US. 134 ( 1980), and Moe vy.

Confederated Salish and Kootenai Tribes, 425 U.S. 463

(1976), for the reasons which the Petitioners have

advanced, see Petition for Writ of Certiorari, No.

93-377, at 14-20, but it also does not heed the sound

counsel of this Court that in the area of state revenue

laws and federal Indian tribes "[g]eneralizations on this

subject have become particularly treacherous.”

Mescalero Apache Tribe v. Jones, 411 U.S. 145 at 147.

This Court has stated that preemption analysis in the

context of legislation affecting federally recognized

Indian tribes of its nature has to take into account the

‘Tespective rights of States, Indians, and the Federal

Government.” /d. at 148; see also White Mountain

Apache Tribe v. Bracker, 448 U.S. 136 at 141-143 and

cases cited therein.!”/

19/ . . .

This means that the assertion of a state regulatory interest

within reservation boundaries is not in and of itself flatly

interdicted, id. at 141 and n.9, and is, further, subject to "no

rigid rule by which to resolve the question whether a

particular state law may be applicd to an Indian reservation

or to tribal members.” /d. at 142. On the contrary, such

assertions are measured against’ theories of federal

preemption or infringement of the rights of reservation

Indians to self-rule. /d., citing Warren Trading Post, 380

U.S. O85 and McClanahan, 411 US. 164 (1973), and

Williams, 358 U.S. 217 (1959). )

20

When the state's regulatory interest involves the

on-reservation conduct of Indians, this Court has held

state revenue regulation to be preempted. E.g.

McClanahan, 411 U.S. 164. But when the conduct of

non-Indians has been at issue, the analysis has turned

upon the competing interests noted above. Cotton

Petroleum Corp. v. New Mexico, 490 U.S. 163, 176

(1989); Ramah Navajo School Board of New Mexico,

Inc. v. Bureau of Revenue, 458 U.S. 832, 838 (1982);

White Mountain Apache, 448 U.S. 136 at 145.2” Thus,

while a state levy on gross proceeds of sale or gross

income was held in Warren Trading Post to have

infringed upon the federal government's comprehensive

regulation of commerce with reservation Indians as

applied to a licensed non-Indian trader doing business

on a federal reservation, a state sales tax upon

non-Indian on-reservation purchasers of cigarettes did

not so infringe, even when the state regulatory scheme

required an Indian retailer to collect the tax. Moe, 425

U.S. 463 at 482-83; Washington v. Confederated Tribes of

Colville, 447 US. 134 at 150-62.2!/ In making. its

20/ This Court, in setting out the framework of analysis on this

point in White Mountain Apache, specifically compared the

results obtaining in Warren Trading Post with Moe. White

Mountain Apache, 448 U.S. 136 at 145.

21/ The legitimate state interest in preventing the avoidance of

the sales tax posed only a minimal burden upon the Indian

traders in Moe, and Warren Trading Post was distinguished

(footnote cont'd)

ee

21

preemption analysis, this Court in Colville took into

account the potentially competing regulatory scheme of

the Indian trader statutes and concluded that these

sought “to regulate businesses selling goods to reservation

Indians for cash or exchange ... but no similar intent is

evident with respect to sales by Indians to nonmembers

of the Tribe.” id. at 155-56 (emphasis added). Thus, any

distinction raised by the Court of Appeals between

Indian trader wholesalers and Indian retailers collapses,

especially in light of the fact, as Petitioners point out,

that the Indian retailers in Colville were federally

licensed Indian traders. Confederated Tribes of Colville

v. Washington, 446 F.Supp. 1339, 1347 (E.D. Wash.

1978).

Apart from its analysis of the Indian trader

statutes, on no other federal preemptive ground did this

Court in Colville find the state tax interest inapplicable

ee aie —

to the cigarette sales in question. / Furthermore this

(footnote cont'd from previous page)

on this point. Moe, 447 U.S. 463 at 482-83. The State of

Washington's amicus bricf aptly discusses how regulations

such as New York's represent a considered policy choice to

avoid collection mechanisms which gencrate friction in

State-tribal relations by focusing upon suppliers, who are

further up the distribution chain from the Indian setallore

and on activities which are off the reservations. -

”

«e Colville, 447 US. 134 at 155-56 and 157. This Court

determined that the state specifically was not infringing

(footnote cont'd)

22

Court stated in Colville that state seizures of cigarette

shipments in-route to the reservation were a proper

response to the non-collection of the tax from sales to

nonmembers on the reservation notwithstanding the

fact that the sales were exempt from the tax in question

while in transit. Colville, 447 U.S. at 161-62. If the

Indian trader wholesalers may legitimately be subjected

to such remedies, then the regulatory scheme under

which this recourse may be taken has not been

summarily preempted by federal law. Accordingly, it is

not sufficient, as the Court of Appeals has done, to

interpose the Indian trader statutes between the New

York regulations and their objective without further

analysis.

(footnote cont'd from previous page)

upon Indian self-rule: "While the tribes do have an interest

in raising revenues for essential governmental programs,

that interest is strongest when the revenues are derived

from value generated on the reservation by activities

involving the Tribes and when the taxpayer is the recipient

of tribal services. The State also has a_ legitimate

governmental interest in raising revenues, and that interest

is likewise strongest when the tax is directed at

off-reservation value and when the taxpayer is the recipient

of state services.” /d. at 156-57. What was at stake with

respect to cigarette sales to nonmembers of the tribes was

the marketability vel non of the tribe's own tax exemption to

nonmembers. As Petitioners justly emphasize, Petition for

Writ of Certiorari at 17, this Court remarked broadly that

no principles of federal Indian law made marketable such

an exemption “to persons who would normally do their

business elsewhere.” Colville, 447 U.S. 134 at 155.

i ll et ly ll ages,

CONCLUSION

The judgment of the New York Court of Appeals

should be reversed.

Dated this 14th day of December. 1993, at

Hartford, Connecticut.

* Counsel of Record

RICHARD BLUMENTHAL

ATTORNEY GENERAL

OF CONNECTICUT

David H. Wrinn

Assistant Attorney General

Office of the Attorney General

55 Elm Street

P.O. Box 120

Hartford, CT 06141-0120

(203) 566-2090