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

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TABLE OF CONTENTS

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INTEREST OF AMICI CURIAE ..........2..222--..2.--c00000+-+- 2

SUMMARY OF ARGUMENT .......W0020.0-ee eee 3

RRC ERE SNE oT 5

I. THE NEW YORK STATE COURT OF AP-

PEALS CORRECTLY DETERMINED THAT

PETITIONERS’ REGULATORY SCHEME IS

PRE-EMPTED BY FEDERAL LAW .......0. 5

A. Federal Law Pre-Empts State Regulations

that Conflict or Interfere with Federal Law

Applicable to Transactions between Indians

and Federally Licensed Indian Traders......... 5

B. New York’s Regulatory Scheme Violates

Federal Law by Interfering with Commerce

between Indians and Federally Licensed In-

a 10

1. New York’s Tax Scheme Comprehen-

sively Regulates Sales by Indian Traders

Oe I TD Siccincestnshisntisncdetintremrtcorins 10

2. New York’s Tax Regime Conflicts with

Federal Law and Usurps Tribal Self-

a A LR EEE SO OTE Er 13

II. THIS COURT’S DECISIONS IN MOE, COL-

VILLE, AND POTAWATOMI ARE INAPPOS-

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CDOTS cxcecncrcccqceeccoscoreapnaneensunestenencemmnmtasuisabonmeasnes 22

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TABLE OF AUTHORITIES

CASES Page

Central Machinery Co. v. Arizona State Taz

Comm’n, 448 U.S. 160 (1980) 0.0. 7,8

City Vending of Muskogee, Inc. v. Oklahoma Taz

Comm’n, 898 F.2d 122 (10th Cir. 1990).............. 22

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

BE CRD cecncecsscecestnesctniictsntamsnnaaaee 9

McClanahan v. Arizona State Tax Comm’n, 411

is SS | 5,9

Moe v. Confederated Salish & Kootenai Tribes,

GBS UB. GE (IGG cnccststvrnemmie 20, 21

Oklahoma Tax Comm’n v. Citizen Band Potawa-

tomi Indian Tribe, 498 U.S. 505 (1991) .............. 22

Ramah Navajo Sch. Bd. v. Bureau of Revenue, 458

ie Se A), nn 9

Warren Trading Post v. Arizona Tax Comm'n,

te SO) | passim

Washington v. Confederated Tribes of Colville In-

dian Reservation, 447 U.S. 1384 (1980) ......... 16, 20, 21

White Mountain Apache Tribe v. Bracker, 448

UB. BOG COBB ccccccersssessentsccosnectveesniaee passim

UNITED STATES CONSTITUTION

US. Comst. aut. E, OG, Gb. @ ccnsececcsssineeeeeeee 5

UNITED STATES TREATIES

Treaty with the Six Nations art. III, 7 Stat. 15

(BFE) aacecccecccccccsncessenssumesennnsuamesssnaniannasanannnnn 10

UNITED STATES STATUTES

pik Tee | = eer 6, 18, 15, 19

p RiR te | fF a 6, 21

Act of July 22, 1790, ch. 33, 1 Stat. 187......0......... 6

UNITED STATES REGULATIONS

Tok A RD Sa 6

NEW YORK STATUTES

BO BAIN G GGG cccecscersrestnsttein 10

Tax Law § 476 17

iii

TABLE OF AUTHORITIES—Continued

NEW YORK STATE REGULATIONS Page

ee 11,13

a 11,15

a 11, 15, 16

ra . 11,15

20 NYCRR § 335.6 (g) ~..........0......0ccceeeeeee siemdeommeminien 14, 16

ee 11

ee 11, 12,14

20 NYCRR § 835.7 (d) ....................-.c-cc-ecee0e- 11, 12, 14, 15, 17

MISCELLANEOUS

Cigarette Smoking Among American Indians,

Alaskan Natives—Behavioral Risk Factor Sur-

veillance System, 1987-1991, 286 J. of Am. Med.

ee 17

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 al.,

. Petitioners,

MILHELM ATTEA & Bros., INC.,

. Respondent.

Evias H. ATTBA, JR.,

6175 Stickler Street, Clarence, New York 14031,

Respondent.

On Writ of Certiorari to the Court of Appeals

of the State of New York

BRIEF AMICI CURIAE OF

SAINT REGIS MOHAWK TRIBE AND

MOHAWK TAX STEERING COMMITTEE

IN SUPPORT OF RESPONDENTS

The Saint Regis Mohawk Tribe and the Mohawk Tax

Steering Committee submit this brief as Amici Curiae in

support of respondents Milhelm Attea & Bros., Inc. and

Elias Attea, Jr.’ The Iroquois Business Association also

joins this brief.

! This brief is filed with the permission of the parties. Written

consents have been provided to the Clerk of this Court.

2

INTEREST OF AMICI CURIAE

The Saint Regis Mohawk Tribe (the “Tribe”) is a

federally recognized, sovereign Indian nation. Its lands

straddle the border between the United States and Canada.

The Tribe is one of the six nations (the “Six Nations”)

that collectively constitute the Iroquois Confederacy.

The Mohawk Tax Steering Committee (the “Steering

Committee”) was formed during 1992 under the auspices

of the Saint Regis Mohawk Tribal Council, an elected

governing body of the Tribe. It consists of representatives

of the Council, traditional Mohawk people (i.e., those

who follow the “Longhouse” form of government), the

Mohawk business community, and other groups.

The function of the Steering Committee is to represent

the Mohawk people, collectively, and to provide represen-

tation on behalf of individual Mohawks, before the In-

ternal Revenue Service, the U.S. Department of the Treas-

ury, federal and state courts, the U.S. Congress, the State

of New York and its Department of Taxation and Fi-

nance, and the New York legislature in cases involving

alleged infringement on sovereignty by reason of taxa-

tion, and in general, alleged illegal taxation of Mohawks.

The State of New York imposes tax on the possession

of cigarettes for sale. The case before this Court involves

an attempt by the State, through regulations promulgated

by its Department of Taxation and Finance, to require

respondents, both of whom are wholesalers, to precollect

this tax on sales of cigarettes to Indian retailers in Indian

territories.

Respondents engage in trade with Indian retailers pur-

suant to federal Indian trader licenses issued by the Bu-

reau of Indian Affairs of the U.S. Department of the

Interior. They contend that only the federal government

may regulate commerce between federally licensed Indian

traders and their Indian customers, and, accordingly, that

the regulations are invalid, as the New York Court of

Appeals ruled below.

3

The Tribe and the Steering Committee have a signifi-

cant and direct interest in this case for three reasons.

First, the case involves the attempted state regulation of

transactions involving Indian retailers and occurring

within the boundaries of Indian territory.” Second, the

regulatory regime envisions direct participation by the

Tribe and other Indian nations with territory that borders

New York. Third, the regulatory regime will result in

extraordinary burdens on Indian retailers and/or imper-

missible taxation of consumers who are not subject to

New York’s cigarette tax.

In summary, this case involves the imposition of sig-

nificant burdens on commerce within Indian territory be-

tween non-Indian suppliers and Indian retailers. Respond-

ents’ interests stem from their status as federal licensees.

The Tribe and the Steering Committee concur with re-

spondents’ position. In addition, however, the Tribe and

the Steering Committee respectfully contend that analysis

of this case also requires consideration by this Court of

the unique and federally recognized interests of the Iro-

quois nations and their people.

SUMMARY OF ARGUMENT

The State of New York Court of Appeals correctly

held that federal regulation of commerce between licensed

Indian traders and Indian retailers pre-empts New York’s

regulatory scheme for precollection of taxes on cigarettes

that may be sold to non-Indian customers in Indian

territory.

The analytical framework set forth by this Court re-

quires examination of the broad policy underlying the

federal Indian trader laws and notions of Indian sover-

eignty rooted in traditional tribal independence. In light

2 For many Iroquois, the term “reservation” has negative racial,

ethnic, and cultural connotations. This brief refers to areas that

are within the governmental jurisdiction of the Six Nations as

“territories,” rather than “reservations,”

4

of the federal, tribal, and state interests at stake, enforce-

ment of New York’s cigarette tax regulations would in-

terfere with virtually every aspect of commerce between

Indian traders and Indian merchants on Indian land,

thereby violating federal law.

The regulations in controversy would invest New York’s

Department of Taxation and Finance with unfettered con-

trol over both the number of untaxed cigarettes available

to be sold by Indian traders and the persons permitted to

purchase and resell such cigarettes. Exercise of such con-

trol would conflict directly with section 261, title 25 of

the U.S. Code, and would usurp proper Indian sover-

eignty over commerce in Indian territory. The regulations

would impose onerous and expensive paperwork and rec-

ordkeeping requirements on all federally licensed Indian

traders, Indian retailers, and individual Indian consumers

in their dealings on Indian land. In addition to burden-

ing commerce between licensed Indian traders and their

Indian customers, the State’s licensing procedure also

would undermine tribal sovereignty. Finally, it is likely

that New York’s regulations would allow for insufficient

supplies of untaxed cigarettes for sale to Indian consumers

on Indian territory. That would burden the licensed trad-

ers, Indian retailers and wholesalers, and, most clearly,

individual Indians.

The pre-emptive effect of the federal Indian trader laws

with respect to commerce between the traders and their

Indian customers is not limited by this Court’s holdings in

cases involving the duties of Indian merchants to collect

sales taxes on sales to non-Indian customers on Indian

territory. Those cases did not consider the impact of

federal Indian trader laws.

5

ARGUMENT

I. THE NEW YORK STATE COURT OF APPEALS

CORRECTLY DETERMINED THAT PETITION-

ERS’ REGULATORY SCHEME IS PRE-EMPTED BY

FEDERAL LAW.

The New York State Court of Appeals held that the

tax provisions in question, although designed to ensure

the collection of tax from non-Indian consumers, en-

croached to a significant degree on trade between whole-

sale distributors and their Indian customers, and thus were

pre-empted by federal law. The holding of the Court of

Appeals was correct, and should be affirmed.

A. Federal Law Pre-Empts State Regulations that

Conflict or Interfere with Federal Law Applicable

to Transactions Between Indians and Federally

Licensed Indian Traders.

Rulings issued by this Court, beginning with Warren

Trading Post v. Arizona Tax Comm'n, 380 U.S. 685, 691

(1965) (“Warren Trading Post’), and including the more

recent decision in White Mountain Apache Tribe v.

Bracker, 448 U.S. 136 (1980) (“White Mountain’), es-

tablish strict limits on state regulation of commercial rela-

tions with the Indian nations. New York State’s cigarette

tax regulations must be evaluated in light of these prece-

dents and their historical antecedents.

Federal control of commercial and other relations with

the Indian nations is rooted deep in our history. In part,

these matters have been treated as a federal responsibility

because of the unique status of the Indian nations as in-

dependent peoples. See, e.g., McClanahan v. Arizona

State Tax Comm'n, 411 U.S. 164, 168-69 (1973). Un-

derpinning the federal role is the Indian Commerce Clause

of the United States Constitution, which grants Congress

the power “[t]o regulate Commerce . . . with the Indian

Tribes.” U.S. Const. art. I, § 8, cl. 3.

6

The federal government has exercised its special author-

ity to regulate dealings with the Indian nations from the

outset of the Republic. In 1790, the first Congress of the

United States passed a statute “to regulate trade and in-

tercourse with the Indian tribes.” Act of July 22, 1790,

ch. 33, 1 Stat. 137. From that day forward, federal stat-

utes have governed commerce with the Indians in their

own territory. These federal statutes are codified in their

current form at title 25 of the U.S. Code, sections 261

through 264, and are referred to collectively as the “In-

dian trader laws.” The essential operative provision grants

the Commissioner of Indian Affairs “the sole power and

authority to appoint traders to the Indian tribes” and to

make rules “specifying the kind and quantity of goods

and the prices at which such goods shall be sold to the

Indians.” 25 U.S.C. § 261.* A comprehensive scheme of

federal regulations implements the statutes. See, e.g., 25

C.F.R. §§ 140.1-.26.

The Indian trader laws are one component of the wide

range of federal policies, procedures, statutes, and regu-

lations governing virtually every aspect of dealings be-

tween Indians, in their own territories, and outside inter-

ests. A panoply of federal law has been enacted to pro-

tect and enhance the ability of Native American nations

and individuals to earn a livelihood, taking into account

Indian sovereignty and right to self-government on In-

dian land.

Pre-emption doctrine, as developed by this Court, rec-

ognizes the special nature of the relationship between the

3 This Court has noted that the Indian trader laws constitute a

“statutory plan Congress set up in order to protect Indians against

prices deemed unfair or unreasonable by the Indian Commis-

sioner.” Warren Trading Post, 380 U.S. at 691. As Warren Trad-

ing Post itself makes clear, however, the pre-emptive effect of a

federal regulatory scheme applicable to Indians is not restricted by

the original congressional intent for the statutes involved,

7

Indian nations and the United States. In Warren Trad-

ing Post, this Court unanimously concluded that the “ap-

parently all-inclusive” federal Indian trader laws “seem

in themselves sufficient to show that Congress has taken

the business of Indian trading on reservations so fully in

hand that no room remains for state laws imposing addi-

tional burdens on traders.” 380 U.S. at 690. Warren

Trading Post involved Arizona’s attempt to impose a tax

of two percent on the gross receipts of a retailer whose

business was located in Navajo territory and who was a

federally licensed Indian trader. The Court explained

that:

[A]ssessment and collection of this tax would to a

substantial extent frustrate the evident congressional

purpose of ensuring that no burden shall be impcsed

upon Indian traders for trading with Indians on res-

ervations except as authorized by Acts of Congress

. This state tax ... would put financial burdens

on appellant [the federally licensed Indian trader] or

the Indians with whom it deals in addition to those

Congress or the tribes have prescribed... .

380 U.S. at 691. The Court concluded that Arizona’s

laws imposing tax on a federally licensed Indian trader’s

sales to Navajos on Navajo territory were pre-empted by

federal law.

Subsequently, this Court held that the Indian trader

laws also pre-empt imposition of Arizona’s gross receipts

tax on a one-time sale of farm equipment to an enterprise

owned by the Gila River Indian Tribe and operating on

Gila River territory, even though the non-Indian supplier

was not a federally licensed trader. Central Machinery

‘In contexts other than this one, the scope of federal pre-

emption depends upon whether Congress explicitly stated its inten-

tion to pre-empt state regulation. It is well settled, however, that

“state authority over non-Indians acting on tribal reservations is

pre-empted even though Congress has offered no explicit statement

on the subject.” White Mountain, 448 U.S. at 151.

8

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

(1980). Determining that the transaction in question

“falls squarely within the language of 25 U.S.C. § 264,”

the Court concluded that “[ijt is the existence of the In-

dian trader statutes, then, and not their administration,

that pre-empts the field of transactions with Indians oc-

curring on reservations.” 448 U.S. at 165.

In a number of subsequent cases, the Court has had

occasion to explicate in greater detail the Warren Trad-

ing Post analysis, as applied in the context of other fed-

eral statutes. These cases establish a more articulated

framework for analyzing the pre-emptive effect of federal

law on state regulation of commercial relations with the

Indian nations.

In White Mountain, the Court reviewed the factors to

be considered in cases where “a State asserts authority

over the conduct of non-Indians engaging inactivity on

the reservation. 448 U.S. at 144. At issue in that case

was whether federal statutes and regulations vesting the

Bureau of Indian Affairs with broad authority over the

sale of timber on Indian territory, including the power to

designate prices and yields, pre-empted motor carrier

license and fuel taxes sought to be imposed by the State

of Arizona. The litigant in question, a logging company

engaged by the tribal timber enterprise to cut and trans-

port trees, operated solely on roads located on Indian

lands. In holding that Arizona’s tax regime was pre-

empted by federal law, the Court stated that it is neces-

sary to examine

the language of the relevant federal treaties and

statutes in terms of both the broad policies that un-

derlie them and the notions of sovereignty that have

developed from historical traditions of tribal inde-

pendence. This inquiry is not dependent on mechan-

ical or absolute conceptions of state or tribal sover-

eignty, but has called for a particularized inquiry into

the nature of the state, federal, and tribal interests at

stake, an inquiry designed to determine whether, in

9

the specific context, the exercise of state authority

would violate federal law.

448 U.S. at 144-45 (emphasis added). The Court con-

cluded that the state’s interest in raising revenue could

not overcome the federal interest, as embodied in the

comprehensive regulatory scheme governing timber oper-

ations on Indian territory, and the interest of the tribe

itself, that is, “notions of sovereignty that have developed

from historical traditions of tribal independence.” ° Jd.

at 145; see also Ramah Navajo Sch. Bd. v. Bureau of

Revenue, 458 U.S. 832, 836-38 (1982) (under White

Mountain, federal regulation of financing and construc-

tion of educational facilities in Indian territory pre-empts

imposition of gross receipts tax on non-Indian construc-

tion company); cf. Cotton Petroleum Corp. v. New

Mexico, 490 U.S. 163, 176-77 (1989) (under White

Mountain, federal regulation of Indian mineral leasing

does not pre-empt state severance taxes on oil and gas

production by non-Indian lessee where Congress expressly

waived exemption from such taxes and tribe not burdened

by the tax regime).

In the instant case, New York seeks to require the

collection, by federally licensed traders, of taxes pur-

portely due on cigarettes destined for sale to non-Indian

consumers in Indian territory. Even assuming that a

valid state interest underlies New York’s precollection

regime,® under the Warren Trading Post line of cases,

5 Federal law and policy in this area are closely interwoven. As

the White Mountain Court noted, “[a]mbiguities in federal law

have been construed generously in order to comport with...

traditional notions of sovereignty and with the federal policy of

encouraging tribal independence.” White Mountain, 448 U.S. at

144 (citing McClanahan v. Arizona State Tax Comm’n, supra, 411

U.S. at 174-75).

6 Amici do not concede that New York has the right to impose

tax on transactions occurring between Indian merchants and their

customers on Mohawk territory. The treaties in force between the

>

10

New York’s tax regulations nevertheless are pre-empted

because they impinge on the interest of the federal govern-

ment in regulating commerce with the Indians, and the

interest of the Indian nations in maintaining independence

from state regulation of transactions on Indian lands.

B. New York’s Regulatory Scheme Violates Federal

Law by Interfering with Commerce Between In-

dians and Federally Licensed Indian Traders.

1. New York’s Tax Scheme Comprehensively Regu-

lates Sales by Indian Traders on Indian Terri-

tory.

Section 471 of the New York Tax Law imposes a tax

“on all cigarettes possessed in the state by any person for

sale ..., except that no tax shall be imposed under such

circumstances that this state is without power to impose

such tax.” The tax is intended to be borne by the retail

cigarette consumer. Tax Law § 471(2). Pursuant to this

provision, the New York Department of Taxation and

Finance promulgated a comprehensive set of regulations

aimed at regulating the distribution, sale, and consump-

tion of cigarettes in sovereign Indian territories for the

sole purpose of collecting the state cigarette tax on the

sale of cigarettes by Indian retailers to non-Indian or non-

member Indian consumers.

The regulatory regime requires Indian (and non-Indian )

retailers and Indian wholesalers who sell or intend to

sell untaxed cigarettes in Indian territories to register with

United States and the Six Nations of the Iroquois Confederacy

confirm that the Six Nations retain their aboriginal sovereignty

over the territories reserved exclusively to them. See, e.g., Treaty

with the Six Nations art. III, 7 Stat. 15, 15-16 (1784). The Six

Nations, including amicus Saint Regis Mohawk Tribe, were never

subjugated by the United States and have never ceded any of

their aboriginal sovereignty over tribal lands. This Court has not

ruled on whether state action, including any sales or excise taxes,

apply in these precise circumstances.

11

the Department of Taxation and Finance. See 20 NYCRR

§ 335.6(b)(4), (£)(2)." An Indian retailer may pur-

chase untaxed cigarettes from a federally licensed Indian

trader only if the State has issued a “certificate of

registration.” See id. § 335.6(f)(3). Registration is

required because so-called “qualified sales” in Indian ter-

ritories are made without the prepayment or precollection

of tax. See id. § 335.6(b)(5). In order to effectuate a

qualified sale in an Indian territory, the purchaser of cig-

arettes is required to give the seller proof of entitlement

to purchase untaxed cigarettes. Id. §§ 335.6(d)(2) (pur-

chases by an exempt Indian nation or tribe), (e)(2)

(purchases by a qualified Indian consumer), and (f) (4)

(purchases by a registered dealer).

Only agents who are licensed by the Department of

Taxation and Finance to purchase and affix cigarette tax

stamps are authorized to possess “untaxed” cigarettes to

transport them onto Indian territory for subsequent “qual-

ified sales.” See id. § 335.7(b)(2). Each such agent

licensed by New York who sells to Indian retailers or

wholesalers on Indian territory also must be a federally

licensed Indian trader. The amount of untaxed cigarettes

which may be sold to Indian nations or tribes or sold to

registered dealers for qualified re-sale will be determined

by the State. See id. §§ 335.7(b) (3), (c), and (d).

If an Indian nation or tribe agrees with the Depart-

ment of Taxation and Finance to regulate, license, or

control the sale of untaxed cigarettes in the territory,

then the wholesale agent must obtain approval from the

nation or tribe, prior to each sale, of the agreed upon

number of untaxed cigarettes he may deliver to the Indian

territory. Jd. § 335.7(c)(1). Otherwise, prior to each

sale, the agent must ask the Department of Taxation and

7 Section 335 of these regulations was renumbered as section

336, as of December 19, 1990, without substantive change. For the

sake of clarity in citing the opinions below and other briefs, the

prior numbers will be used.

12

Finance for approval of the amount of untaxed cigarettes

he may deliver to the Indian territory. Jd. § 335.7

(c)(2).°

Department of Taxation and Finance approval of the

number of untaxed cigarettes that may be delivered will

be based on evidence of valid purchase orders of quanti-

ties “reasonably related to the probable demand of quali-

fied Indian consumers in the trade territory” of the Indian

nation or tribe or of the registered dealer involved. /d.

§ 335.7(d)(1). Probable demand is determined by the

Department of Taxation and Finance. In those cases

where the Indian nation or tribe agrees to regulate the

sale of untaxed cigarettes, or presumably otherwise col-

lects data on the number of sales to qualified consumers,

the Department of Taxation and Finance will “consult”

with the nation or tribe regarding its evidence on prob-

able demand. /d. § 335.7(d)(2)(i). In the absence of

such regulation or evidence, the amount of untaxed ciga-

rettes that may be delivered to an Indian territory will

be equal to the average daily cigarette consumption in

the State of New York, multiplied by the number of en-

rolled members of the nation or tribe. Jd. § 335.7

(d)(2)(ii). The Department of Taxation and Finance

also will “consider” evidence provided by registered

dealers relating to probable demand. See id. § 335.7

(d}<4).

The Department of Taxation and Finance will con-

sider the same sources of evidence to determine the trade

territory of an Indian nation or tribe or of a registered

dealer. Jd. §§ 335.7(d)(3)(i), (d)(4). Otherwise,

the Department of Taxation and Finance will determine

the trade territory “based upon the information at its

disposal.” Id. § 335.7(d) (3) (ii).

8 Whether an Indian nation or tribe participates in the regula-

tory regime or not, the Department of Taxation and Finance will

determine the total amount of untaxed cigarettes that may be sold.

See 20 NYCRR § 335.7 (d).

13

It is evident from the foregoing that New York’s re-

gime for precollection of cigarette taxes would affect vir-

tually every aspect of transactions occurring in Indian

territory between federally licensed Indian traders and

their Indian customers.

2. New York’s Tax Regime Conflicts with Federal

Law and Usurps Tribal Self-Government.

The regulations under scrutiny purport to control each

basic component of cigarette sales by non-Indian whole-

salers to their Indian customers in Indian territories—

who is entitled to sell untaxed cigarettes, who is entitled

to purchase such cigarettes, and the quantity of such ciga-

rettes that may be sold. In addition, the regulations im-

pose comprehensive and burdensome licensing and rec-

ordkeeping requirements on both wholesalers and Indian

merchants. To say that these regulations interfere with

Indian trade is an extreme understatement. They are

in direct conflict with the federal Indian trader laws,

burden dealings between Indians and Indian traders, and

wrest from tribal governing bodies the authority to regu-

late transactions occurring in Indian territories.

New York’s regulations are in direct conflict with sec-

tion 261 of the Indian trader laws. In that statute, Con-

gress granted the Commissioner of Indian Affairs “sole

power and authority . . . to make... rules . . . specifying

the kind and quantity of goods . . . which . . . shall be

sold to the Indians.” 25 U.S.C. § 261 (emphasis added).

Yet the regulations in question purport to control com-

merce in untaxed cigarettes between federally licensed

Indian traders and their Indian customers in Indian

territories.

The New York regulations permit only those persons

registered with the Department of Taxation and Finance

to purchase and recell untaxed cigarettes in Indian terri-

tories. See 20 NYCRR § 335.6(b)(4). Accordingly, the

right of a federally licensed Indian trader to sell untaxed

14

cigarettes to Indian purchasers is conditioned on registra-

tion with the State by the purchasers, who must provide

proof of entitlement to purchase such cigarettes. Id.

§ 335.6(g). Further, the import of the regulations is

that the Department of Taxation and Finance has the

ultimate authority to determine the number of untaxed

cigarettes that may be sold in Indian territories. If an

Indian nation or tribe does not agree to regulate sales of

untaxed cigarettes in its territory in accordance with the

dictates of the Department, then the Department’s au-

thority over such sales will be unfettered. Absent regula-

tion by the Indian nation or tribe, the Department will

calculate both (1) the trade territory “based upon the

information at its disposal,” id. § 335.7(d)(3) (ii), and

(2) probable demand “based upon the New York aver-

age consumption per capita, . . . multiplied by the num-

ber of enrolled members of the affected nation or tribe,”

id. § 335.7(d)(2)(ii). At most, the Department also

will “consider” any evidence of probable demand sub-

mitted by registered dealers (such as Indian retailers),

id. § 335.7(d)(4), and perhaps by the nation or tribe

itself. In any event, absent regulation by the Indian na-

tion or tribe, the Department will determine the total

number of untaxed cigarettes permitted to be sold, and

must approve beforehand each separate sale of untaxed

cigarettes by a federally licensed Indian trader to an In-

dian retailer on Indian territory.

If an Indian nation or tribe agrees to regulate cigarette

sales in its territory, it must negotiate with New York's

Department of Taxation and Finance to determine the

“agreed upon amount of [untaxed] cigarettes” that can

be brought into the territory by federally licensed Indian

traders. See id. § 335.7(c)(1). That number must be

“reasonably related to . . . probable demand of qualified

Indian consumers in the trade territory.” Jd. §§ 335.7

(d)(1), (2)(i). The Department of Taxation and Fi-

nance will “consult” with the Indian nation or tribe re-

garding any evidence it may have relating to (1) prob-

15

able demand, id. § 335.7(d)(2)(i), and (2) the “regu-

lated and or licensed sellers located on its reservation,”

id. § 335.7(d)(3)(i).

It is clear that the Department of Taxation and Fi-

nance alone will make the final determination of how

many untaxed cigarettes may be brought into Indian

territory by federally licensed Indian traders, even in cases

where the Indian nation or tribe agrees to regulate cig-

arette sales in accordance with the Department's regula-

tions. At most, the Department will “consult” with the

Indian nation or tribe and then will determine probable

demand within the trade territory. The Department will

decide whether the number of untaxed cigarettes to be

“agreed upon” between the nation or tribe and the De-

partment in fact is reasonably related to that probable

demand.

In short, the State of New York asserts the authority

to control the very matters expressly reserved to the

Commissioner of Indian Affairs in section 261 of the

Indian trader laws. Thus, New York’s precollection

scheme, on its face, conflicts with federal statutes de-

signed to govern commercial relations with the Indian

nations. This should be sufficient to establish that the

regulations are pre-empted by federal law. In addition,

however, it is clear that New York’s regulations will, in

practice, both interfere with Indian commerce and offend

the sovereignty of the Indian nations.

Under the regulations, cach Indian nation or tribe,

including amicus Saint Regis Mohawk Tribe, must ob-

tain an “exempt organization certificate” from the De-

partment of Taxation and Finance. /d. § 335.6(d) (ii).

Each retailer and Indian wholesaler must obtain a “cer-

tificate of registration.” Jd. § 335.6(f). Each Indian con-

sumer must “issue to the seller . . . a properly completed

certificate of individual Indian exemption.” Id. § 335.6

(e)(2). Upon making “an initial purchase,” the pur-

16

chaser must provide the supplier with a copy of the appli-

cable certificate. Id. § 336.6(g)(1). Each subsequent de-

livery of untaxed cigarettes must be “substantiated as be-

ing exempt from tax with an individual bill, invoice, re-

ceipt or other form of written evidence given by the seller

showing the exempt Indian nation or tribe, qualified In-

dian consumer, or registered dealer as the purchaser.

Id. Such substantiation “must indicate the quantity of

cigarettes delivered, the purchase price of the cigarettes

without regard to any exemption and the price paid or to

be paid by the exempt purchaser for such cigarettes. Id.

§ 335.6(g)(2). The seller must retain copies of the

substantiation, id., and “establish an acceptable system of

associating [the] copies . . . with the applicable tax ex-

emption certificates initially received from the purchas-

ers.” Id. § 335.6(g) (3).

These rules will require detailed documentation of every

transaction between federally licensed Indian traders and

their Indian customers on Indian territory and every trans-

action between Indian retailers and Indian consumers.

The expense and paperwork burden imposed by this un-

wieldy system will be oppressive.”

Under New York’s regulatory scheme, there is no as-

surance that Indian consumers will have access to suffi-

cient quantities of untaxed cigarettes to satisfy their per-

In Washington v. Confederated Tribes of Colville Indian Res-

ervation, 447 U.S. 134, 159-60 (1980), this Court upheld Wash-

ington State’s requirement that Indian merchants retain records

of Indian purchasers, their triba! affiliations, the Indian territory

in which each sale took place, and the dollar amounts and dates

of each sale. As the Court of Appeals concluded below, the re-

quirements that New York State seeks to impose are more burden-

some than those at issue in Colville. Moreover, in Colville this

Court upheld Washington State’s recordkeeping requirements

solely because the Indian tribes involved failed to show that the

requirements were not reasonably necessary. The lower court had

imposed that burden of proof on Washington State. See id.

17

sonal requirements. Indeed, it is virtually certain that

Indian consumers will be forced to purchase taxed ciga-

rettes. Moreover, there is no mechanism in the regula-

tions for refunding state cigarette taxes illegally paid.

See Tax Law § 476 (refund procedure for agents, deal-

ers, and distributors, but not consumers).

In determining the number of untaxed cigarettes to be

allowed, the regulations rely in large part on the daily

average consumption of cigarettes throughout New York

State. See 20 NYCRR § 335.7(d)(2)(ii). The under-

lying premise is that daily average consumption of ciga-

rettes in Indian territories is the same. The disparity in

smoking rates between Indians and the public-at-large,

however, has been reported in medical literature. See,

e.g., Cigarette Smoking Among American Indians, Alas-

kan Natives—Behavioral Risk Factor Surveillance System,

1987-1991, 286 J. of Am. Med. Ass’n. 3052 (Dec. 2,

1992). If “probable demand” is limited to the overall

New York average rate times the number of Indians in a

given “trade territory,” the number of untaxed cigarettes

available almost certainly will not meet actual demand by

Indian consumers. The regulations purport to account

for any such differences by directing the Department of

Taxation and Finance to “consider” information sub-

mitted by a given Indian nation or tribe or by a given

Indian retailer. See 20 NYCRR § 335.7(d)(1), (d)(2)

(i). There is no requirement, however, that the Depart-

ment accept any such information. The Department has

final authority to determine “probable demand” using the

New York State average consumption rate, in addition

to determining the “trade territory” and even the num-

ber of Indian consumers within that territory.”

10 This problem is particularly significant to amicus Saint Regis

Mohawk Tribe. The Tribe’s territory straddles the border between

the United States and Canada. Members of the Tribe reside on

both sides of the border and travel freely between the two portions

of the Tribe’s lands. Specifically, thousands of members of the

Tribe live in the Canadian portion of the territory. There is sig-

18

Finally, the regulations as applied would effectively

usurp tribal authority over transactions occurring in In-

dian territories. As previouly noted, if the regulations are

given effect, New York State alone will control the flow

of untaxed cigarettes into Indian territories. At most, the

Department of Taxation and Finance will “consult” with

the Indian nation or tribe and then will determine prob-

able demand within the trade territory. The Department

will decide whether the number of untaxed cigarettes to

be “agreed upon” between the nation or tribe and the

Department in fact is reasonably related to that probable

demand.

In these circumstances, the exercise of the Indian na-

tion’s or tribe’s authority to approve each sale of un-

taxed cigarettes within its own territory will be reduced

to informing each federally licensed Indian trader of its

share of the “agreed upon” total number allowed by the

Department. It is this aspect of New York’s regulations

that is most offensive to tribal sovereignty. If the Saint

Regis Mohawk Tribe, or any other nation or tribe border-

ing New York State, chooses not to regulate cigarette

sales on its own land pursuant to the State’s regulations,

then the Department of Taxation and Finance will dic-

tate the number of untaxed cigarettes that can be pur-

chased from federally licensed Indian traders, and will

have veto power over each and every sale of untaxed cig-

arettes to Indian merchants on Indian land. If the tribe

submits and agrees to regulate the distribution of untaxed

cigarettes according to the State’s rules, then the Tribe's

role will be advisory at most. The Tribe’s regulation of

cigarette sales will require the imprimatur of the Depart-

ment of Taxation and Finance in determining the number

nificant trade, including commerce in cigarettes, between the two

portions of the Tribe’s territory. There is no assurance, however,

that New York’s Department of Taxation and Finance will take

into account the number of Saint Regis Mohawks who reside on the

Canadian side in determining the number of untaxed cigarettes to

be made available in the southern part of the Tribe’s territory.

19

of untaxed cigarettes available and in reviewin

of ul each

individual sale. ‘

Moreover, the State’s requirement that Indian nations

or tribes and Indian retailers obtain “certificates” of tax

exemption will vest the Department of Taxation and Fi-

nance with another layer of substantive control over com-

merce in cigarettes on Indian territory. Certification is

another procedure in which Indians will be required to

seek New York’s imprimatur in order to be allowed to

purchase untaxed cigarettes from federally licensed Indian

traders and sell them to Indian consumers. That element

of New York’s tax scheme violates Indian tribal sovere-

ignty and power to regulate commerce on Indian land.

Thus, the regulations vest New York with substantive

control over commerce in cigarettes occurring on Indian

territory. This complete usurpation of tribal authority of-

fends those “notions of sovereignty . . . developed from

historical traditions of tribal independence,” that underlie

any determination of whether state action is pre-empted

by federal law. White Mountain Apache Tribe v.

Bracker, supra, 448 U.S. at 145.

In summary, New York’s regulatory regime, by pur-

porting to regulate the most fundamental aspects of sales

by federally licensed Indian traders to Indian customers

in Indian territories, on its face conflicts with section

261 of the Indian trader laws, which by its terms governs

these same aspects of cigarette sales by Indian traders.

mere a there can be no doubt that the New York

precollection regime would, in practice, im significa

additional burdens on the selationshlp te som federally

licensed Indian traders and their Indian customers, in

derogation of tribal self-government. This Court should

hold that, under Warren Trading Post and its progeny,

oo York’s regulatory scheme is pre-empted by federal

aw.

20

II. THIS COURT’S DECISIONS IN MOE, COLVILLE,

AND POTAWATOMI ARE INAPPOSITE.

The pre-emptive force of the Indian trader laws in

cases involving state taxation of sales by federally li-

censed Indian traders who sell to Indian customers in

their own territory is not altered by this Court’s holdings

in cases involving collection of state sales taxes by Indian

merchants who make retail sales to non-Indian purchas-

ers in Indian territory. See Washington v. Confederated

Tribes of Colville Indian Reservation, 447 U.S. 134

(1980) (“Colville”); Moe v. Confederated Salish &

Kootenai Tribes, supra, 425 U.S. 463 (1976) (“Moe”).

Neither Moe nor Colville addressed the issue of whether

federal law pre-empts a precollection regime imposed on

sales between federally licensed Indian traders and their

Indian customers on Indian territory.

Moe involved application of Montana’s direct tax on

retail consumers of cigarettes, which retailers were re-

quired to collect. 425 U.S. at 482. The Court held that

“It]he State’s requirement that the Indian tribal seller

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

burden” that neither “frustrates tribal self-government”

nor “runs afoul of any congressional enactment dealing

with the affairs of reservation Indians.” 425 U.S. at 483.

In Moe, the Court noted that Warren Trading Post “does

not apply,” distinguishing the cases on their facts. 425

USS. at 482.

Colville involved Washington State’s tax on “the sale,

use, consumption, handling, possession or distribution” of

cigarettes, the legal incidence of which was on “the pur-

chaser in transactions between an Indian seller and a

non-Indian buyer.” 447 U.S. at 141-42. The Court re-

lied on Moe to conclude that “the State may validly re-

quire the tribal smokeshops to affix stamps purchased

from the State to individual packages of cigarettes prior

to the time of sale to nonmembers of the Tribe.” 447

U.S. at 159. In Colville, the Indian merchants involved

21

were licensed federal Indian traders, as were their non-

Indian wholesale suppliers. 447 U.S. at 144. However,

the Court carefully pinpointed the distinction between

Indian retailers selling to non-Indians versus federally

licensed Indian traders selling to Indians:

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

Incorporate a congressional desire comprehensively

to regulate businesses selling goods to reservation

Indians for cash or exchange, see Warren Trading

Post Company v. Arizona Tax Comm'n, 380 US.

686 (1965), but no similar intent is evident with re-

spect to sales made by Indians to non-members of the

Tribe.

447 U.S. at 155-56. The status of the Indian retailers as

federally licensed Indian traders was irrelevant, therefore,

to the holding in Colville. That issue was not mentioned

at all in Moe.

The transactions at issue in Moe and Colville were re-

tail sales by Indian-owned enterprises to non-Indians (or

to non-member Indians). The taxes at issue in those

cases were sales/use taxes that were imposed directly on

retail transactions, to be paid by the non-Indian custom-

ers and collected by the Indian retailers. Moe and Col-

ville hinge on “tribal sovereignty,” deference to which

does not oust the “minimal burden” of a state’s require-

ment that Indian merchants collect tax on sales to non-

Indian customers. Warren Trading Post, by contrast,

rests on the pre-emptive effect of the federal Indian trader

laws. Respondents are correct in stating that petitioners’

reliance on Moe and Colville to weaken, narrow, or limit

the pre-emptive effect of the federal Indian trader laws,

as explained in Warren Trading Post and its progeny, is

misplaced.”

™ As noted, the holdings in Moe and Colville make no mention

of the federal Indian trader laws. Despite the clear statements in

Moe and Colville distinguishing each case from Warren Trading

Post, the two lines of cases can be confused. Non-Indian whole-

salers who are licensed Indian traders, such as respondents in this

22

Finally, petitioners’ reliance on certain dictum in Okla-

homa Tax Comm'n v. Citizen Band Potawatomi Indian |

Tribe, 498 U.S. 505 (1991), is similarly misplaced. In

that case, the Court held that tribal sovereign immunity

bars states from attempting to collect from Indian nations

or tribes state taxes payable on retail sales to non-Indians

in Indian territory. The Court ventured, however, that

“[s]tates may of course collect the sales tax from cigarette

wholesalers . . . by assessing wholesalers who supplied

unstamped cigarettes to the tribal stores.” 498 U.S. at

514. It should be noted that neither Potawatomi, nor the

only authority cited for this proposition, City Vending of

Muskogee, Inc. v. Oklahoma Tax Comm’n, 898 F.2d 122

(10th Cir. 1990), even mentions the federal Indian trader

laws. Accordingly, Potawatomi is not authority on the

question of whether federal law pre-empts New York’s

tax regulations.

CONCLUSION

For the foregoing reasons, amici urge this Court to

affirm the decision of the New York State Court of

Appeals.

Respectfully submitted,

BRADLEY S. WATERMAN

(Counsel of Record)

SAMUEL M. MARUCA

G. FRANK RILEY III

Of Counsel

ZAPRUDER & ODELL

601 13th Street, N.W., Suite 800S

Washington, D.C. 20005

(202) 508-9600

Counsel for Amici Curiae

Saint Regis Mohawk Tribe

Mohawk Taz Steering Committee

January 18, 1994

case, come under Warren Trading Post. This Court should de-

cline petitioners’ invitation to blur these two separate lines of

cases.