Amicus Curiae Brief — Department of Taxation and Finance of NY v. Milhelm Attea & Bros.
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Supreme Court of the United Sfaigs,, ,... .
October Term, 1993
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DEPARTMENT OF TAXATION AND FINANCE OF THE
STATE OF NEW YORK, et al.,
Petitioners,
Vv.
MILHELM ATTEA & BROS. INC.,
Respondent.
o
JAMES W. WETZLER, as Commissioner of Taxation and
Finance of the State of New York, et al.,
Petitioners,
Vv.
ELIAS H. ATTEA, JR., 6175 Stickler Street,
Clarence, New York 14031,
Respondent.
S
On Writ Of Certiorari To The Court of Appeals
Of The State Of New York
o
BRIEF AMICI CURIAE OF THE CHEYENNE-ARAPAHO
FRIBES OF OKLAHOMA, THE NATIONAL CONGRESS OF
AMERICAN INDIANS, et al. IN SUPPORT OF RESPONDENTS
S
Metopy L. McCoy*
YVONNE TERESA KNIGHT
Km Jerome GorrscHALK
Native AMERICAN RIGHTS FUND
1506 Broadway
Boulder, CO 80302
(303) 447-8760
Counsel the Cheyenne-Arapaho
Tribes of Oklahoma, the National
Congress of American Indians, et al.
“Counsel of Record for All Amici
January 1994
(additional amici listed inside)
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CAF OS 0 OE eB “o”
__Salish and Kootenai Tribes of (612) 893-1813
BertRAM E. Hirscu
81-33 258th Street
Floral Park, NY 11004
(718) 347-3022 1136 Pearl Street, Suite 203
Counsel for the Sisseton- Boulder, CO 80302
Wahpeton Dakota Nation, (303) 444-2549
also known as the Sisseton- Counsel for the Blac
Wahpeton Sioux Tribe Tribe of the Blackfeet Indian
Patrick L. Smomn Reservation and the Ute
é' Indian Tribe of the Uintah
Legal Department
Confederated Salish and and Ouray Reservation
Kootenai Tribes of the Curt V. BLuEDoc
Flathead Nation BiuEDoc Law Orrice, P.A.
P.O. Box 278 Southgate Office Plaza
Pablo, MT 59855 Suite 670
(406) 675-2700 5001 West 80th Street
Counsel for the Confederated Bloomington, MN 55437
the Flathead Nation Counsel for the Shakopee
Mdewakanton Dakota
MicHaet E. Taytor Community
Reservation Attorney
Confederated Tribes of the
Colville Reservation
Box 150
Nespelem, WA 99155
(509) 634-4711
Counsel for the Confederated
Tribes of the Colville
Reservation
Additional Amici
Jicarilla Apache Tribe
Pueblo of Laguna
Rosebud Sioux Tribe
Santa Ana Pueblo
Stockbridge-Munsee Community Band of Mohican
Indians
Three Affiliated Tribes of the Fort Berthold Indian
Reservation
TABLE OF CONTENTS
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INTEREST OF THE AMICI CURIAE................
INTRODUCTION AND SUMMARY OF ARGUMENT
“ese eevee eneeeneeeneeeeeneeeneeeeeee ere eee hh ee eee
TT Ti ccradebbnsebaddeseeceeesctoecsececes
I. THE STATE CIGARETTE TAX REGULATIONS IN
THIS CASE ARE INVALID UNDER FEDERAL
LAW AT LEAST TO THE EXTENT THEY
RESTRICT SALES OF UNTAXED CIGARETTES
TO TRIBAL MEMBERS IN INDIAN COUNTRY. .
A. State Regulation Of Cigarette Sales To Tribal
Members In Indian Country Is Preempted
By The Indian Traders Statutes And By The
Compelling Federal And Tribal Interests In
Tribal Self-Government And Economic
ET nenbedestéecccoccccecescoeces
B. State Regulation Of Cigarette Sales To Tribal
Members In Indian Country Infringes On
Tribal Self-Government....................
Il. IN CASES WHERE A TRIBE HAS ENACTED
ITS OWN ENFORCEMENT SCHEME OR
ENTERED INTO A COMPACT WITH A STATE
WHICH ADDRESSES THE COLLECTION AND
REMITTANCE OF VALID STATE TAXES ON
CIGARETTE SALES TO NON-MEMBERS IN
INDIAN COUNTRY, THE APPLICABLE PRE-
SUMPTION SHOULD BE THAT SUCH TRIBAL
LAWS AND COMPACTS PREEMPT THE
STATE’S ENFORCEMENT SCHEME...........
12
TABLE OF CONTENTS - Continued
Page
Ill. IN CASES WHERE CIGARETTE SALES ARE
AN INCIDENTAL ASPECT OF A LARGER,
RESERVATION-BASED TRIBAL ECONOMIC
DEVELOPMENT PROJECT, TRIBAL INTER-
ESTS MAY OUTWEIGH STATE INTERESTS IN
TAXING NON-MEMBER CIGARETTE PUR-
GE bd dbccdcescdecesecéccvnbeconhesseceres 18
CUE acc nssssnevncdistateneianens Sr
TABLE OF AUTHORITIES
Page
Brendale v. Confederated Tribes and Bands of the
Yakima Indian Nation, 492 U.S. 408 (1989)........ 14
California v. Cabazon Band of Mission Indians,
Ge Ce ee is 6066s cbeckctesevcs 11, 18, 19, 20
Central Machinery Co. v. Arizona Tax Comm’‘n,
ee Se SE, ic. Finn oudaddbedoabbunundvic< 10
Citizen Band Potawatomi Indian Tribe of Okla-
homa v. Oklahoma Tax Comm’‘n, 888 F.2d 1303
(10th Cir. 1989), aff'd in part and rev'd in part, 498
ey I On oo ec oe nadedadenesdiubunees 11
Cotton Petroleum Corp. v. New Mexico, 490 U.S.
eee hee enaneneae ae 14
County of Yakima v. Confederated Tribes and
Bands of the Yakima Indian Nation, 502 U.S.
oi, CL dis cht tchekebéchewdeaaee« 14
Gila River Indian Community v. Waddell, 967 F.2d
GL ERIE AE I eee ae 18
Indian Country, U.S.A., Inc. v. Oklahoma ex rel.
Oklahoma Tax Comm'n, 829 F.2d 967 (10th Cir.
1987), cert. denied, 487 U.S. 1218 (1988)............ 21
lowa Mutual Ins. Co. v. LaPlante, 480 U.S. 9 (1987) .... 17
McClanahan v. Arizona Tax Comm'n, 411 U.S. 164
ae Ras aE og GaN ot Ee ere ae ee rene 13
Mississippi Band of Choctaw Indians v. Holyfield,
ee en ee dunehuwenas 17
Moe v. Confederated Salish and Kootenai Tribes of
the Flathead Reservation, 425 U.S. 463 (1976)..... passim
National Farmers Union Ins. Cos. v. Crow Tribe,
ne ccs cdadnbebkubbaaue des
iv
TABLE OF AUTHORITIES — Continued
Page
New Mexico v. Mescalero Apache Tribe, 462 U.S.
Be ME cc ccdscnedcdetisddcndnobadiis 14, 17, 18, 20
Oklahoma Tax Comm’n v. Citizen Band
Potawatomi Indian Tribe of Oklahoma, 498 U.S.
fC OTe eT TT TTT TTT TTT rT Te 13, 17
Oklahoma Tax Comm'n v. Sac and Fox Nation, 508
if oe Re eee 12
Ramah Navajo School Bd. v. Bureau of Revenue,
— 5 Ff —_- PPT eTTTeT rer reT Te TTT Tee 10
Warren Trading Post Co. v. Arizona Tax Comm’n,
Be Ce GE ED vee ccccucecccasccedetucess 3, 9, 12
Washington v. Confederated Tribes of the Colville
Indian Reservation, 447 U.S. 134 (1980)....... passim
White Mountain Apache Tribe v. Bracker, 448 U.S.
BP ec cctcnvescnascvensscesccsesecocse 10, 12, 15
Williams v. Lee, 358 U.S. 217 (1959).............. 12, 13
Unitrep States STATUTES
The Indian Traders Statutes, 25 U.S.C. §§ 261-264..... )
The Indian Child Welfare Act, 25 U.S.C.
i PEED SEceusewsnceneevcescececscsgestuevece 17
The Indian Gaming Regulatory Act, 25 U.S.C
DT cuncadunuashactdentescesansesavescccaus 20
State STATUTES AND REGULATIONS
New York Tax Law §§ 481, 1814, 1846, and 1847..... 7
SD OD MEME cc ccccccccccscessccoocccee passim
Vv
TABLE OF AUTHORITIES - Continued
Page
N-88-53, Notice to Registered Distributors of
Motor Fuel, Diesel Motor Fuel and Licensed
Cigarette Agents Regarding Sales of Tax-Free
Product on Indian Reservations.................. 8, 9
TripAL Copes AND ORDINANCES
Cheyenne-Arapaho Tribes of Oklahoma General
Revenue and Taxation Act of 1988, Ordinance
Pe, GER CE, By, BOE. cccccccccccccvcccscces
Flathead Nation Tax Exempt Sales Ordinance, No.
Se SE CE edn diudedesdasudevescivendceeds
Sisseton-Wahpeton Sioux Tribes Codes of Law,
Chapter 10, Retail Business Tangible Personal
Property Sales Tax Act (Feb. 5, 1986) and Chap-
ter 12, Tribal Tobacco Outlets Excise Tax Act
ar SED Given ios 460044 00040600400NKeiiene eee
COMPACTS AND AGREEMENTS
Agreement Between the Shakopee Mdewakanton
Indian Community and the Department of Rev-
enue of the State of Minnesota Related to the
Refund of Precollected Excise Taxes on Ciga-
SE Gs ED eddcuesddseccavidcoccscccadecsss
Agreement Between the Stockbridge-Munsee
Tribe and the Department of Revenue of the
State of Wisconsin Related to the Refund of
Precollected Excise Taxes on Cigarettes (Aug.
PS SS-Cenannacucsesdennesaswsdedeenbbusiescewes
No. 93-377
¢
In The
Supreme Court of the United States
October Term, 1993
°
DEPARTMENT OF TAXATION AND FINANCE OF THE
STATE OF NEW YORK, et al.,
Petitioners,
V.
MILHELM ATTEA & BROS. INC., et al.,
Respondent.
oe |
JAMES W. WETZLER, as Commissioner of Taxation and
Finance of the State of New York, et al.,
Petitioners,
V.
ELIAS H. ATTEA, JR., 6175 Stickler Street,
Clarence, New York 14031,
Respondent.
°
On Writ Of Certiorari To The Court of Appeals
Of The State Of New York
e
BRIEF AMICI CURIAE OF THE CHEYENNE-ARAPAHO
TRIBES OF OKLAHOMA, THE NATIONAL CONGRESS OF
AMERICAN INDIANS, et al. IN SUPPORT OF RESPONDENTS
e
INTEREST OF THE AMICI CURIAE!
Amici curiae are thirteen federally recognized Indian
tribes and one national Indian organization.? Amici have a
substantial interest in issues regarding sales of cigarettes
in Indian country. Some Amici tribes sell cigarettes to
non-tribal members and to members in Indian country, in
their convenience stores and in conjunction with other
tribal businesses. All Amici tribes exercise their sovereign
jurisdiction over cigarette sales and other commercial
activities in Indian country. They do so under this Court's
cases and under other federal law confirming their sover-
eignty, including their sovereign right to be free from
state jurisdiction in Indian country.
The State of New York (hereinafter “the State”) here
seeks to enforce quotas on the number of untaxed ciga-
rettes that may be sold to tribal members in Indian coun-
try. The State also presumes to regulate how and where
these sales will occur and how and where such purchases
may be used. The paramount issue in this case then is
whether a state can regulate cigarette sales to tribal mem-
bers in Indian country. Amici strenuously urge this Court
1 Counsel for Petitioner does not object and Counsel for
Respondents consent to the filing of the Brief of Amici. Their
letters are submitted for filing herewith.
2 The National Congress of American Indians (NCAI) is the
oldest and largest national organization of Indian governments
and individuals in the United States. NCAI is dedicated to
protecting the rights and improving the welfare of American
Indians and Alaska Natives, to enlightening the public toward a
better understanding of Indian people, and to preserving rights
under Indian treaties and agreements with the United States.
to reject the State’s backhanded attempt to regulate such
sales.
Several Amici supporting the State in this case
broadly assert or imply that Indian retailers are not abid-
ing by their obligations under federal law to collect and
remit valid state taxes on cigarette sales to non-tribal
members, and that Indians are engaged in widespread
marketing of naked cigarette tax exemptions to non-mem-
bers in Indian country. Amici urge this Court, in fashion-
ing its opinion in this case, to consider that many tribes
have enacted regulations or entered into agreements with
states addressing cigarette tax collection in Indian coun-
try, and that sales of cigarettes in Indian country to non-
members increasingly occur in the context of value gener-
ated on the reservation and in conjunction with the provi-
sion of services to non-members.
¢
INTRODUCTION AND SUMMARY OF ARGUMENT
In this case, wholesale distributors who supply ciga-
rettes to Indian retailers on reservations located in New
York challenge the State’s cigarette tax laws and regula-
tions. The New York Court of Appeals held the laws and
regulations invalid under federal law. The court distin-
guished the laws and regulations here from those
involved in Moe v. Confederated Salish and Kootenai Tribes of
the Flathead Reservation, 425 U.S. 463 (1976) and Washing-
ton v. Confederated Tribes of the Colville Indian Reservation,
447 U.S. 134 (1980) on the grounds that the State assesses
its cigarette taxes on wholesalers, not retailers. The court
then held that the rule of Warren Trading Post Co. v.
Arizona Tax Comm'n, 380 U.S. 685 (1965), that federal law
has completely preempted state regulation of reservation
Indian trade, applied in this case rather than Moe and its
progeny. Alternatively, the court found the laws and reg-
ulations impose undue burdens on the wholesalers.
The New York Court of Appeals reached the correct
result, at least with respect to regulation of sales of ciga-
rettes to tribal members, though it failed to note the most
compelling reason for that result. The thrust of the state
laws and- regulations is twofold. The laws assess whole-
salers for taxes imposed on retail cigarette sales, includ-
ing sales on Indian reservations to non-tribal members.*
The regulations regulate on-reservation sales of untaxed
cigarettes to tribal members. They do this by dictating
how and where tribal Indians can sell, purchase, and use
untaxed cigarettes. In this sense the state regulations are
unlike any heretofore examined by this Court.
In Part I of this Brief Amici address the State’s regula-
tion of sales of cigarettes to tribal members in Indian
country. We show how that regulation is preempted by
federal law and infringes on tribal self-government.
In Parts II and III we address the analytical approach
this Court should adopt in determining whether and how
a state may enforce its taxes on cigarette sales to non-
members in Indian country in two situations involving
tribal interests not presented by the facts of Moe and
Colville.
3 Amici do not address the issue of the State’s right to assess
wholesalers for taxes imposed on retail sales of cigarettes to
non-tribal members in Indian country.
The first situation involves tribal efforts to comply
with the holdings in Moe and Colville that tribes must
assist in enforcing valid state taxes on cigarette sales to
non-members. We urge this Court to adopt the principle
that the existence of tribal laws or tribal-state compacts
which address collection and remittance of the state taxes
overcomes the presumption that a state enforcement
scheme is necessary to prevent tax evasion, and shifts the
burden to the state to show that the tribal enforcement
scheme is ineffective.
The second situation focuses on the nature of the
cigarette sales and involves instances where the sales to
non-members are an incidental aspect of a larger on-
reservation tribal economic enterprise involving provi-
sion of services to non-members. In such situations, we
urge the Court to adopt the principle that the state’s
interest in taxing non-member sales is outweighed by
tribal and federal interests and therefore state taxes may
not be imposed on such sales.
+
ARGUMENT
I. THE STATE CIGARETTE TAX REGULATIONS IN
THIS CASE ARE INVALID UNDER FEDERAL LAW
AT LEAST TO THE EXTENT THEY RESTRICT
SALES OF UNTAXED CIGARETTES TO TRIBAL
MEMBERS IN INDIAN COUNTRY
The State here comprehensively and unlawfully regu-
lates sales of cigarettes to tribal members in Indian coun-
try at the retail and consumer levels. It prescribes how
many untaxed cigarettes can be sold to Indian retailers on
their reservations, where the retailers must take delivery
of these cigarettes, how the tribal members must use the
untaxed cigarettes they buy, and where they must use
them.
The State incorrectly frames the issue regarding these
regulations as whether they are “minimal burdens”
designed to assist in the collection of valid state taxes on
reservation sales of cigarettes to non-tribal members. Moe
v. Confederated Salish and Kootenai Tribes of the Flathead
Reservation, 425 U.S. 463 (1976) and Washington v. Confed-
erated Tribes of the Colville Indian Reservation, 447 U.S. 134
(1980) sanctioned the imposition of minimal burdens by
states on tribes which were reasonably necessary to pre-
vent fraud in cigarette sales to non-members. In Colville,
for example, state regulations requiring tribes and Indian
retailers to keep records of the numerical and dollar
amounts of sales they made to non-tribal members and to
tribal members were upheld. 447 U.S. at 160.
However, no attempt was made by states in those
cases to restrict the number of untaxed cigarettes which
could be sold to tribal members. This distinction is criti-
cal. The minimal burden test should not be applied to
determine the validity of direct state regulation of sales to
members. Rather, such regulation is invalid because it is
preempted by federal law and infringes on tribal self-
government.
A. State Regulation Of Cigarette Sales To Tribal
Members In Indian Country Is Preempted By
The Indian Traders Statutes And By The Com-
pelling Federal And Tribal Interests In Tribal
Self-Government And Economic Development
The State here sets a quota on the number of untaxed
cigarettes which Indian retailers may purchase for resale
on their reservations. 20 NYCRR §§ 335.7(b), 335.7(c), and
335.7(d). Indian retailers are prohibited from purchasing,
selling, or possessing untaxed cigarettes beyond the
quota. Id. at § 335.7(e); see also New York Tax Law §§ 481,
1814, 1846, and 1847 (proscribing civil and criminal pen-
alties for unlawful possession of untaxed cigarettes). The
State readily admits it limits “the amount of tax free
product which may be purchased by the tribal
retailers. .. . ” State’s Op. Br. at 24.
The quota is based on an amount “reasonably related
to the probable demand” for cigarettes by tribal members
on a reservation. 20 NYCRR § 335.7(d)(1). Probable
demand is determined in one of two ways. Id. at
§ 335.7(d)(2). The State must consult with tribes that
regulate, license, or control the sale and distribution of
cigarettes within their reservations regarding evidence
the tribes may submit to such probable demand, includ-
ing sales records, consumption records, tribal enrollment
records, and other statistical evidence. Id. at
§ 335.7(d)(2)(i). In the absence of tribal regulation or
evidence, the State will calculate the probable demand
“based on the New York average consumption per capita,
as compiled for the most recently completed calendar or
fiscal year, multiplied by the number of enrolled mem-
bers of the affected nation or tribe. ... ” Id. at
§ 335.7(d)(2)(ii); see also State’s Op. Br. at 19 (probable
demand is “an amount no greater than the maximum
legitimate Indian consumption of the reservation”).
Wholesalers and Indian retailers must register with
the State to purchase untaxed cigarettes. 20 NYCRR
§§ 335.6(b)(4) and 335.6(f). Prior approval of the State or
regulating tribe is required for each sale or delivery of
untaxed cigarettes. Id. at § 335.7(c). The quota system is
implemented through a “coupon system” imposed on
wholesalers and Indian retailers. See Notice to Registered
Distributors of Motor Fuel, Diesel Motor Fuel and
Licensed Cigarette Agents Regarding Sales of Tax-Free
Product on Indian Reservations, N-88-53, New York State
Department of Taxation and Finance, reprinted in the Joint
Appendix in this case at 44a-50a.
The State issues monthly, to all registered whole-
salers and Indian retailers, an allotment of coupons (each
coupon represents 400 packages of cigarettes) based on
the quotas of untaxed cigarettes for each reservation.*
Coupons are among the sales records which wholesalers
4 The regulations set the quota on a reservation-wide basis,
but do not explain how that quota is to be shared among whole-
salers or Indian retailers where there are more than one dealing
with or operating on a reservation. Likewise, Notice N-88-53
provides that “[t]he reservation allotment of tax-free product
will . . . be allocated among the registered dealers located on
that reservation by means of a tax exemption coupon,” but fails
to explain how. It is reasonable, however, to presume that the
State has some means of addressing the division of the quota
among reservation retailers. Such action intensifies the state
intrusion into the federally preempted field of regulating sales
to tribal members.
ts
and Indian retailers must complete and remit to the State.
Untaxed cigarette purchases by the retailers must be
made according to the coupons which specify the dealer,
location of delivery, and numerical amount of cigarettes
which may be delivered/purchased. Notice N-88-53; see
also State’s Op. Br. at 12-13 and 22-23.
As purchasers and consumers of untaxed cigarettes,
tribal members are also regulated. They may buy untaxed
cigarettes only “within the boundaries of a qualified res-
ervation for [their] own use or consumption (i.e. other
than for resale) within such reservation.” 20 NYCRR
§ 335.6(b)(1)(ii); accord § 335.6(e)(1) (tribal members may
purchase untaxed cigarettes only if they take delivery of
the cigarettes on their reservations and purchase them for
their own use or consumption within such reservation).
Hence, tribal members apparently cannot, for example,
give untaxed cigarettes as gifts to other tribal members,
and they clearly cannot smoke or take them off their
reservations.
All of these provisions go far beyond recording and
reporting cigarette sales made to tribal members and
amount to direct regulation of those sales unauthorized
by any act of Congress and contrary to decisions of this
Court. In Warren Trading Post Co. v. Arizona Tax Comm'n,
380 U.S. 685 (1965), this Court invalidated the application
of a state sales tax on sales made to reservation Indians.
The Court held the traders statutes, 25 U.S.C. §§ 261-264,
part of the historic “comprehensive federal regulation” of
trade on Indian reservations, preempted the state law. 380
U.S. at 686 and 688. Specifically, the Court stated:
10
These apparently all-inclusive regulations and
the statutes authorizing them would seem in
themselves sufficient to show that Congress has
taken the business of Indian trading on reserva-
tions so fully in hand that no room remains for
state laws imposing additional burdens... .
Id. at 690.
Subsequently, the Indian traders statutes have been
held to preempt a variety of state taxes on reservation
commercial transactions and activities. E.g., White Moun-
tain Apache Tribe v. Bracker, 448 U.S. 136 (1980) (motor
carrier license and fuel use taxes as applied to non-Indian
logging company operating on reservation); Central
Machinery Co. v. Arizona Tax Comm'n, 448 U.S. 160 (1980)
(transaction privilege tax of on-reservation sale of trac-
tors to Indian enterprise); Ramah Navajo School Bd. v.
Bureau of Revenue, 458 U.S. 832 (1982) (tax on gross
receipts of non-Indian construction company received
from tribal school board for construction of school on
reservation).
Taxation is merely a form of regulation and the
traders statutes themselves do not speak in terms of how
a state may regulate, they speak to whether the state may
regulate and they say it may not. As this Court stated in
Central Machinery:
[W]e held in Warren Trading Post by enacting
these statutes Congress ‘has undertaken to regu-
late reservation trading in such a comprehensive
way that there is no room for the States to
legislate on the subject. .. . ‘ Until Congress
repeals or amends the Indian traders stat-
utes ... we must give them ‘a sweep as broad as
c-
11
[their] language . . . ‘ and interpret them in light
of the intent of the Congress that enacted them.
448 U.S. at 165-66 (citations omitted); accord Colville, 447
U.S. at 155-56 (“The Indian traders statutes incorporate a
congressional desire comprehensively to regulate busi-
nesses selling goods to reservation Indians for cash or
exchange”).
Moreover, this Court has held state regulation of
tribes in Indian country to be preempted in cases where
taxation was not involved or was involved along with
other regulations. In California v. Cabazon Band of Mission
Indians, 480 U.S. 202 (1987), a state sought to apply its
gambling laws to tribal reservation bingo games. The
Court found no federal statute authorizing the state's
asserted jurisdiction and therefore noted that the “[dlJeci-
sion in this case turns on whether state authority is
preempted by the operation of federal law. . . . ” 480 U.S.
at 216.
The Court in Cabazon found the applicable tribal and
federal interests there to be “traditional notions of Indian
sovereignty and the congressional goal of Indian self-
government, including its ‘overriding goal’ of encourag-
ing tribal self-sufficiency and economic development,” as
well as promotion by federal agencies of tribal bingo
under various federal laws and programs. 480 U.S. at
216-19.5 These “compelling federal and tribal interests”
5 Similarly, other federal statutes and programs likely sup-
port Indian cigarette sales. See Citizen Band Potawatomi Indian
Tribe v. Oklahoma Tax Comm'n, 888 F.2d 1303, 1304 (10th Cir.
1989), aff'd in part and rev'd in part, Oklahoma Tax Comm'n v.
Citizen Band Potawatomi Indian Tribe, 498 U.S. 505 (1991)
12
preempted the state laws. Id. at 221-22; see also Moe, 425
U.S. at 480-81 (vendor license fee on reservation Indian
business held preempted); Oklahoma Tax Comm'n v. Sac
and Fox Nation, 508 U.S. __, 113 S.Ct. 1985 (1993) (motor
vehicle registration fee on tribal members in Indian coun-
try held preempted).
Under the traders statutes and these cases the State
regulation of cigarette sales to tribal members in Indian
country here is preempted. Once federal preemption of
an activity is found, the inquiry is over. All state regula-
tion is prohibited, since there is “no room” for it. Warren
Trading Post, 380 U.S. at 690. On this point the New York
Court of Appeals was absolutely correct. There is no need
to reach the minimal burden question with respect to
state regulation of reservation cigarette sales to tribal
members because there is no room for any burdens.
B. State Regulation of Cigarette Sales to Tribal
Members In Indian Country Infringes on Tribal
Self-Government
The State’s asserted regulation of intra-tribal trade in
Indian country also must fail because it infringes on the
right of Indian tribes to self-government. Infringement on
tribal self-government is an independent barrier to the
application of state law to tribal members in Indian coun-
try. White Mountain Apache Tribe v. Bracker, 448 U.S. at
142-43. This Court has long recognized that state law may
not infringe “on the right of reservation Indians to make
(tribal convenience store selling cigarettes was constructed with
federal funds).
13
their own laws and be ruled by them.” Williams v. Lee, 358
U.S. 217, 220 (1959).
State regulation of cigarette sales to tribal members
in Indian country would clearly interfere with significant
tribal and federal interests, including the Indian sover-
eignty and immunity doctrines and the congressional
goal of tribal self-government, especially the “overriding
goal of encouraging tribal self-sufficiency and economic
development.” See Potawatomi, 498 U.S. at 510.
The quota in particular would adversely affect tribes
that both sell cigarettes and tax those sales because it
would limit their potential sales revenues and tax reve-
nues. Even where tribes do not tax, the quota would
restrict potential sales revenue available to support the
operation of tribal governments and the delivery of gov-
ernmental services. The quota could also limit private
revenues and employment opportunities in retail sales,
thereby contributing to unemployment and poverty in
Indian country. The other regulations on tribal members
as retailers and consumers present obvious further intru-
sions on “the right of reservation Indians to make their
own laws and be ruled by them.” Williams v. Lee, 358 U.S.
at 220.
If the State here were taxing the cigarette sales to
tribal members it could not do so under Moe, Potawatomi,
and other cases of this Court, e.g., McClanahan v. Arizona
Tax Comm'n, 411 U.S. 164 (1973) (Indian tribes and their
members are “per se” exempt from state taxation in
Indian country unless Congress provides otherwise). A
fortiori the State cannot regulate these sales. Indeed, the
very nature of non-taxing regulations may present more
of a threat to tribal self-government. Dual taxation of
14
non-members in Indian country has been upheld in part
because taxpayers can be subject to different sovereigns.
E.g., Colville, 447 U.S. at 152-53 (state and tribal cigarette
taxes); Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163
(1989) (state and tribal oil and gas severance taxes). But,
as the Court has recognized, compliance with dual regu-
latory schemes is much more difficult, if not impossible.
See Brendale v. Confederated Tribes and Bands of the Yakima
Indian Nation, 492 U.S. 408 (1989) (landowner cannot com-
ply simultaneously with tribal and county zoning and
land use regulations); New Mexico v. Mescalero Apache
Tribe, 462 U.S. 324 (1983) (denying state authority to
regulate hunting and fishing by non-members on a reser-
vation concurrently with tribe).
State regulation of sales of cigarettes to tribal mem-
bers in Indian country simply cannot be reconciled with
tribal self-government and self-determination.® Hence,
the decision below must be affirmed at least with respect
to the application of the state regulations to sales of
cigarettes to tribal members.’
6 Where federal and tribal interests have preempted a field,
there is no balancing of the state’s interest. See County of
Yakima v. Confederated Tribes and Bands of the Yakima Indian
Nation, 502 U.S. __, 112 S.Ct. 683 (1992). In such cases states
may only regulate tribal members in Indian country with
express congressional authorization. Id. at 692.
7 Amici express no opinion on the issue of whether the
unlawful regulation of cigarette sales to tribal members invali-
dates the entire state cigarette tax scheme. And, because we are
convinced that the federal preemption and infringement doc-
trines govern the decision in this case regarding state regulation
of sales to tribal members, we do not address the issue of
whether the state laws and regulations here impose undue bur-
dens under Moe and Colville.
15
Il. IN CASES WHERE A TRIBE HAS ENACTED ITS
OWN ENFORCEMENT SCHEME OR ENTERED
INTO A COMPACT WITH A STATE WHICH
ADDRESSES THE COLLECTION AND REMIT-
TANCE Of VALID STATE TAXES ON CIGARETTE
SALES TO NON-MEMBERS IN INDIAN COUN-
TRY, THE APPLICABLE PRESUMPTION SHOULD
BE THAT SUCH TRIBAL LAWS AND COMPACTS
PREEMPT THE STATE’S ENFORCEMENT
SCHEME
A state’s interest in regulating the activities of non-
members in Indian country must be weighed against the
relevant tribal and federal interests. Colville, 447 U.S. at
156-57; accord White Mountain Apache Tribe v. Bracker, 448
U.S. at 144-45. The issue of the State’s regulation of
cigarette sales to non-members in Indian country here
should be considered in light of a tribal interest appar-
ently not present in the record in this case, but which
nevertheless is pertinent to the ultimate reach of this
decision — one which will affect all of Indian country.
That interest relates to the exercise of tribal governmental
powers in compliance with Moe and Colville.
Several Amici tribes have enacted codes and ordi-
nances which govern taxation and regulation of cigarette
sales to members and non-members in Indian country.®
® E.g., Chapter 2, Cheyenne-Arapaho Tribes of Oklahoma
General Revenue and Taxation Act of 1988, Ordinance No.
8118003 (Apr. 27, 1988); Confederated Salish and Kootenai
Tribes of the Flathead Nation Tax Exempt Sales Ordinance, No.
94A (Sept. 28, 1993); Sisseton-Wahpeton Sioux Tribes Codes of
Law, Chapter 10, Retail Business Tangible Personal Property
Sales Tax Act (Feb. 5, 1986) and Chapter 12, Tribal Tobacco
Outlets and Excise Tax (May 4, 1982).
16
Amici are aware of other tribes which have similar regula-
tions. Some Amici have entered into compacts with states
which govern cigarette tax collection and enforcement in
Indian country.? Amici are aware of a growing number of
other tribes which have entered into similar agreements.
Where such tribal regulations or compacts address
the collection and remittance of valid state taxes on ciga-
rette sales to non-members, there is no need for a state
unilaterally to impose additional requirements. In
instances where there was no finding of such a tribal
system, this Court has approved a rebuttable presump-
tion that a state may impose “minimally burdening” col-
lection and recordkeeping requirements on tribes and
Indian retailers. Moe, 425 U.S. at 482-83; Colville, 447 U.S.
at 159-60. Colville in particular recognizes that a tribe may
rebut the presumption by showing that the asserted state
requirements are not reasonably necessary as a means of
preventing fraud. 447 U.S. at 160.
This Court should now acknowledge that if there is a
tribal scheme, adequate accountability is presumed and
the burden is on the state to show that accountability is
lacking. Hence this Court should clarify that tribal laws
and compacts defeat the presumption that a state may
° E.g., Agreement Between the Shakopee Mdewakanton
Indian Community and the Department of Revenue of the State
of Minnesota Relating to the Refund of Precollected Excise
Taxes on Cigarettes (Aug. 1988); Agreement Between the Stock-
bridge-Munsee Tribe and the Department of Revenue of the
State of Wisconsin Related to the Refund of Precollected Excise
Taxes on Cigarettes (Aug. 1988).
a
17
impose even minimal burdens on tribes and Indian
retailers in Indian country.
Otherwise, this Court will be sanctioning a presump-
tion that tribes will be dishonest or incompetent, which is
wholly unwarranted as a blanket rule for Indian country.
In other contexts this Court has rejected arguments that
such general attacks on tribes are justifiable. E.g., lowa
Mutual Ins. Co. v. LaPlante, 480 U.S. 9, 19 (1987) (“The
alleged incompetence of tribal courts is not among the
exceptions to the exhaustion [of tribal remedies] require-
ment” established in National Farmers Union Ins. Cos. v.
Crow Tribe, 471 U.S. 845 (1985)); New Mexico v. Mescalero
Apache Tribe, 462 U.S. at 342 n.27 (“We reject the State’s
claim that the Tribe’s ability to manage its wildlife
resources suffers from a lack of enforcement powers and
therefore concurrent jurisdiction is necessary to fill the
void”).
The Court has recognized that Congress has spoken
to this issue as well. See Mississippi Band of Choctaw
Indians v. Holyfield, 490 U.S. 30, 54 (1989) (under the
Indian Child Welfare Act, 25 U.S.C. §§ 1901-1923, state
and federal courts “must defer to the experience, wis-
dom, and compassion of the [] tribal courts to fashion an
appropriate remedy” for tribal children). These cases and
statutes teach that tribes are to be trusted in the first
instance and the burden is on the state or non-Indian
party to prove otherwise.
This Court recently suggested that tribes and states
may work cigarette tax issues out together to their mutual
satisfaction. Potawatomi, 498 U.S. at 514. Similar encour-
agement and flexibility is warranted in this case as well.
18
The fact that many tribes have developed tribal laws and
have negotiated compacts with states aptly demonstrates
these issues can be worked out at the local level. See Brief
of Amici States of Washington, et al. in Support of Peti-
tioner at 20 (“Consistent with the Court’s suggestion in
Potawatomi, a number of states and tribes have sought,
with some success, to negotiate compacts for the collec-
tion and distribution of cigarette taxes. . . . Other negotia-
tions in the area of cigarette taxes and motor vehicle fuel
are continuing”).
Ill. IN CASES WHERE CIGARETTE SALES ARE AN
INCIDENTAL ASPECT OF A LARGER, RESERVA-
TION-BASED TRIBAL ECONOMIC DEVELOP-
MENT PROJECT, TRIBAL INTERESTS MAY
OUTWEIGH STATE INTERESTS IN TAXING
NON-MEMBER CIGARETTE PURCHASES
Sales of cigarettes in Indian country today are vastly
different from when this Court decided Moe and Colville.
Such sales do not always occur at “smoke shops.” They
may occur at grocery stores or other establishments at
which cigarettes are but a minor or insignificant item in
the overall business operation. More and more often,
cigarette sales in Indian country take place at tribal
casinos, bingo halls, resorts, lodges, sports and recreation
facilities, and other major economic development projects
initiated and maintained by tribes. See, e.g., Cabazon, 480
U.S. at 205 (tribai bingo halls and card clubs); New Mexico
v. Mescalero Apache Tribe, 462 U.S. at 327 (tribal hunting
and fishing resort complex); Gila River Indian Community
v. Waddell, 967 F.2d 1404 (9th Cir. 1992) (tribal sporting,
recreational, and cultural facilities consisting of lake
19
marina, automobile race tracks, and performing arts
amphitheatre).
Many non-members visit these tribal enterprises,
some for significant periods of time, not because they can
buy untaxed cigarettes, but because they want to enjoy
the benefits of the tribal economic development project.
Non-members may purchase cigarettes while they are
enjoying the benefits of the tribal project. But their pri-
mary purpose for entering and being in Indian country is
other than to buy cigarettes.
In short, contrary to the views of the State’s support-
ing Amici in this case, non-members are not always
attracted to Indian country solely because of cheap ciga-
rettes, and sales of cigarettes to non-members in Indian
country are not always tantamount to the sale of a tax
exemption. Moreover, when they are in Indian country,
non-member visitors as well as non-member employees
of the tribal project are entitled to and do receive signifi-
cant services provided by tribes, such as police and fire
protection, ambulance and emergency medical services,
roads, water, and other public utilities, and tribal judicial
systems.
Where sales of cigarettes to non-members are an
incidental and relatively minor aspect of an overall tribal
project, and where the non-member is the recipient of
significant tribal services, the state may have little, if any,
interest in taxing the non-member cigarette purchases.
And there may be other preemptive and infringement
forces at work. In Cabazon, the Court expressly distin-
guished Colville and stated the following:
20
Here, however, the Tribes are not merely
importing a product onto the reservations for
immediate resale to non-Indians. They have
built modern facilities which provide recre-
ational opportunities and ancillary services to
their patrons, who do not simply drive onto the
reservations, make purchases and depart, but
spend extended periods of time there enjoying
the services the Tribes provide.
... The tribal bingo enterprises are similar to the
resort complex featuring hunting and fishing,
that the Mescalero Apache Tribe operates on its
reservation. . .. The Mescalero project generates
funds for essential tribal services and provides
employment for tribal members. We there
rejected the notion that the tribe is merely mar-
keting a tax exemption from state hunting and
fishing regulations. . . . Similarly, the Cabazon
and Morongo Bands are generating value on the
reservations through activities in which they
have a substantial interest.
480 U.S. at 219-20. In New Mexico v. Mescalero Apache Tribe,
the Court had found the “concerted and sustained”
undertakings of the tribe there to develop its reservation
economy were “far removed from those situations, such
as on-reservation sales outlets which market to nonmem-
bers goods not manufactured by the tribe or its members,
in which the tribal contribution to an enterprise is de
minimis.” 462 U.S. at 341.
States cannot tax or regulate these tribal economic
enterprises directly. Id.; accord Cabazon, 480 U.S. at 220-21;
see also the Indian Gaming Regulatory Act, 25 U.S.C.
§ 2710(d)(4) (states cannot impose taxes, fees, or charges
on tribes engaged in gaming). State taxes on cigarette
21
saies incidental to these enterprises may be prohibited as
well. See Indian Country U.S.A., Inc. v. Oklahoma ex rel.
Oklahoma Tax Comm'n, 829 F.2d 967 (10th Cir. 1987), cert.
denied, 487 U.S. 1218 (1988) (holding state sales taxes on
tribal bingo enterprise and related activities, including
food services for patrons and sales of bingo supplies and
accessories, preempted by federal law).
+
CONCLUSION
For the reasons stated above, the decision of the New
York Court of Appeals should be affirmed.
DATED this 18th day of January, 1994.
Respectfully submitted,
Metopy L. McCoy*
YVONNE TERESA KNIGHT
Kim JEROME GOTTSCHALK
Native AMERICAN RiGHTs FUND
1506 Broadway
Boulder, CO 80302
(303) 447-8760
Counsel for the Cheyenne-Arapaho
Tribes of Oklahoma, Jicarilla Apache
Tribe, Pueblo of Laguna, Rosebud
Sioux Tribe, Santa Ana Pueblo,
Stockbridge-Munsee Community
Band of Mohican Indians, Three
Affiliated Tribes of the Fort Berthold
Indian Reservation, and the National
Congress of American Indians
22
BerTRAM E. Hirscu
81-33 258th Street
Floral Park, NY 11004
(718) 347-3022
Counsel for the Sisseton-Wahpeton
Dakota Nation, also known as the
Sisseton-Wahpeton Sioux Tribe
Patrick L. SMITH
Legal Department
Confederated Salish and Kootenai
Tribes of the Flathead Nation
P.O. Box 278
Pablo, MT 59855
(406) 675-2700
Counsel for the Confederated Salish
and Kootenai Tribes of the Flathead
Nation -
Micuaet E. Taytor
Reservation Attorney
Confederated Tribes of the
Colville Reservation
Box 150
Nespelem, WA 99155
(509) 634-4711
Counsel for the Confederated Tribes of
the Colville Reservation
JEANNE S. WHITEING
Rosert S. THompson, III
WHITEING AND THOMPSON
1136 Pearl Street, Suite 203
Boulder, CO 80302
(303) 444-2549
Counsel for the Blackfeet Tribe of the
Blackfeet Indian Reservation and the
Ute Indian Tribe of the Uintah and
Ouray Reservation
23
Curt V. BiusDoc
BiueDoc Law Orrice, P.A.
Southgate Office Plaza
Suite 670
5001 West 80th Street
Bloomington, MN 55437
(612) 893-1813
Counsel for the Shakopee
Mdewakanton Dakota Community
*Counsel of Record for all Amici
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