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

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No. 93-377

i No 2

wl es

IN THE

Supreme Court of the Wuited States fe

OCTOBER TERM, 1993

DEPARTMENT OF TAXATION AND FINANCE OF THE

STATE OF NEw York, et al.,

. Petitioners,

MILHELM ATTEA & Bros., INC..,

Respondent.

JAMES W. WETZLER, COMMISSIONER OF

TAXATION AND FINANCE, et ai.,

7 Petitioners,

EviAs H. ATTBA, Jr.,

Respondent.

On Writ of Certiorari to the Court of Appeals

of the State of New York

BRIEF OF THE NATIONAL GOVERNORS’

ASSOCIATION, NATIONAL LEAGUE OF CITIES,

U.S. CONFERENCE OF MAYORS, NATIONAL

ASSOCIATION OF COUNTIES, INTERNATIONAL

CITY/COUNTY MANAGEMENT ASSOCIATION, AND

COUNCIL OF STATE GOVERNMENTS

AS AMICI CURIAE IN SUPPORT OF PETITIONERS

RICHARD RUDA *

Chief Counsel

JAMES I. CROWLEY

STATE AND LOCAL LEGAL CENTER

444 North Capitol Street, N.W.

Suite 345

Washington, D.C. 20001

(202) 434-4850

* Counsel of Record for the

Amici Curiae

WILSON - Eres PRINTING Co Inc 784-0096 - WasrinGTon. D.C. 20001

’

QUESTION PRESENTED

Whether the Indian trader statutes, 25 U.S.C. §$§ 261-

64, prohibit New York from engaging in reasonable regu-

lation of cigarette wholesalers to prevent widespread tax

evasion by non-Indians.

TABLE OF CONTENTS

QUESTION PRESENTED. |

TABLE OF AUTHORITIES. sas

SUMMARY OF ARGUMENT

Il.

THE INDIAN TRADER STATUTES DO NOT

EVIDENCE A CONGRESSIONAL PURPOSE

TO PROHIBIT THE STATES FROM EN-

GAGING IN REASONABLE REGULATION

OF INDIAN WHOLESALERS TO PREVENT

TAX EVASION BY NON-INDIANS

A. Moe And Colville Establish The Validity Of

New York’s Scheme. “HP Re SAS a

B. New York’s Scheme Does Not Conflict With

The Indian Trader Statutes nt wea

1. New York’s Scheme Does Not Impinge on

the Commissioner’s Authority Under the

Indian Trader Statutes

Congress Did Not Contemplate that the

Indian Trader Statutes Would Pre-empt

State Efforts to Prevent Tax Evasion

3. Requiring Wholesalers to Collect Tax Due

on Cigarettes Which Wil] Ultimately be

Borne By Non-Indians Does Not Place an

Impermissible Burden on Either Whole-

salers or Retailers and Does Not Frus-

trate the Statutory Purpose

(iii)

TABLE OF CONTENTS—Continued

| age

4. Decisions Subsequent to Warren Trading

Post Demonstrate that the Indian Trader

Statutes Do Not Foreclose All State Reg-

ulation of Traders... 27

TABLE OF AUTHORITIES

Cases Page

Central Machinery Co. v. Arizona Tax Comm’ n,

gS eee a ee passim

Dows v. City of Chicago, 78 U.S. (11 Wall.) 108

(1870) _ SO RA Ae ae RRR 0, A x

Draper v. United States, 164 U.S. 240 (1896). 21

Fair Assessment in Real Estate Ass’n v. McNary,

3 ae ee 8,9

First Nat’l Bank v. Board of Comm'rs, 264 U.S. 450

RR ER NEE eee IRR: a i sehain hs 9

Great Lakes Dredge & Dock Co. v. Huffman, 319

SERENE ie Sea a 8-9

Gregory v. Ashcroft, 111 S.Ct. 2395 (1991) 9, 11, 13, 23

Herzog Bros. Trucking, Inc. v. State Tax Comm’ n,

aPC voces 11

Lane County v. Oregon, 74 U.S. (7 Wall.) 71

RE ed SIRs eee & Oa A Fa oe 20

Mathews v. Rodgers, 284 U.S. 521 (1932) 9

McClanahan v. Arizona Tax Comm’n, 411 U.S. 164

Sen cre Te eae: Te a 10

McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316

enhassurirdscissne ce x

Mescalero Apache Tribe 1 v. Jones, 411 US. “145

(1973) .......... seutoubinenntntibbnatesiedhinibeaedniaannidecthoak 12

Moe v. Confederated Salish & Kootenai Tribes, 425

U.S. 463 (1976) _ saetunbieaniedabidbbudiion Resaee tein to passim

Montana v. United States, 450 US. 544 (1981) 21, 22

Oklahoma Tax Comm’n v. Potawatomi Indian

Tribe, 111 S.Ct. 905 (1991) | ts 15

Oliphant v. Suquamish Indian Tribes, 135 ) Uv. Ss. 191

(1978) 6, 13, 21, 23

Providence Bank v. Billings, 29 U.S. (4 Pet.) 514

FSA aL Nee . 8

Ramah Navajo School Ba. v. Bureau of Rev., “458

U.S. 832 (1982) . 4,9, 10,12

Snyder v. Wetzler, 1993 N.Y. App. Div. LEXIS

10523 (Nov. 10, 1993) RS

Rice v. Rehner, 463 U.S. 713 (1983) passim

Thomas «. Gay, 169 U.S. 264 (1898) 12

United States v. Bass, 401 U.S. 336 (1971) i 11

TABLE OF AUTHORITIES—Continued

Page

United States v. California, 113 S. Ct. 1784

(1993) . = a *

United States v. La France. 289 U, Ss. 568 (1931) 20

United States v. McGowan, 302 U.S. 535 (1938) _ 4,12

Warren Treding Post Co. v. Arizona Tax Comm'n,

gg OM eee eee ees passim

Washington v. Confederated Tribes of Colville In-

dian Reservation, 447 U.S. 134 (1980) passim

White Mountain Apache Tribe v. Bracker 448

U.S. 136 (1980) 1,9

Wilson v. Omaha Indian Tribe, 442 US. 653

(1979) ........ PR a AT ON Re aE Ne 6, 13, 21, 23

Treaties

Treaty With The Camanches And Kioways, Oct. 18,

1865, 14 Stat. 717. | ete " 22

Treaty With The Cherokee Indians, July 19, 1866,

14 Stat. 799 . 22

Treaty With The Cheye ennes s And Arr apahoes, Oct.

14, 1865, 14 Stat. 703... 22

Treaty With The Choctaws And Chickasaws, Apr.

28, 1866, 14 Stat. 769 22

Treaty With The Crow Indians, May 7, 1868, 15

Stat. 649 =e 6, 22

Treaty With The Lower Brule Rand, Oct. 1, 1865, 5,

NIE rer cena eee eae 22

Treaty With The Navajo Indians, June 1, 1868, 15

I lab cciciastesidets nies 22-2

Treaty With The Omaha Indians, Mar. 6, 1865, 14

re i ea ea. Din | 22

Treaty With The Shoshonees And Bannacks, July 3,

1868, 15 Stat. 673 23

Treaty With The Sioux Indians, “Apr. 29 _ 1868, 15

1 Fae 22

Treaty With The Ute Indians, Mar. 2, 1868, 15

Stat. 619 22

Statutes

Act of Aug. 15, 1953, ch. 506, 67 Stat. 590 23

Act of June 30, 1834, ch. 161, 4 Stat. 729 6, 23

vii

TABLE OF AUTHORITIES—Continued

Page

Act of Apr. 18, 1796,Ch.13,1Stat.452 =. 23

Act of July 22, 1790, Ch. 33,1 Stat.187. 17

De By vic cececvcncrcccrsceeccessncnncesosenasecee —— 11

4USBL. § 106-11................... Ba LRA me ARORA a = 11

a Es a 2, 3, 9, 17

I 2) passim

nS lane ee

TE RS Tae es. =F an Oe — )

Sa SIRES Sa Se eet ee ere es 5,18

28 U.S.C. § 1341... ROO Eta ee 11

N.Y. Tax Law § 471(2)... osiieilctnantinbccatadenta sae

N.Y. Tax Law § 471(3)....... tit c ee

N.Y. Tax Law § 474(4) eee Ee cdacieoiommial 3, 7, 16

Regulations

25 C.F.R. § 140,22 = .-. 19-20

N.Y. Comp. Codes R. & Regs. tit. 20,§ 335.6 3, 16

N.Y. Comp. Codes R. & Regs. tit. 20, § 335.6(d) 3, 16

N.Y. Comp. Codes R. & Regs. tit. 20, § 335.6(¢) 3, 16, 26

N.Y. Comp. Codes R. & Regs. tit. 20, § 335.6(¢)

ae 7, 26

N.Y. Comp. Codes R. & Regs. tit. 20, § 335.7 (b) 3,16

N -Y. Comp. Codes R. & Regs. tit. 20, § 335.7 (c) 3,16

N.Y. Comp. Codes R. & Regs. tit. 20, § 335.7 (d) 3, 16

N.Y. Comp. Codes R. & Regs. tit. 20, § 335.7(d)

Re 5,19

N.Y. Comp. Codes R. & Regs. tit, 20, § § 335.7 (d) (2)

(i) ee pie are Nei eee 19

Legislative Materials

I1.R. Rep. No. 474, 23d Cong., 1st Sess. (1834) 17

Other Authorities

tlack’s Law Dictionary (6th ed. 1990) _ - 20

Felix S. Cohen, Federal Indian Law (19: 58 ed. ) 10

Felix S. Cohen, Handbook of Federal Indian Law

(1942) A. hae Ne: AAP, San ae 17

viii

TABLE OF AUTHORITIES—Continued

Felix S. Cohen, Handbook of Federal Indian Law

James Dao, Ruling Scuttles Plan to Collect Taxes

on Reservation Sales, N -Y.Times, June 11, 1993.

Dana Milbank, Native Americans’ State Taz

Breaks Provoke Disputes, Wall St. J., July 20,

RENE ae ara 1 ae (ot MN OO ne Oe alia ate

IN THE

Supreme Court of the United States

OCTOBER TERM, 1993

No. 93-377

DEPARTMENT OF TAXATION AND FINANCE OF THE

STATE OF NEW York, et a/..

. Petitioners,

MILHELM ATTEA & Bros., INC..

Respondent.

JAMES W. WETZLER, COMMISSIONER OF

TAXATION AND FINANCE, et al.,

. Petitioners,

Evias H. ATTBA, Jr.,

Respondent.

On Writ of Certiorari to the Court of Appeals

of the State of New York

BRIEF OF THE NATIONAL GOVERNORS’

ASSOCIATION, NATIONAL LEAGUE OF CITIES,

U.S. CONFERENCE OF MAYORS, NATIONAL

ASSOCIATION OF COUNTIES, INTERNATIONAL

CITY/COUNTY MANAGEMENT ASSOCIATION, AND

COUNCIL OF STATE GOVERNMENTS

AS AMICI CURIAE IN SUPPORT OF PETITIONERS

INTEREST OF THE AMICI CURIAE

Amici, organizations whose members include state.

county, and municipal governments and officials through-

out the United States, have a compelling interest in legal

issues that affect state and local governments. Among the

most important of such issues are those which involve

State and local government tax collection schemes.

Like other States, New York has had to confront the

problem of persons purchasing cigarettes in stores located

on Indian reservations to evade payment of the State's

excise tax. Vo prevent this revenue loss, estimated to be

at least $65 million annually, see Pet. Br. 11, New York

imposed various collection and record-keeping obligations

on cigarette wholesalers. The New York Court of Ap-

peals held, however, that the Indian trader statutes, 25

USC. §§ 261-64, preempt the State's scheme. Not only

is this decision inconsistent with this Court's cases inter-

preting the Indian trader statutes, it presents a grave

threat to state efforts to design effective tax collection

schemes which address this problem of tax evasion.

Because the Court's decision will have a direct impact

on this issue of fundamental importance to amici and their

members, amici submit this brief to assist the Court in

its resolution of the case.’

STATEMENT

New York, like other States which have Indian reserva-

tions within their borders, confronts the serious problem

of tax evasion caused by non-Indians purchasing cig-

arettes, motor fuel, and other goods at reservation stores

that do not collect state excise taxes. In New York, this

revenue loss is the “largest single form of tax evasion”

confronting the State, Dana Milbank, Native Americans

State Tax Breaks Provoke Disputes, Wall St. 3., July 20,

1992, at B2 (quoting Commissioner James W. Wetzler),

and is now estimated at $100 million annually.’ See Pet.

Br. 11 & 4. In an effort to address this serious ,

New York devised a scheme to facilitate the collection of

these indisputably valid taxes from non-Indian taxpayers.

' The parties have consented to the filing of this brief amicus

curiae. Letters indicating their consent have been filed with the

Clerk of the Court.

2 This figure includes $65 million in lost cigarette taxes and $35

million in lost motor fuel taxes. See Pet. Br. 11 & nA.

_ LL

purchase tax exempt (unstamped) cig-

arcttes See NY. Comp. Codes R. & Regs. tit, 20

protect against tax evasion by non-exempt

;

w York also wholesalers to obtain approval

ee ae ae oe os ine ee os to ee of

untaxed cigarettes to be sold. See id. § 335.7(b)-(d).

Finally, New York requires wholesalers to maintain cer-

tain records of both their taxable and tax exempt cig-

arette sales. See id. § 335.6(g); N.Y. Tax Law § 474(4),.

ing on this Court's decision in Warren Trading

aan a. Arizona Tax Comm'n, 380 US. 685 (1965),

the New York Court of Appeals held that the Indian

trader statutes, 25 US.C. §§ 261-64, pre-empted the

State’s scheme for collecting excise taxes due on sales

to non-Indians. According to the court, the State's

lection scheme is an invalid “attempt{} to regulate in

area which Congress has taken ‘fully in hand’” and “im-

pinges on the federal interest, as evidenced by the Indian

trader statutes, to ‘comprehensively . . . regulate the busi-

nesses selling goods to reservation Indians.”” Pet. App.

iteservation, 447 US. 194, 151, 160-61 (1980). Accordingly, this

brief uses the terms non-exempt and non-Indians interchangeably

to refer to those persons subject to the State's taxes.

11 (citations omitted). The court further reasoned that

the State’s scheme “impinges on” the federal government's

authority “to determine ‘the kind and quantity of

and the prices at which such goods shall be

Indians.’ /d. at 11-12 (quoting 25 U.S.C. § 261).

over, the court reasoned that the State's scheme

“financial burdens on [the wholesalers] or the I

with whom [they] deal{] in addition to those

tilepee

ites

to protect Indians against prices deemed

reasonable by the Indian commissioner.” /d.

ing Warren Trading Post, 360 US. at 691).

Because “traditional notions of Indian self-government

are. . . deeply engrained in our jurisprudence,” Ramah

Navajo School Bd. v. Bureau of Rev., 458 US. 832, 837

(1982) (quoting White Mountain Apache Tribe vy.

Bracker, 4486 US. 136, 143 (1980)), the Court has gen-

erally eschewed reliance on “standards of pre-emption de-

veloped in other areas” in favor of a balancing approach

examining “the relevant state, federal and tribal interests.”

Id. at 838 (citing White Mountain, 448 US. at 143-45).

Accordingly, where federal statutes are designed to “pro-

mot{e) tribal independence and economic development,”

the Court has generally applied a presumption against the

exercise of state authority. /d. at 838; see also Rice v.

Rehner, 463 US. 713, 719-20 (1983). Where state reg-

ulation does not implicate a traditional aspect of tribal

sovereignty, however, the Court has not “appllied| a pre-

sumption of a lack of state authority,” Rice, 463 US. at

726, but instead looked only for conflict between the state

and federal schemes. Moe v. Confederated Salish &

Kootenai Tribes, 425 US. 463, 483 (1976) (quoting

United States v. McGowan, 902 US. 535, 539 (1938));

cf. Rice, 463 US. at 726.

The Indian trader statutes do not confer any direct

benefit on the Indian tribes. And the Court's decisions in

Moe and Washington v. Confederated Tribes of Colville

Indian Reservation, 447 US. 134 (1980), foreclose any

argument that notions of tribal sovereignty and economic

development entitle the tribes to market an economic

advantage based on tax free sales to non-exempt persons

See Moe, 425 US. at 482-83; Colville, 447 US. at

155-57. The circumstances of this case thus demonstrate

that it is inappropriate to apply the “presumption of

emption” of state powers. Rice, 463 US. at 726.

Court need only determine whether New York's scheme

“ ‘conflict{s] with the federal enactment{],’” here, the In-

dian trader statutes. Moe, 425 US. at 483 (quoting

McGowan, 902 US. at 539).

g of “proper |

engage in” trade with the Indians, see 25 U.S.C. § 262,

“to prohibit the introduction of goods” into the Indian

28?

Se ei

eae

fly

=f PSE:

elsewhere.” Colville, 447 US. at 155. The State can

thus limit a tribe's purchases of tax-exempt product to

the personal consumption of its members as a “reasonably

necessary .. . means of preventing fraudulent transac-

tions.” Jd. at 160.

Nor does New York's requirement that wholesalers col-

lect the tax due on non-exempt product interfere with the

Commissioner's power to “specify[] . . . the prices at

which (cigarettes) shall be sold.” 25 US.C, § 261. The

State does not assert any power to regulate prices; whole-

salers and retailers remain free to bargain over the price

of cigarettes, subject only to applicable federal regula-

tions. Moreover, while New York requires that the excise

tax “be added to and collected as part of the sales price

of the cigarettes,” N.Y, Tax Law § 471(3), in their ordi-

nary meanings the terms “price” and “tax” are too distinct

to conclude that section 261's purpose was to prohibit the

States from requiring Indian wholesalers to collect a law-

fully imposed excise tax at the time of the product's sale

to Indian retailers.

Moreover, the Court has recognized that “(legislation

dealing with Indian affairs ‘cannot be interpreted in isola-

tion but must be read in light of the common notions of

the day and the assumptions of those who drafted [it].’”

Wilson v. Omaha Indian Tribe, 442 U.S, 653, 666 (1979)

(quoting Oliphant v. Suquamish Indian Tribe, 435 US.

191, 206 (1978)). The historical context of section 261's

enactment, as evidenced by the provisions of numerous

treaties by which the United States guaranteed the tribes

that non-Indians would not be allowed onto their reserva-

tions, see, ¢.g., Treaty With The Crow Indians, May 7,

1868, art, 2, 15 Stat. 649, 650, as well as provisions of

federal law requiring all individuals trading with the In-

dians to obtain licenses, Act of June 30, 1834, ch. 161

$2 & 4, 4 Stat. 729-30, and prohibiting nearly all barter

trade between non-Indians and Indians, id. § 7, 4 Stat. at

730, demonstrate that Congress did not contemplate that

Indian trading posts would become centers of widespread

tax evasion by non-Indians, selling them millions of dollars

borne by non-exempt persons when they purchase ciga-

rettes for their own consumption, See Pet. App. 4; N.Y.

Tax Law §471(2). The tax is thus no different than the

taxes upheld in Moe and Colville. See Moe, 425 US. at

4862-83; Colville, 447 US, at 154-61, It is only fair that

those receiving the benefit of state-provided services should

not be allowed “to flout [their] legal obligation to pay the

tax{es}" which fund them, Moe, 425 US, at 482.

Nor does the State's scheme frustrate the congressional

purpose to protect the Indians from fraudulent or unfair

prices. New York does not assert any authority to reg-

ulate prices. Moreover, because New York requires tax

stamps to be affixed to each package of taxable cigareties

as well as duplicate invoices detailing the quantity and

wholesale price of the items delivered for both taxable

and tax-exempt product, the State’s scheme does not frus-

trate the congressional purpose to protect against fraudu-

lent prices. See N.Y. Tax Law §§ 471(2), 474(4); N.Y.

Comp. Codes R. & Regs., tit. 20, § 335.6(¢)(2).

The New York Court of Appeals also erred in relying

on Warren Trading Post to hold that the State's scheme

was pre-empted because it “attempts to regulate in an area

which Congress has taken ‘fully in hand.’” Pet, App.

11 (quoting 380 U.S. at 690). While in Central Ma-

chinery Co, v. Arizona Tax Comm'n, 448 US. 160

(1980), the Court relied on Warren Trading Post for the

proposition that the Indian trader statutes occupy the

field so as to foreclose state regulation, the Court's deci-

sions in Moe and Colville make clear that States can

impose requirements on Indian traders so long as they

are “reasonably necessary as a means of preventing fraud-

ulent transactions.” Colville, 447 US. at 160, Because

New York's requirements meet this standard, its scheme

is not pre-empted,

ARGUMENT

I, NEW YORK’S TAX COLLECTION SCHEME 18 NOT

PRE-EMPTED UNLESS IT CONFLICTS WITH THE

INDIAN TRADER STATUTES

This Court has long recognized that no function of state

government is more essential to its sovereignty than the

administration and collection of tax revenues. Providence

Bank v. Billings, 29 U.S, (4 Pet.) 514, 560 (1830); Me-

Culloch v, Maryland, 17 US. (4 Wheat.) 316, 424

(1819), As the Court stated in Dows v. City of Chicago,

78 U.S. (11 Wall.) 108 (1870):

It is upon taxation that the several States chiefly

rely to obtain the means to carry on their respective

governments, and it is of the utmost importance to

all of them that the modes adopted to enforce the

taxes levied should be interfered with as little as

possible. Any delay in proceedings of the officers,

upon whom the duty is devolved of collecting the

taxes, may derange the operations of government,

and thereby cause serious detriment to the public.

76 US. (11 Wall.) at 110. In a long line of cases, the

Court has accordingly “recognized the important and

sensitive nature of state tax systems and the need for

federal-court restraint when deciding cases that affect

such systems.” Fair Assessment in Real Estate Ass'n vy.

McNary, 454 US. 100, 102 (1981); see also United

States v, California, 113 §. Ct. 1784 (1993); Great Lakes

Dredge & Dock Co. v. Huffman, 319 U.S. 293 (1943);

Mathews v. Rodgers, 284 U.S. 521 (1932); First Nat'l

Bank v. Board of Comm'rs, 264 U.S. 450 (1924).*

The question presented in this case—whether the In-

dian trader statutes, 25 U.S.C. §§ 261-64, pre-empt New

York’s administrative scheme for preventing widespread

evasion of valid excise taxes by non-Indian purchasers of

cigarettes—counsels a similar approach. As the Court

recently reaffirmed, “the States retain substantial sover-

eign powers under our constitutional scheme, powers with

which Congress does not readily interfere.” Gregory v.

Ashcroft, 111 S. Ct. 2395, 2401 (1991). A State’s

efforts to address widespread evasion of lawful taxes is

within these sovereign powers.

To be sure, the regulation of commerce with the Indian

tribes has long been an important federal concern. In

recognition that “traditional notions of Indian self-govern-

ment are . . . deeply engrained in our jurisprudence,”

Ramah Navajo School, 458 U.S. at 837 (quoting White

Mountain, 448 U.S. at 143), the Court has generally

eschewed reliance on “standards of pre-emption developed

in other areas” in favor of a balancing approach exam-

ining “the relevant state, federal and tribal interests.” /d.

at 838 (citing White Mountain, 448 U.S. at 143-45).

Thus, in cases implicating tribal sovereignty interests, the

Court has frequently recast the presumption against pre-

emption of state authority into a presumption against the

exercise of state authority. See, e.g., id.; White Mountain,

448 U.S. 142-45. As the Court stated in Ramah Navajo

School, in such cases “ambiguities in federal law should

be construed generously, and federal pre-emption is not

limited to those situations where Congress has explicitly

4 These cases generally did not involve questions of statutory

construction but rather the Court’s equitable discretion in declining

to exercise jurisdiction, see, e.g., Fair Assessment, 454 U.S. at 113-

16; or the exercise of common law adjudication. See, e.g., Califor-

nia, 113 S.Ct. at 1787-90. But this principle is validly applied here

where a federal statute assertedly pre-empts a State from address-

ing widespread evasion of a lawfully imposed tax.

announced an intention to pre-empt state activity.” 458

U.S. at 838 (citing White Mountain, 448 U.S. at 143-44,

150-51). Thus, at times the Court has stated that State

law is pre-empted “ ‘except where Congress has expressly

provided that State laws shall apply.” McClanahan v.

Arizona Tax Comm'n, 411 U.S. 164, 171 (1973) (quot-

ing Felix Cohen, Federal Indian Law 845 (1958 ed.)).

Nonetheless, where state regulation does not implicate

a traditional aspect of tribal sovereignty, the Court has

not “appl{ied| a presumption of a lack of state authority.”

Rice, 463 U.S. at 726. The nature of the federal legisla-

tion at issue here and the absence of any tradition of

tribal sovereignty authorizing sales to non-Indians free

from valid state excise taxes demonstrate the inappropri-

ateness in this case of applying the “presumption of pre-

emption.” Id. at 724-26.

Unlike those congressional enactments designed to

“promot(e] tribal independence and economic develop-

ment,” Ramah Navajo School, 458 U.S. at 838, the Indian

trader statutes were aimed principally at providing the

federal government with a means of controlling the law-

lessness of white settlers. See Francis P. Prucha, American

Indian Policy In The Formative Years 48 (1962).° And

5 As Professor Prucha wrote concerning the Indian trader stat-

utes’ predecessors:

The genesis of the first trade and intercourse acts is clear.

The laws were necessary to provide a framework for the trade

—to establish a licensing system which would permit some con-

trol and regulation—but this was merely a restatement of old

procedures. The vital sections of the laws dealt with the crisis

of the day on the frontier. They sought to provide an answer

to the charge that treaties with the Indians, which guaranteed

their rights to the territory behind the boundary lines, were

not respected by the United States. The laws were not “Indian”

laws; they touched the Indian only indirectly, as they limited

him in his trade and his sale of land. The legislation was,

rather, directed against the lawless whites on the frontier and

sought to restrain them from violating the sacred treaties made

with the Indians.

American Indian Policy 48.

the Court’s decisions in Moe and Colville foreclose any

argument that notions of tribal sovereignty and economic

development entitle the tribes “to market an exemption

from state taxation to persons who would normally do

their business elsewhere.” Colville, 447 U.S. at 155; see

also Moe, 425 U.S. at 482-83. In short, federal Indian

policy is not premised on the notion that the Indian tribes

are entitled to benefit from the tax evasion of persons

lawfully subject to state taxing authority. Cf. 4 U.S.C.

$§ 104-06, 109 (providing that persons other than Indians

are not exempt from state income or sales and use taxes

for activities occurring on reservations). And given Con-

gress’s recognition of the importance of minimizing dis-

ruption to state systems for the administration and col-

lection of tax revenues, see, e.g., 28 U.S.C. § 1341 (Tax

Injunction Act); 4 U.S.C. §§ 104-111 (Buck Act), the

Court should not construe the silence of, or any ambigui-

ties in, the Indian trader statutes as pre-empting New

York’s scheme. Cf. Gregory, 111 S. Ct. at 2403: United

States v. Bass, 404 U.S. 336, 349 (1971).

The consequences of doing otherwise are simply too

great. By the State’s estimate, it loses approximately $65

million in cigarette tax revenues on an annual basis. Pet.

Br. 11. And while not at issue in this case, the State has

likewise lost substantial motor fuel excise tax revenues

currently estimated at $35 million annually because of a

similar holding of the New York Court of Appeals. See

Pet. Br. 11 n.4; Herzog Bros. Trucking, Inc. v. State Tax

Comm'n, 69 N.Y.2d 536 (1987). Thus, estimates place

the revenue loss at $100 million annually. See Pet. Br. 11

& n.4; James Dao, Ruling Scuttles Plan to Collect Taxes

on Reservation Sales, N.Y. Times, June 11, 1993, at BS.

The situation the State confronts is compounded by the

assertion of various tribes that the State “has no power

or authority to regulate these transactions on the reserva-

tions,” Br. Am. Cur. Seneca Nation of Indians et al. (cert.

stage) 4, and the refusal of some Indian retailers to

collect these taxes. See, e.g., Snyder v. Wetzler, 1993

N.Y. App. Div. LEXIS 10523 (Nov. 10, 1993).* Ac-

cordingly, a holding that the Indian trader statutes pre-

empt the State’s scheme will, with respect to New York,

render illusory Moe’s and Colville’s affirmation of state

authority to collect taxes on sales to non-exempt persons.

New York seeks to use minimally intrusive means to

collect from non-Indians a valid excise tax which does

not implicate tribal sovereignty interests. In these cir-

cumstances, it is inappropriate to apply the “presumption

of pre-emption” of state powers. See, e.g., Rice, 463 U.S.

at 726. Accordingly, under the Court’s precedents, the

relevant inquiry is whether New York’s scheme “ ‘con-

flict{s] with the federal enactments,’” here, the Indian

trader statutes. Moe, 425 U.S. at 483 (quoting United

States v. McGowan, 302 U.S. 535, 539 (1938) and citing

Thomas v. Gay, 169 U.S. 264, 273 (1898)). See also

Ramah Navajo School, 458 U.S. at 847-48 (Rehnquist,

J., dissenting); Central Machinery, 448 U.S. at 168

(Stewart, J., dissenting); cf. Rice, 463 U.S. at 726 (where

tribal sovereignty interests are not implicated, Court has

“only to determine whether application of .. . state . . .

laws would ‘impair a right granted or reserved by federal

law’”) (quoting Mescalero Apache Tribe v. Jones, 411

U.S. 145, 148 (1973)).

A careful examination demonstrates that this case pre-

sents no conflict between the state and federal schemes.

Indeed, the notion that Congress’s purpose in enacting the

Indian trader statutes was to pre-empt the States in such

a functionally important area of sovereignty as the col-

lection of lawfully imposed taxes from non-Indians is

difficult to reconcile with the historical context of § 261’s

* Snyder involves a state assessment against Barry E. Snyder,

Sr., head of the 6,000 member Seneca Nation, and operator of the

“Seneca Hawk” store on the Cattaraugus Reservation, for $6.3

million in uncollected sales and excise taxes on cigarettes and gaso-

line for the year 1989. See Gary Spencer, State Wins Sales, Excise

Taz Ruling Against Indians, N.Y. Law Journal, Nov. 22, 1993, at 1.

The State also has assessments pending against five other Indian

retailers. /d.

enactment. See, e.g., Central Machinery, 448 U.S. at

166 (Indian trader statutes must be interpreted “in light

of the intent of the Congress that enacted them[.]”); Wil-

son v. Omaha Indian Tribe, 442 U.S. 653, 666 (1979)

(“Legislation dealing with Indian affairs ‘cannot be inter-

preted in isolation but must be read in light of the com-

mon notions of the day and the assumptions of those who

drafted [it].’”) (quoting Oliphant v. Suquamish Indian

Tribe, 435 U.S. 191, 206 (1978) ).

Nonetheless, the New York Court of Appeals relied on

this Court’s decision in Warren Trading Post to hold that

the Indian trader statutes pre-empted the State’s tax col-

lection scheme. According to the court, the State’s col-

lection scheme “attempts to regulate in an area which

Congress has taken ‘fully in hand’” and “impinges on the

federal interest, as evidenced by the Indian trader statutes,

to ‘comprehensively . . . regulate businesses selling goods

to reservation Indians.” Pet. App. 11 (internal citations

omitted). The court further reasoned that the State’s

scheme “impinges on” the federal government’s authority

“to determine ‘the kind and quantity of goods and the

prices at which such goods shall be sold to the Indians.’ ”

Id. at 11-12 (quoting 25 U.S.C. § 261). Moreover, the

court concluded that the. State’s scheme imposes “finan-

cial burdens on [the wholesalers] or the Indians with

whom [they] deal[] in addition to those Congress or the

tribes have prescribed, and could thereby disturb and dis-

arrange the statutory plan Congress set up in order to

protect Indians against prices deemed unfair or unreason-

able by the Indian Commissioner.” Jd. at 12 (quoting

Warren Trading Post, 380 U.S. at 691).

The net effect of the decision is to frustrate the State’s

ability to collect revenues in an effective and minimally

intrusive manner. Yet the design of a State’s tax admin-

istration and collection scheme surely “is a decision of

the most fundamental sort for a sovereign entity,” Greg-

ory, 111 S. Ct. at 2400, for the State’s very existence

depends upon it. This untoward result is indefensible

given the absence of any conflict between the State’s

scheme and the Indian trader statutes. And it is truly

regrettable given the State’s substantial interest in collect-

ing indisputably valid taxes and the absence of any tribal

sovereignty interest in profiting from the evasion of these

taxes. See Colville, 447 U.S. at 155; Moe, 425 US. at

482-83.

IL _ THE INDIAN TRADER STATUTES DO NOT

EVNOENCE A CONGRESSIONAL PURPOSE TO

PROHIBIT THE STATES FROM ENGAGING IN

REASONABLE REGULATION OF INDIAN WHOLE-

SALERS TO PREVENT TAX EVASION BY NON-

INDIANS

A. Moe and Colville Establish the Validity of New

York’s Scheme

Before analyzing the various provisions of the State's

collection scheme, it is worthwhile to revisit this Court’s

decisions in Moe and Colville. These cases upheld the

validity of taxes similar to those imposed here and the

right of the States to impose minimal burdens on Indian

retailers. No valid basis exists for distinguishing them.

In Moe, this Court heid that a State could require an

“Indian seller doing business on tribal land” to collect

State taxes on the sales of cigarettes to non-Indian pur-

chasers. 425 U.S. at 481-82. In so holding, the Court

specifically rejected the tribe’s contention that the State’s

imposition of a collection duty on Indian sellers for taxes

owed by non-Indian purchasers was a “gross interference

with [its] freedom from state regulation” under Warren

Trading Post, id. at 482, noting that the tax was “validly

imposed” and the collection obligation was a “minimal

burden.” /d. at 483.

In Colville, the Court upheld a state law requiring

tribal smokeshops to collect cigarette taxes from non-

Indians as well as non-enrolled Indians who lived on the

reservation. The Court rejected the tribe’s arguments that

the State’s law was pre-empted by various federal Indian

laws including the Indian trader statutes, was inconsistent

with the principle of tribal sovereignty, and was invalid

under the Indian Commerce Clause. 447 U.S. at 154-

160. Moe and Colville thus establish the validity of the

taxes which New York seeks to collect.

Of course, in both Moe and Colville the State sought

to impose the collection (and attendant record-keeping

and licensing) obligations on the Indian retailer rather

than the wholesaler. But given that the Court has already

recognized that such obligations impose at most a “mini-

mal burden” on the Indian retailer, see Colville, 447 U.S.

at 159; Moe, 425 U.S. at 483; cf. Rice, 463 U.S. at 715

(upholding State’s authority to require licensed Indian

trader to obtain liquor license because of sales to non-

Indians), it is not plausible to suggest that New York’s

decision to place the collection and record-keeping obliga-

tion on the wholesaler is significant enough to render its

scheme pre-empted. Imposing the collection and record-

keeping obligations on the wholesaler rather than the re-

tailer does not make these burdens any more substantial

than those upheld in Moe and Colville. To the contrary,

because there are far more transactions at the retail rather

than the wholesale level, the collection and record-keeping

requirements upheld in Colville are far more burdensome

than those imposed by New York’s scheme. Indeed,

Colville’s upholding of the State’s right to require Indian

retailers to keep detailed records of their transactions with

tax-exempt Indians, see 447 U.S. at 159, transactions

which are as much a part of the Indian trade as those

between the wholesaler and retailer, should foreclose any

argument that the Indian trader statutes pre-empt a State

from placing such obligations on the wholesaler. And

the holding below is all the more remarkable given this

Court’s recent statement in Oklahoma Tax Comm'n vy.

Potawatomi Indian Tribe, 111 S.Ct. 905, 912 (1991),

that States can collect cigarette taxes from Indian whole-

salers. In any event, the Indian trader statutes do not

evidence a congressional purpose to displace New York’s

tax collection scheme.

Bh. New York's Scheme Does Not Conflict with the

Indian Trader Statutes

New York's scheme for collecting cigarette excise taxes

has three principal features. First, the State requires that

the tax be paid through the purchase of stamps at the

time of the first taxable sale by a wholesaler. See N.Y.

Tax Law § 471(2). This obligation applies to all whole-

salers regardless of whether they supply Indian or non-

Indian retailers. See id. Second, in recognition that en-

rolled Indians cannot be taxed on cigarettes they purchase

on their reservations for their own consumption, New

York allows Indian retailers to purchase tax exempt (un-

stamped) cigarettes. See N.Y. Comp. Codes R. &

Regs. tit. 20, § 335.6. To protect against tax evasion by

non-Indians, New York nominally limits Indian retailers

to purchasing an amount equal to the “probable demand

of qualified Indian consumers in the trade territory.”

N.Y. Comp. Codes R. & Regs. tit. 20, §§ 335.6(d):

335.7(c) & (d). New York also requires wholesalers to

obtain approval as to the amount of untaxed cigarettes

to be sold from either the tribe or the State. See id.

§ 335.7(b)-(d). Finally, New York requires wholesalers

to maintain certain records of their tax exempt cigarette

sales. See id. § 335.6(g).”

In holding that the State’s scheme was pre-empted, the

New York Court of Appeals articulated three reasons.

Relying on the language of 25 U.S.C. § 261, the court

reasoned that the State's scheme “impinges on the author-

the Commissioner of Indian Affairs to determine

. The court further rea-

dens on [the wholesalers] or the Indians with whom [they]

deal [| in addition to those Congress or the tribes have

" New York also imposes record-keeping requirements on taxable

sales of cigarettes. See N.Y. Tax Law § 474(4).

‘

1. New York's Scheme Does Not

srt E

Prucha, American Indian Policy 48. While these

have undergone various revisions throughout their

tory, one of their overarching purposes has been to

tect Indian tribes from fraudulent . See

Machinery Co., 448 US. at 165 (noting that “[ojne

the fundamental purposes of these statutes and regula-

Rep. No. 474, 23d Cong., Ist Sess. 11 (1834) (noting

that “{t}he Indians do not meet the traders on equal terms,

a te aes oe Oa eee ee eae

imposition”); id. at 95 (report of commissioners i-

mating “the average profits charged on goods in the Indian

country at 100 per cent”).”

In their current version, the Indian trader statutes, 25

U.S.C. $& 261-64, contain four provisions. These provi-

* See aleo id. at 96-07 (detailing disparities between cost of

various goods and prices at which sold to the Indians).

sions govern the “[plower to appoint traders with In-

dians, id. § 261; the “[pjersons permitted to trade with

Indians,” id. § 262; the “(pjrohibition of trade by Presi-

dent,” id. § 263; and “{t\rading without license.” /d.

§ 264. At the outset, amici submit that none of the prin-

cipal features of New York's tax collection scheme even

arguably implicates the federal government's power to

regulate the selection or licensing of “proper person{s] to

engage in” trade with the Indians, see id. § 262, “to pro-

hibit the introduction of goods” into the Indian country,

see id. § 263, or to order the forfeiture of goods intro-

duced by unlicensed traders. See id. § 264. Accordingly,

the only provision of the Indian trader statutes at issue in

this case is section 261. This section provides in relevant

25 USC. 5 261.

Relying on this provision, the New York Court of Ap-

retailers. New York does not limit the amount of taxed

Indian re-

tailers. To be sure, New York nominally limits the

amount of untaxed cigarettes which Indian wholesalers

can sell to the “probable demand” of the exempt nation

or tribe. See N.Y. Comp. Codes R. & Regs. tit.

§ 335.7(d)(1). But it is incorrect :

below did, that this

thority to determine the

sold to the Indians. As

eral Indian policy does not authorize I

market an exemption from state taxation to

would normally do their business elsewhere.”

at 155. The State can thus limit the tribes’ pur

tax-exempt products to the personal consumption of their

members as a “reasonably necessary .. . means of pre-

venting fraudulent transactions.” ns.” Id at 160. New York's

> :

‘

§ 335.7(d)(2)(i), is no more burdensome than the

scheme upheld in Colville, which required retailers to

“record and retain for state inspection the names of all

Indian purchasers, their tribal affiliations, . . . the dollar

amount and dates of sales.” 447 US. at 159. In short,

this aspect of New York's scheme does not interfere with

the Commissioner's authority and fully satisfies the re-

quirement that it be a “reasonably necessary .. . means

of preventing fraudulent transactions.” Jd. at 160.

Nor does New York's requirement that wholesalers col-

lect the excise tax interfere with section 261’s grant to

the Commissioner of the “sole power” to “specify|] .. .

the prices at which . . . goods shall be sold to the Indians.”

New York does not assert any authority to regulate the

prices which Indian wholesalers charge Indian retailers.

To the contrary, Indian wholesalers and retailers remain

free to bargain over the price of cigarettes and are fully

subject to the Commissioner's regulation “that the prices

charged by licensed traders (be) fair and reasonable.” 25

C.F.R. § 140.22.

That New York requires Indian wholesalers to collect

the tax due on non-exempt product at the time it is sold

to Indian retailers does not mean that it is “specifying . . .

the prices at which |cigarettes] shall be sold.” 25 U.S.C.

§ 261. In their ordinary meanings, the terms “price” and

“tax” are too distinct to conclude that Congress’s purpose

in enacting section 261 was not only to grant the Com-

missioner the sole authority to regulate prices but also to

prohibit the States from requiring Indian wholesalers to

collect a lawfully imposed excise tax at the time of the

product's sale to Indian retailers. Compare Black's Law

Dictionary 1188 (6th ed. 1990) (defining “price” as

“[slomething which one ordinarily accepts voluntarily in

exchange for something else”) with id. at 1457 (noting

that “[e)jssential characteristics of a tax are that it is not

a voluntary payment... , but an enforced contribution,

exacted pursuant to legislative authority”); United States

v. La Franca, 282 US. 568, 572 (1931) (“A tax is an

enforced contribution to provide for the support of the

government|.|"); Lane County v. Oregon, 74 US. (7

Wall.) 71, 80 (1868) (“ ‘A tax in its essential characteris-

tics . . . is not founded on contract or agreement.’ ”)

(citation omitted ).

An excise tax can, of course, “be added to and col-

lected as part of the sales price” of an item as New York

the issioner’s requirement that it be “fair and rea-

sonable.” 25 C.F.R. § 140.22 Accordingly, except for

where a State seeks to tax enrolled Indians, there is no

tion on the wholesaler and section 261's grant of authority

to the Commissioner to specify the prices of goods sold to

Indians. See, ¢g., Moe, 425 US. at 483 (quoting

McGowan, 302 US. at 539 and citing Thomas, 169 US.

at 273).

2. Congress Did Not Contemplate that the Indian

Trader Statutes Would Preempt State Efforts

to Prevent Tax Evasion

As the Court has often recognized, “[{I)egislation dealing

with Indian affairs ‘cannot be interpreted in isolation but

must be read in light of the common notions of the day

and the assumptions of those who drafted [it].’” Omaha

Indian Tribe, 442 US, at 666 ( Suquamish Indian

Tribe, 435 US. at 206). The has thus interpreted

§ 261 “in light of the intent of the Congress that enacted

(it}.” Central Machinery, 448 US. at 166 (citing Omaha

Indian Tribe, 442 U.S. at 666; Suquamish Indian Tribe,

435 US. at 206). The historical context of section 261's

enactment demonstrates that Congress could not have

envisioned that non-Indians would travel onto reservations

in large numbers to evade payment of lawful state taxes.

At the time of section 261's enactment in 1876, federal

Indian policy was still largely marked by removal of the

Indians from their lands and segregation of them on res-

ervations. See generally Felix §. Cohen, Handbook of

Federal Indian Law 121-29 (1982 ed.). As the Court

has recognized, it was not until 1887 when Congress

adopted the General Allotment (Dawes) Act, 24 Stat.

388, that “the eventual assimilation of the Indian popula-

tion and the ‘gradual extinction of Indian reservations

and Indian titles’” became the central tenets of federal

Indian policy. Montana v. United States, 450 U.S. 544,

559 n.9 (1981) (quoting Draper v. United States, 164

U.S. 240, 246 (1896) and internal citation omitted); see

also Cohen at 130 (1982 ed,),

Thus, at the time of section 261's enactment, many of

the treaties and agreements which had been negotiated

with the various Indian tribes contained provisions in

which the United States agreed “to prohibit most non-

Indians from residing on or passing through reservation

lands used and occupied by the Tribe[s|.”. Montana,

450 U.S, at 558, For example, Article Il of the Treaty

With The Crow Indians, May 7, 1868, 15 Stat, 649, 650

provided that “the United States now solemnly agrees that

no persons, except those herein designated and authorized

to do so, , , shall ever be permitted to pass over,

upon, or reside in the territory described in this article for

the exclusive use of said Indians... .”* And in the

* See also Treaty With The Omaha Indians, Mar. 6, 1866, art. 4,

14 Stat, 667, 668 (The whole of the lands . , , shall constitute and

be known a# the Omaha reservation, within and over which all laws

and

ect,

passed or which may be passed by

ent of Indian affairs or the agent for the tribe.”) ; Treaty

Lower Brule Indians, Oct. 14, 1866, art. ‘ 699, 8 a

white person, other than officers, agents employe(e

United States shall be permitted to go on om

reservation, unless previously admitted as a member of

band according to their usages.”) ; Treaty With The Cheyennes

Arrapahoes, Oct, 14, 1865, art. 2, 14 Stat.

son, except officers, agents, and employees of the Govern

go upon or settle within the country embraced within said

unless formally admitted and incorporated into some one

tribes lawfully residing there, according to ite laws and

Treaty With The Camanches And Kioways, Oct. 18, 1865,

14 Stat. 717, 718 (same); Treaty With The Choctaws And

saws, Apr. 28, 1866, art. 43, 14 Stat, 769, 779 (same); Treaty Wi

The Cherokee Indians, July 19, 1866, art. 27, 14 Stat, 799,

(“all persons not in the military service of the Un States,

citizens of the Cherokee nation, are to be prohibited from

into the Cherokee nation”); Treaty With The Ute Indians,

1868, art. 2, 15 Stat. 619, 620 (“no persons, except those

authorized so to do, and except such officers, agents, and employe(e|

of the government as may be authorized to enter upon Indian reser

vations in discharge of duties enjoined by law shall

mitted to pass over, settle upon, or reside in the”

Treaty With The Sioux Indians, Apr. , ,

636 (same); Treaty With The Navajo Indians, June 1, 1868, art, 2,

#3.

FERsz?

apse

ith

Trade and Intercourse Act of 1834, Congress, in addition

to requiring licenses to trade with the Indians, prohibited

non-Indians from obtaining through barter with the Indian

tribes any goods except skins and furs, a provision which

remained in effect until 1953. Act of June 30, 1834,

ch. 161, §§ 2, 4, & 7, Stat. 729, 730."

In 1876, federal policy thus greatly circumscribed trade

and intercourse between Indians and non-Indians."' The

historical context of section 261’s enactment demonstrates

that Congress did not contemplate that Indian trading

posts would become centers of widespread tax evasion by

non-Indians, selling millions of dollars a year in untaxed

goods to them. Because section 261 “ ‘cannot be inter-

preted in isolation but must be read in light of the com-

mon notions of the day and the assumptions of those who

drafted’ ” it, Omaha Indian Tribe, 442 U.S. at 666 (quot-

ing Suquamish Indian Tribe, 435 U.S. at 206), it is in-

appropriate to attribute to it pre-emptive force over New

York’s effort to collect lawful taxes. Cf. Gregory, 111

S. Ct. at 2403; Bass, 404 U.S. at 349.

15 Stat. 667, 668 (same); Treaty With The Shoshonees And

Bannacks, July 3, 1868, art. 2, 15 Stat. 673, 674 (same).

1 The exception for skins and furs stems from § 7 of the Act of

Apr. 18, 1796, Ch. 13, 1 Stat. 452, 453, and likely owed to the great

economic and yolitical significance of the fur trade.

This provision was repealed by the Act of Aug. 15, 1953, Ch. 506,

§ 1, 67 Stat. 590.

11 At the time of section 261’s enactment, several other provisions

of the 1834 act which greatly limited contact between white settlers

and the Indians remained in force. See Act of June 30, 1834, ch. 161,

§8 (prohibiting trapping in Indian country); id. §9 (prohibiting

grazing without tribal consent in Indian country); id. §§ 10-11

(authorizing federal government to use military force to remove

intruders and settlers from Indian country); id. § 12 (prohibiting

non-governmental sale, lease, or conveyance of lands by Indians to

non-Indians) .

3. Requiring Wholesalers to Collect Tax Due on

Cigarettes Which Will Ultimately be Borne By

Non-Indians Does Not Place an impermissible

Burden on Either Wholesalers or Retailers and

Does Not Frustrate the Statutory Purpose

The New York Court of Appeals also held that to the

extent the State collected tax on stamped cigarettes, it

imposed “ ‘financial burdens on [the wholesalers] or the

Indians with whom [they] deal{] in addition to those

Congress or the tribes have prescribed, and could thereby

disturb and disarrange the statutory plan Congress set up

in order to protect Indians against prices deemed unfair or

unreasonable by the Indian Commissioner.’” Pet. App.

12 (quoting Warren Trading Post, 380 U.S. at 691).

The court’s rationale, however, ignores not only the fac-

tual context of Warren Trading Post, but also this Court’s

decisions in Moe and Colville.

In Warren Trading Post, the Court held that the Indian

trader statutes pre-empted a State from imposing a gross

receipts gross income tax on a licensed Indian trader

which engaged in retail trading with reservation Indians.

380 U.S. at 690-91. The trader, however, did not claim

that it was exempt from taxation on its sales to non-

Indians. See id. at 686. Thus, the Court’s statement in

Warren Trading Post that the tax “would put financial

burdens on [the trader] or the Indians with whom it

deals,” id. at 691, is properly read as applying only to

those taxes which are ultimately borne by reservation In-

dians. See Moe, 425 U.S. at 482. This conclusion is

further supported by the Court’s comment that “since fed-

eral legislation has left the State with no duties or respon-

sibilities respecting the reservation Indians, we cannot

believe that Congress intended to leave to the State the

privilege of levying this tax.” Warren Trading Post, 380

U.S. at 691 (footnote omitted ).”

12 This conclusion is also consistent with the Court’s decision in

Central Machinery Co., which .nvalidated, under the Indian trader

statutes, a “transaction privilege tax” imposed on the sale of farm

machinery to a tribal enterprise. See 448 U.S. at 161-65. The tax,

SA ie, EE BB A a ta te, ll a 5 ee ell te

In contrast to the tax at issue in Warren Trading Post,

New York does not place the financial burden of the ex-

cise tax on either the wholesale trader or tax-exempt res-

ervation Indians. Rather, under New York’s scheme, the

tax is ultimately borne by non-exempt persons who receive

the benefit of the many services the State provides. See

Pet. App. 4 (noting that tax “is ultimately added to the

retail price and is paid by the consumer”); N.Y. Tax Law

§ 471(2). The tax, therefore, does not “put financial

burdens on [the traders] or the Indians with whom [they]

deal.” Warren Trading Post, 380 U.S. at 691; see also

Colville, 447 U.S. at 154-61 (upholding State’s authority

to require tribal smokeshop to collect tax on sales to non-

Indians and non-enrolled Indians); Moe, 425 U.S. at 482

(distinguishing Warren Trading Post on grounds that

“luJnlike the sales tax here, the tax was imposed directly

on the seller, and... there was . . . no claim that the

State could not tax that portion of the receipts attributable

to on-reservation sales to non-Indians”).” It is only fair

however, was added to the price of the machinery and was borne

by reservation Indians. /d.

18 Amici believe that the court of appeals’ statement that the

State’s tax scheme imposed “financial burdens on [plaintiffs] or the

Indians with whom [they] deal[],” see Pet. App. 12, was concerned

solely with the burden of the tax itself and not the burden of lost

sales caused by having to collect tax on sales to non-exempt persons

or the cost of complying with the State’s record-keeping require

ments. In any event, Moe and Colville make clear that New York’s

tax on non-Indians purchasing goods at a reservation store is “valid

even if it seriously disadvantages or eliminates the Indian retailer’s

business with non-Indians.” Colville, 447 U.S. at 151 (discussing

Moe) (footnote omitted). As the Court stated in Colville, “prin-

ciples of federal Indian law, whether stated in terms of pre-emption,

tribal self-government, or otherwise, [do not] authorize Indian

tribes .. . to market an exemption from state taxation to persons

who would normally do their business elsewhere.” Jd. at 155; see

also Moe, 425 U.S. at 482, 483 (noting that “the competitive ad-

vantage which the Indian seller . . . enjoys over all other cigarette

retailers . . . is dependent on the extent to which the non-Indian

purchaser is willing to flout his legal obligation to pay the tax”

and holding that “to the extent that the ‘smoke shops’ sell to those

upon whom the State has validly imposed a sales or excise tax with

respect to the article sold, the State may require the Indian propri-

that those individuals receiving the benefit of state pro-

vided services should not be allowed “to flout [their] legal

obligation to pay the taxfes]” which fund them. Moe,

425 US. at 482.

Nor does the State’s scheme disturb the Congressional

purpose of protecting Indians from either fraudulent or

“unfair or unreasonable” prices. Warren Trading Post,

380 U.S. at 691. As stated before, New York does not

assert any authority to regulate the prices of goods sold

to the Indians. And there can be no contention that the

State’s scheme frustrates the Congressional purpose be-

cause unscrupulous wholesalers might attempt to col'ect

cigarette tax on products earmarked for purchase by tax-

exempt Indians. Under New York law, tax stamps must

be affixed to packages of cigarettes as evidence of pay-

ment of the tax. See N.Y. Tax Law §$ 471(2). Moreover,

for each delivery, invoices (in duplicate) must detail “the

number of packages and cigarettes contained therein. . .

and the items and quantity and wholesale price of each

item. . . .” Id. § 474(4); see also N.Y. Comp. Codes

R. & Regs., tit. 20, § 335.6(g)(2) (“Every . . . invoice

. . given by the sel'er must indicate the quantity of

cigarettes delivered, the purchase price of the cigarettes

without regard to any exemption and the price paid or to

etor simply to add the tax to the sales price and thereby aid the

State’s collection and enforcement thereof’).

Colville likewise upheld in toto the State of Washington’s detailed

record-keeping requirements as a “reasonably necessary . . . means

of preventing fraudulent transactions.” See 447 U.S. at 160. Under

Washington’s scheme, Indian retailers were required to “record the

number and dollar volume of taxable sales to nonmembers of the

Tribe [and] [with respect to nontaxable sales, . . . record and

retain for state inspection the names of al! Indian purchasers, their

tribal affiliations, the Indian reservations within which sales are

made, and the dollar amount and dates of sales.” Jd. at 159. Sales

by retailers to tax-exempt Indians are, of course, as much a part of

the Indian trade as sales by wholesalers to retailers. And New

York’s record-keeping requirements are no more burdensome than

those upheld in Colville. See N.Y. Comp. Codes R. & Reg. tit. 20,

§ 335.6(g).

— Bn Nema Le Renee ne.

be paid by the exempt purchaser for such cigarettes.”).

The State’s requirements that stamps be affixed to taxable

cigarettes and invoices list the items, quantity and whole-

sale price of cigarettes being delivered, provides the In-

dian retailer with adequate protection against fraudulent

overcharging. Accordingly, there is no basis for the New

York Court of Appeals’ conclusion that the State’s scheme

“could disturb and disarrange” Congress’s plan to protect

the Indians from “unfair or unreasonable” prices. Pet.

App. 12.

4. Decisions Subsequent to Warren Trading Post

Demonstrate that the Indian Trader Statutes Do

Not Foreclose All State Regulation of Traders

The New York Court of Appeals also relied on Warren

Trading Post to hold that the State’s scheme was pre-

empted because it “attempts to regulate in an area which

Congress has taken ‘fully in hand.’” Pet. App. 11 (quot-

ing 380 U.S. at 690). The Court has, of course, invoked

Warren Trading Post for the proposition that the Indian

trader statutes occupy the field. See Central Machinery,

448 U.S. at 165-66 (“by enacting these statutes Congress

‘has undertaken to regulate reservation trading in such a

comprehensive way that there is no room for the States

to legislate on the subject’”) (quoting 380 U.S. at 691

n.18). But as the four dissenting justices in Central Ma-

chinery explained, the Court has “rejected the contention

that the Indian trader statutes occupy the field so com-

pletely as to pre-empt all state laws affecting those who

trade on the reservation with reservation Indians.” 448

U.S. at 167 n.1 (Stewart, J., dissenting, joined by Powell,

J., Rehnquist, J., & Stevens, J.); 448 U.S. at 172 (“Our

most recent cases undermine the notion that 25 U.S.C.

§§ 261-264 occupy the field so as to pre-empt all state

regulation affecting licensed Indian traders.” ) (Powell, J.,

dissenting).

In Moe, for example, a unanimous Court rejected a

claim that Warren Trading Post barred a State from re-

quiring Indian retailers to collect tax on sales to non-

Indians. 425 U.S. at 481-82. And Colville’s upholding

of a state requirement that Indian retailers maintain de-

tailed records of their sales to tax-exempt Indians puts to

rest any claim that Congress pre-empted all state regula-

tion of Indian trading. See 447 U.S. at 159-60. As

Colville makes clear, the Indian trader statutes do not

pre-empt state requirements “reasonably necessary as a

means of preventing fraudulent transactions.” 447 U.S.

at 160. Because the State’s scheme satisfies this standard,

the New York Court of Appeals erred in holding that it

was pre-empted.

CONCLUSION

The judgment of the New York Court of Appeals

should be reversed.

Respectfully submitted,

RICHARD RUDA *

Chief Counsel

JAMES I. CROWLEY

STATE AND LOCAL LEGAL CENTER

444 North Capitol Street, N.W.

Suite 345

Washington, D.C. 20001

(202) 434-4850

* Counsel of Record for the

December 16, 1993 Amici Curiae

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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.