# Amicus Curiae Brief — Arizona Dept. of Revenue v. Blaze Constr. Co.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1999
- **Citation:** 526 U.S. 32

## Text

fa
No. 97-1536

IN THE
Supreme Court ofthe Waited Stato C

OCTOBER TERM, 1997

STATE OF ARIZONA EX REL. ARIZONA
DEPARTMENT OF REVENUE,
- Petitioner,

BLAZE CONSTRUCTION COMPANY, INC.,

Respondent.

On Writ of Certiorari to the
Arizona Court of Appeals,
Division One

BRIEF OF THE NATIONAL CONFERENCE OF
STATE LEGISLATURES, COUNCIL OF STATE
GOVERNMENTS, NATIONAL GOVERNORS’
ASSOCIATION, U.S. CONFERENCE OF MAYORS,
NATIONAL LEAGUE OF CITIES, NATIONAL
ASSOCIATION OF COUNTIES, INTERNATIONAL
CITY/COUNTY MANAGEMENT ASSOCIATION, AND
INTERNATIONAL MUNICIPAL LAWYERS
ASSOCIATION AS AMICI CURIAE
IN SUPPORT OF PETITIONER

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 Printine Co.. Inc. - 789-0096 - WasHincTon. D.C. 20001

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TABLE OF CONTENTS

Page
QUESTION PRESENTED ...... imancied _ i
TABLE OF AUTHORITIES iv
INTEREST OF THE AMICI CURIAE .................. 1
IEEE te iecirnnitaetniniareinsccqusvoocsinectntsieseummemectesnecenecenees 3
SUMMARY OF ARGUMENT ..... 5
ARGUMENT 7

THE ARIZONA COURT OF APPEALS ERRED
IN HOLDING THAT TAXATION OF THE
GROSS RECEIPTS OF A FEDERAL CONTRAC-
TOR IS PREEMPTED BY FEDERAL INDIAN
BE cetnreiatcdpenaaatsestaaptremmnmansnececancmnespamanmageeemmmmntacneess 7

A. Arizona’s Assessment Of Transaction Privilege
Tax On Blaze Does Not Violate Intergovern-
mental Tax Immunity Principles ...................... x

B. The Arizona Court Of Appeals Erred In Apply-
ing Indian Sovereignty Principles To Hold Ari-
zona’s Transaction Privilege Tax Preempted... 11

(iii)

iv
TABLE OF AUTHORITIES

Cases Page

Aetna Life Ins. Co. v. Haworth, 300 U.S. 227
STE ES REE SS Re ae oe 19
California v. Cabazon Band of Mission Indians,
EC ee 6, 12, 18, 19
Cotton Petroleum Corp. v. New Mexico, 490 U.S.
ERENCE SENT TATE PRET ROPES eee 10, 20
County of Yakima v. ‘Confederated Tribes and
Bands of the Yakima Indian Nation, 502 U.S.

SF OR OR ES. 7,12, 13
James v. Dravo Contracting Co., 302 U.S. 134

Se eee wT P passim
Maricopa & P. R.R. v. Territory of Arizona, 156

- } &: a er eeee ES 14
Mescalero Apache Tribe v. Jones, 411 U.S. 145

(1973) passim
Metcalf & Eddy v. Mitchell, 269 U.S. 514 (1926). 9
Moe v. Salish & Kootenai Tribes, 425 U.S. 463

ROE ee TY a ae 20
Montana Catholic Missions v. Missoula County,

bis: fF eee ee ree ee 13, 15

Montana v. United States, 450 U.S. 544 (1981)... 13
Oklahoma Tax Comm'n v. Chickasaw Nation, 115

I 12, 17, 20
Oklahoma Tax Comm'n v. Texas Co., 336 U.S. 342
a eS 15
Oklahoma Tax Comm’n v. United States, 319 U.S.
ff EE ERLE be ee ae ee 16
Oliphant v. Suquamish Tribe, 485 U.S. 191
ET CERES or “ 18
Standard Oil Co. v. Johnson, 316 U.S. 481 (1942) .. 9
Strate v. A-1 Contractors, 117 S.Ct. 1404 (1997)... 12,13
Thomas v. Gay, 169 U.S. 264 (1897) _........... 13, 14, 14-15
United States v. Boyd, 378 U.S. 39 (1964) —...... 10
United States v. New Mezxico, 455 U.S. 720
CRD eremtrecsenens 8, 9,10
Utah & Northern Ry. v. Fisher, 116 U.S. 28
AES RET SEES | SEN. sas rena 18, 13-14

Wagoner v. Evans, 170 U.S. 588 (1898) 18, 15

Vv

TABLE OF AUTHORITIES—Continued

Warren Trading Post Co. v. Arizona Tax Comm'n,
CE SED cintnstrintintaetiicindisdiinainsmmaptinendiinnsen
Washington v. Confederated Tribes of the Colville

Page

19

Indian Reserv., 447 U.S. 134 (1980) .......12, 20, 20-21

White Mountain Apache Tribe v. Bracker, 448
U.S. 186 (1980)

Other Authorities

Budget Of The United States Government: Fiscal
Year 1999 (U.S. G.P.O. 1998) —..........................
Federal Highway Administration & Bureau of In-
dian Affairs, Indian Reservation Roads Pro-
gram Stewardship Plan (July 1996) —.............
Indian Health Service, Department of Health and
Human Services, Fiscal Year 1999 Justification

Regulations and Statutes

BT ccsirnsncinshidnsttiocicienenemnanbinapiiancansieatens
ek
CO SSS seanaetoeupstions
oo ee see ,
EEE ean
SST SES Ee Comoe eee
Ariz. Rev. Stat. § 42-1306 00.
Aris. Rev. Stat. § 48-1817 ................................-.

18, 19

4,5

IN THE
Supreme Court © the United States

OCTOBER TERM, 1997

No. 97-1536

STATE OF ARIZONA EX REL. ARIZONA
DEPARTMENT OF REVENUE,

9. Petitioner,

BLAZE CONSTRUCTION COMPANY, INC.,
Respondent.

On Writ of Certiorari to the
Arizona Court of Appeals,
Division One

BRIEF OF THE NATIONAL CONFERENCE OF
STATE LEGISLATURES, COUNCIL OF STATE
GOVERNMENTS, NATIONAL GOVERNORS’
ASSOCIATION, U.S. CONFERENCE OF MAYORS,
NATIONAL LEAGUE OF CITIES, NATIONAL
ASSOCIATION OF COUNTIES, INTERNATIONAL
CITY/COUNTY MANAGEMENT ASSOCIATION, AND
INTERNATIONAL MUNICIPAL LAWYERS
ASSOCIATION AS AMICI CURIAE
IN SUPPORT OF PETITIONER

INTEREST OF THE AMICI CURIAE

Amici, organizations whose members include state,
county, and municipal governments and officials
throughout the United States, have a vital interest in

2

legal issues that affect state and local governments.’
Of obvious concern to amici and their members is the
preservation of state taxing authority, including the
collection of taxes from federal contractors who en-
gage in commercial activities on Indian reservations.

The issue in this case, whether Arizona can impose
a non-discriminatory transaction privilege tax on a
federal contractor engaged in construction activity
on a reservation, is of particular importance to amici.
For more than sixty years, it has been the rule that
a state gross receipts tax on a federal contractor
does not violate intergovernmental tax immunity.
See James v. Dravo Contracting Co., 302 U.S. 134,
161 (1937). The Arizona Court of Appeals disre-
garded this clear rule and instead applied the multi-
factor balancing approach of Indian law preemption
analysis to invalidate the tax. It did so notwithstand-
ing that no Tribe was a party to the contract.

The lower court’s approach marks an unwarranted
expansion of Indian law preemption analysis and
interjects great uncertainty into an area where clear
rules are necessary for effective fiscal planning. It
calls into question the State’s authority to enforce
both tax laws and other non-discriminatory measures.

1 Pursuant to Rule 37.8 of the Rules of this Court, the
parties have consented to the filing of this brief amicus curiae.
Their letters of consent have been filed with the Clerk of the
Court.

Pursuant to Rule 87.6 of the Rules of this Court, amici
state that no counsel for a party has authored this brief in
whole or in part, and that no person or entity, other than
amici, their members, or their counsel, has made a monetary
contribution to the preparation or submission of this brief.

3

Because of the importance of this issue to state
and local governments, amici submit this brief to
assist the Court in its resolution of the case.

STATEMENT

This case arises out of Arizona’s attempt to enforce
its transaction privilege tax on Blaze Construction
Co., which contracted with the United States to build
roads on various Indian reservations located in the
State. The transaction privilege tax is a form of gross
receipts tax, see Ariz. Rev. Stat. § 42-1306, which the
State imposes on a wide variety of businesses, includ-
ing prime contractors. See id. § 42-1317. The tax
does not discriminate against federal] contractors.

Under the Federal Lands Highway Program, 23
U.S.C. § 204, the United States Bureau of Indian
Affairs (BIA) receives Federal Highway Adminis-
tration (FHWA) funds for road improvement proj-
ects on Indian reservations. Each year, the FHWA
advises the BIA’s Branch of Roads as to the approxi-
mate amount of funds it w.~ receive under the pro-
gram. Pet. App. 3a. Tribes submit project requests
to the Branch of Roads, which decides the scope of
the project and the amount to be spent. Jd. at 3a. The
Branch of Roads issues a specification package for
each project and BIA’s Design Section solicits bids.
Id. at 4a. After the FHWA authorizes funding for
a particular project, BIA awards the contract. /d.

BIA awarded Blaze contracts to construct roads
and bridges on six Indian reservations located in

Arizona. Id. at 2a-4a. While Blaze is incorporated
under the laws of the Blackfeet Tribe of Oregon, see
id, at 2a, it is not owned by a member of any of the

Arizona Tribes upon whose reservations it performed

4

the contracts. Blaze was paid entirely by the Federal
Government.

Each year the Federal Government, through sev-
eral agencies, enters into substantial contracts to carry
out its programs for Indian tribes. The exact amount
of these contracts is not easily ascertainable for vari-
ous reasons.2 The amount of budgetary authority for
these programs does, however, provide some indication
of the size of the Federal Government’s contracting on
behalf of Tribes. For example, in Fiscal Year 1997,
the Indian Reservation Roads program had an au-
thorized funding level of $191 million. See Indian
Reservation Roads Program, at 3. In Fiscal Year
1997, BIA incurred obligations of $49 million for edu-
cation construction, $3 million for public safety and
justice construction, $51 million for resource manage-
ment construction, and $16 million for improvements
and repairs to various Bureau facilities and systems.
See Appendix, Budget Of The United States Govern-
ment: Fiscal Year 1999 547 (U.S. G.P.O. 1998).

The Indian Health Service, an agency of the De-
partment of Health and Human Services, received
$373,375,000 in Fiscal Year 1998 budgetary author-

2 Overhead and administrative costs are frequently not
readily ascertainable. Moreover, some programs such as the
roads program are funded under appropriations made to both
the Departments of the Interior and Transportation. See
Federal Highway Administration & Bureau of Indian Affairs,
Indian Reservation Roads Program Stewardship Plan 4 (July
1996).

3 These amounts include administrative costs and are thus
greater than actual contract amounts. The data is, however,
helpful in demonstrating the magnitude of the Federal Gov-
ernment’s contracting on behalf of Tribes and the potential
revenue loss to the States.

5

ity for its Contract Health Services, which purchases
“hospital care, physician services, outpatient care, lab-
oratory, dental, radiology, pharmacy, and patient
transportation.” Indian Health Service, Department
Of Health and Human Services, Fiscal Year 1999
Justification of Estimates for Appropriations Com-
mittees, 64. The Indian Health Service also contracts
with “managed care and health maintenance activ-
ities . . . plac[ing] a high priority on developing con-
tracts and rate agreements with private sector pro-
viders.” Jd. at 65. In addition, the Indian Health
Service received $262 million in Fiscal Year 1997
budgetary authority to “support[] construction, re-
pair and improvement, equipment, and environmental
health and facilities.” Appendix, Budget Of The
United States: FY 1999, at 404-05. As the data indi-
cate, the Federa! Government makes substantial ex-
penditures for goods and services that are furnished
by federal contractors on reservations and large
amounts of state tax revenue are therefore at stake
in this case.

SUMMARY OF ARGUMENT

1, This Court has long held that a non-discrim-
inatory state tax on the gross receipts of a federal
contractor does not violate intergovernmental tax im-
munity even though the Federal Government should-
ers the economic burden of the levy. James v. Dravo
Contracting Co., 302 U.S. 134, 161 (1937). The
Court has further limited the scope of the immunity
to prohibit a state tax only when it falls on the United
States, its agencies or instrumentalities. Thus, unless
the entity subject to tax is an integral part of, or an
arm of, the Federal Government, it is not entitled to

intergovernmental immunity in the absence of Con-
gressional legislation granting it immunity.

Applying these clear principles demonstrates that
Blaze is not entitled to immunity from Arizona’s tax.
Blaze is not an arm or instrumentality of the United
States. Rather, it is a corporation organized under
the laws of the Blackfeet Tribe of Oregon whose pur-
pose is to engage in commercial activity for profit.
Moreover, Congress has not enacted legislation im-
munizing Blaze and other federal construction con-
tractors from state taxation. Blaze is therefore sub-
ject to Arizona’s transaction privilege tax.

2. The Arizona Court of Appeals failed to give
controlling weight to this Court’s intergovernmental
tax immunity cases. Instead, it took the unprece-
dented step of applying the multi-factor balancing
approach of Indian preemption analysis notwith-
standing that the taxable transaction did not involve
a Tribe or its members.

The Court has employed a categorical approach in
evaluating state taxation of Tribes and their mem-
bers on the reservation, imposing a per se rule pro-
hibiting such taxes absent Congressional authoriza-
tion or “cession of jurisdiction.” California v. Cabazon
Band of Mission Indians, 480 U.S. 202, 215 n.17
(1987). In these circumstances, the Court has ex-
plained that balancing is not necessary because “the
federal tradition of Indian immunity from state taxa-
tion” of Tribes and their members on the reservation
“is very strong and .. . the state interest in taxation
is correspondingly weak.” Id.

This reasoning applies with equal force when a
State asserts taxing authority over a transaction on

7

a reservation that does not involve a Tribe or its
members. As the Court has explained, its “more
recent cases have recognized the rights of States,
absent a congressional prohibition, to exercise crim-
inal (and, implicitly, civil) jurisdiction over non-
Indians located on reservation lands.” County of
Yakima v. Confederated Tribes and Bands of the
Yakima Indian Nation, 502 U.S. 251, 257-58 (1992).
A long line of cases further establishes that in such
circumstances, the State’s authority to tax is very
strong and the federal and tribal interests are corres-
pondingly weak. In these instances, there is no need
for the judiciary to rebalance the various interests
and usurp Congress’ authority in the area. The tax
is presumptively valid in the absence of Congressional
legislation prohibiting it.

Arizona seeks to tax a transaction which does not
involve a Tribe or Tribal members doing business on
their home reservation. Such taxation imposes no
burden on Tribal interests. Moreover, no provision
of Federal law immunizes Blaze’s activities from state
taxation. In the absence of such legislation, Arizona
can lawfully assess its transaction privilege tax
against Blaze.

ARGUMENT

THE ARIZONA COURT OF APPEALS ERRED IN
HOLDING THAT TAXATION OF THE GROSS RE-
CEIPTS OF A FEDERAL CONTRACTOR IS PRE-
EMPTED BY FEDERAL INDIAN LAW

The Arizona Court of Appeals held that the State
could not impose its transaction privilege tax, a non-
discriminatory gross receipts tax, on Blaze Construc-
tion Co. for work it performed pursuant to con-

tracts it entered into with the Bureau of Indian
Affairs to build roads on six Indian reservations in
Arizona. The court held so notwithstanding that Blaze
is not owned by a member of a Tribe whose reserva-
tion is located in Arizona (and that Blaze performed
no work on its owners’ home reservation) and that
it contracted not with any Tribe but with a Federal
agency.

As explained below, the status of the parties to this
contract demonstrates that the legality of Arizona’s
transaction privilege tax is governed for federal law
purposes by intergovernmental tax immunity. See
United States v. New Mewico, 455 U.S. 720 (1982).
The Arizona Court of Appeals, however, disregarded
the clear rules of the intergovernmental tax immunity
doctrine, which require that the tax be upheld, and
instead applied Federal Indian law preemption analy-
sis to invalidate the tax. The holding below misreads
this Court’s cases and marks an unwarranted expan-
sion of Federal Indian law preemption analysis. If
affirmed, the decision would threaten the States’ au-
thority to enforce a wide range of generally appli-
cable state taxes and regulations on any contractor
doing business with the Bureau of Indian Affairs. The

judgment of the Arizona Court of Appeals should
therefore be reversed.

A. Arizona’s Assessment Of Transaction Privilege Tax
On Blaze Does Not Violate Intergovernmental Tax
Immunity Principles

1. More than sixty years ago, this Court made
clear that a state tax on the gross receipts of a con-

tractor that provides services to the Federal Govern-
ment does not violate the intergovernmental tax im-
munity doctrine. See Dravo Contracting, 302 U.S. at

9

161. As the Court explained, “a nondiscriminatory
tax upon the earnings of an independent contractor
derived from services rendered to the government
[can]not be said to be ‘imposed upon an agency of
government in any technical sense,’ and [can]not ‘be
deemed to be an interference with government, or an
impairment of the efficiency of its agencies in any
substantial way.’” Jd. at 157 (quoting Metcalf &
Eddy v. Mitchell, 269 U.S. 514, 524-25 (1926)).

In United States v. New Mexico, the Court subse-
quently explained that the immunity “may not be
conferred simply because the tax has an effect on the
United States, or even because the Federal Govern-
ment shoulders the entire economic burden of the
levy.” 455 U.S. at 734. Moreover, “immunity can-
not be conferred simply because the state tax falls
on the earnings of a contractor providing services to

the Government.” Jd. (citing Dravo Contracting, 302
U.S. at 154).

Judicial recognition of the immunity is thus “ap-
propriate in only one circumstance: when the levy
falls on the United States itself, or on an agency or
instrumentality so closely connected to the Govern-
ment that the two cannot realistically be viewed as
separate entities.” Jd. at 735. The Court’s cases thus
reject the notion that a contractor is entitled to the
immunity because it is a “federal agent.” Jd. at 736.
Rather, contracting entities are not immune from
state taxation unless they are “ ‘integral parts of [a
governmental department],’ and ‘arms of the Govern-
ment deemed by it essential for the performance of
governmental functions.’” Jd. at 737 (quoting Stand-
ard Oil Co. v. Johnson, 316 U.S. 481, 485 (1942) ).

As the Court has explained, the reason for the
narrow scope of intergovernmental tax immunity is

10

that Congress can provide a federal contractor with
immunity by either “expressly providing as respects
contracts in a particular form, or contracts under
particular programs.” United States v. New Mexico,
455 U.S. at 737; cf. Cotton Petroleum Corp. v. New
Mexico, 490 U.S. 168, 175-76 (1989); Mescalero
Apache Tribe v. Jones, 411 U.S. 145, 150 (19738).
Whether a federal contractor is entitled to the im-
munity is thus a question of Congressional intent.
See United States v. New Mewico, 455 U.S. at 737-38.

2. Application of these principles demonstrates
that Blaze Construction is not entitled to immunity
from Arizona’s transaction privilege tax. Blaze is
not an agency or instrumentality of the United States.
Rather, it is a corporation organized under the laws
of the Blackfleet Tribe of Oregon, see Pet. App. 2a,
which was created and exists for the purpose of en-
gaging in “ ‘commercial activities carried on for
profit.’” United States v. New Mewico, 455 U.S. at
734-35 (quoting United States v. Boyd, 378 U.S. 39,
44 (1964)); see also J.A. 12a. Congress has demon-
strated no intent to “ ‘incorporate[] [Blaze] into the
government structure as to become [an] instrumen-
talit[y] of the United States and thus enjoy govern-
mental immunity.’” United States v. New Mezico,
455 U.S. at 736 (quoting Boyd, 378 U.S. at 48).
Blaze thus stands on the same footing as the Federal
contractors whose assertions of entitlement to inter-
governmental tax immunity were rejected in United
States v. New Mewxico, see 455 U.S. at 739-43, Boyd,
see 378 U.S. at 48, and Dravo Contracting. See 302
U.S. at 149, 161.

Nor has Congress chosen to provide Blaze with
immunity from Arizona’s tax. Congress has not en-
acted a statute exempting contracts of the type Blaze
entered into—a fixed fee contract—from state taxa-

Act (25 U.S.C. § 47)
the Indian Self-Determination and Education
Assistance Act (25 U.S.C. § 450e(b)), which Section
204 makes applicable to the Indian Reservation Roads
program, demonstrate either expressly or implicitly a
Danantenl intent to immunize Blaze from state
taxation. Congress is, of course, aware of this Court’s
decisions regarding the scope of intergovernmental
tax immunity and its power to immunize federal con-
tractors. Its failure to immunize Blaze from Ari-
zona’s transaction privilege tax ought to be the be-
ginning and end of this case.

B. The Arizona Court Of Appeals Erred In Applying
Indian Sovereignty Principles To Hold Arizona’s
Transaction Privilege Tax Preempted

1. The Arizona Court of Appeals gave no explana-

tion as to why this Court’s decision in United States
v. New Mezico is not controlling. See Pet. App. 6a-
7a. Instead, it , ~oceeded to apply principles of Indian
law preemption analysis to invalidate Arizona’s tax.
The court’s application of the Indian preemption doc-
trine to a tax on a transaction that did not involve
a Tribe or Tribal members has no support in this
Court’s cases and is a troublesome development for
state tax and regulatory authority.

To the best of amici’s knowledge, this Court has
never applied the balancing test of Indian law pre-
emption analysis to an assertion of state authority
over a transaction which did not involve a Tribe or
its members. This is for good reason, as protecting

12

Tribal self-government is a principal purpose of the
doctrine. See, e.g., Washington v. Confederated Tribes
of the Colville Indian Reserv., 447 U.S. 134, 161
(1980). Where, as here, a State ane ses a tax on a
transaction which does not involve a Tribe or its
members, the tax does not interfere with tribal
sovereignty.

The Court has thus explained that its “more recent
cases have recognized the rights of States, absent a
congressional prohibition, to exercise criminal (and,
implicitly, civil) jurisdiction over non-Indians located
on reservation lands.” County of Yakima v. Confeder-
ated Tribes and Bands of the Yakima Indian Nation,
502 U.S. 251, 257-58 (1992); see also Strate v. A-1
Contractors, 117 S.Ct. 1404, 1409 (1997) (rejecting
tribal court jurisdiction over auto accident on reser-
vation involving non-tribal members). Cf. Mescalero
Apache Tribe v. Jones, 411 U.S. 145, 148-49 (1973)
(“Absent express federal law to the contrary, Indians
going beyond reservation boundaries have generally
been held subject to non-discriminatory state law
otherwise applicable to all citizens of the State.”) ;
Oklahoma Tax Comm’n v. Chickasaw Nation, 115
S.Ct. 2214, 2222-24 (1995) (upholding state income
tax on members of Chickasaw Nation who worked for
Tribe but reside off reservation).

The Court has further explained that “[i]n the
special area of state taxation of Indian tribes and
tribal members, we have adopted a per se rule” which
prohibits state taxation “‘absent cession of juris-
diction or other federal statutes permitting it.’”
California v. Cabazon Band of Mission Indians, 480
U.S. 202, 215 n.17 (1987) (quoting Mescalero Apache
Tribe, 411 U.S. at 148). The Court’s “categorical

approach,” County of Yakima, 502 U.S. at 258, is

ity to tax is “very strong” and the Federal and Tribal
interests are “correspondingly weak.” See Montana
Catholic Missions v. Missoula County, 200 U.S. 118
(1906); Wagoner v. Evans, 170 U.S. 588 (1898);
Thomas v. Gay, 169 U.S. 264 (1897); Utah & North-
ern Ry. v. Fisher, 116 U.S. 28 (1885); ef. Strate,
117 S.Ct. 1404; Montana v. United States, 450 U.S.
544 (1981); Oliphant v. Suquamish Tribe, 435 U.S.
191 (1978). In such cases, there is no need for the
judiciary to rebalance the various interests and usurp
Congress’ authority in the area.

In the earliest case, Utah & Northern Railway, a
corporation challenged a territorial tax on its prop-
erty located within the boundaries of an Indian reser-
vation. The taxpayer contended that the tax inter-
fered with the provisions of the treaty creating the
reservation, asserting in essence a claim that the
treaty preempted the territory’s exercise of general
jurisdiction. See 116 U.S. at 31. The Court rejected
the argument, noting that “[t]he authority of the

Tribes to lease “their unoccupied lands for grazing
purposes” and that the tax “interfere[d] with...a
lawful commercial intercourse with the Indians, over
which Congress has absolute control.” Id.

The Court also rejected this argument, explaining
that:

[t]he unlimited power of Congress to deal with
the Indians, their property and commercial trans-
actions, so long as they keep up their tribal or-
ganizations, may be conceded; but it is not per-

too remote and indirect to be as an
interference with the legislative power of Con-
gress.

Id. at 274-75.4 See also Montana Catholic Missions,
200 U.S. at 128-29 (rejecting claim of immunity
from state property tax by charitable organizations
which used property for benefit of Indians) ; Wagoner
v. Evans, 170 U.S. 588 (1898).

As these authorities make clear, where a State does
not impose a tax on the commercial relationship be-
tween a Tribe and non-Indians, taxation of the activi-
ties and property of non-Indians (and non-Tribal
members) imposes at most an insubstantial burden on
Tribal interests. Because the burden on Tribal and
Federal interests is so insubstantial where a Tribe
or its members are not taxed, there is no need for
judicial reweighing of the relevant interests. The tax
is valid in the absence of Congressional legislation
prohibiting it.

The Court has also used a categorical approach in
cases involving the closely related issue of a State’s

*The Court has since made clear that non-Indian lessees
of Indian lands are subject to non-discriminatory state taxa-
tion of gross production and to production excise taxes. See
Oklahoma Taz Comm’n v. Texas Co., 336 U.S. 342 (1949).

16

authority to impose taxes on Tribes and Indians off
the reservation. In Oklahoma Tax Comm'n v. United
States, 319 U.S. 598 (1943), the Court addressed the
validity of state inheritance taxes imposed on the
transfer of the estates of deceased members of the
Five Civilized Tribes. The Tribes had “no effective
tribal autonomy” and their members held their lands
in fee. Id. at 603. Notwithstanding that the Indians
were wards of the United States, the Court refused
to exempt them from non-discriminatory state taxes
in the absence of express Congressional action grant-
ing them an exemption from estate taxes. See id. at
603-10. As the Court observed, “This Court has re-
peatedly said that tax exemptions are not granted by
implication” and that this rule applies “to taxing acts
affecting Indians as to all others.” Jd. at 606. The
Court further explained that “[i]f Congress intends
to prevent the State of Oklahoma from levying a gen-
eral non-discriminatory estate tax applying alike to
all its citizens, it should say so in plain words.” Id.
at 607.

To similar effect is Mescalero Apache Tribe. In
Mescalero, the Court upheld New Mexico’s authority
to impose a gross receipts tax on a ski resort which
the Tribe operated off the reservation. The Court
reasoned that “[a]bsent express federal law to the
contrary, Indians going beyond reservation bounda-
ries have generally been held subject to non-discrimi-
natory state law otherwise applicable to all citizens
of the State.” 411 U.S. at 148-49. In so holding, the
Court rejected the Tribe’s claim that the Indian Re-
organization Act, which encouraged Tribes “to re-
vitalize their self-government through the adoption of
constitutions and bylaws and through the creation of
chartered corporations, with power to conduct the
business and economic affairs of the tribe,” id. at 151,

17

conferred intergovernmental tax immunity on the
Tribe’s enterprise. See id. at 151-55.

it is derived, or its other is itself exempt from
tax.” 411 U.S. at 156. See also Chickasaw Nation,
115 S.Ct. at 2222-24 (upholding Oklahoma’s income

18

proach of Thomas and Utah & Northern Railway.
And where, as here, a tax falls on a federal con-
tractor, there is no reason for discarding the clear
principles of this Court’s intergovernmental tax im-
munity cases in favor of the multi-factor balancing
approach of Indian preemption analysis.

2. As authority for applying the balancing ap-
proach of Indian preemption law, the Arizona Court
of Appeals relied on White Mountain Apache Tribe v.
Bracker, 448 U.S. 136 (1980). In particular, the
lower court relied on this Court’s statement that
where “‘a State asserts authority over the conduct
of non-Indians engaging in activity on the reserva-
tion,’ ” the

“inquiry is not dependent on mechanical or abso-
lute conceptions of state or tribal sovereignty,
but has called for a particularized inquiry into
the nature of the state, federal, and tribal in-
terests at stake, an inquiry designed to determine
whether, in the specific context, the exercise of
state authority would violate federal law.”

Pet. App. 6a (quoting 448 U.S. at 144-45). Accord-
ing to the court of appeals, “[tjhis formulation
neither suggests nor implies that Indian law pre-
emption analysis is inapplicable when the on-reserva-
tion activities of non-Indians over which the state
seeks to exercise authority do not arise out of direct
commercial relations with the tribe or a tribal en-
tity.” Id. at 7a. The lower court further reasoned
that “nothing in the Court’s application of that analy-
sis in White Mountain suggests that it implicitly
follows any such limitation. The identity of the nomi-
nal contracting party in fact played no part in the
inquiry.” Id.

19

The court’s reasoning begs the question of why
White Mountain would contain such a limitation when
the tax was levied on a contractor which did business
with a Tribal entity and its ultimate incidence fell on
the Tribe. See 448 U.S. at 139, 151.5 This Court
decides cases and controversies based on the legal re-
lations of the parties before it and not “upon a hypo-
thetical state of facts.” Aetna Life Ins. Co. v.
Haworth, 300 U.S. 227, 241 (1937). It is thus no
surprise that White Mountain does not address
whether Indian law preemption principles apply to a
tax on the gross receipts of a federal contractor.

Indeed, while White Mountain articulated as a rule
of decision the above-described balancing test, at bot-
tom the case was no more than an implied preemption
case. As the Court made clear, “[o]ur decision today
is based on the pre-emptive effect of the comprehen-
sive federal regulatory scheme, which . . . leaves no
room for the additional burdens sought to be imposed
by state law.” 448 U.S. at 151 n.15 (citing Warren
Trading Post Co. v. Arizona Tax Comm’n, 380 U.S.
685 (1965)). In short, the Court would have come
to the same result in White Mountain simply by ap-
plying traditional preemption principles.

This Court’s other cases demonstrate that the White
Mountain balancing approach exists for the middle
ground of cases which fall between the per se prohibi-
tion of taxation of Indian Tribes and their members
when on their reservations, see Cabazon Band, 480
U.S. at 215 n.17, and the categorical rule allowing

5 The Court signalled its awareness of this feature of the
case when it indicated that the case presented “the question
whether a particular state law may be applied to an Indian
reservation or to tribal members.” 448 U.S. at 142.

20

States to apply non-discriminatory taxes to “Indians
going beyond reservation boundaries.” Mescalero
Apache Tribe, 411 U.S. at 148. The balancing ap-
proach is appropriate where it is not clear at the out-
set whether state or Tribal interests should prevail.
But where, as here, a transaction does not involve an
Indian tribe or Tribal members doing business on their
home reservation, it is clear that state interests pre-
dominate in the absence of Congressional legislation
to the contrary. See id.; see also Chickasaw Nation,
115 S. Ct. at 2222-246

6 The Court’s cases have frequently recognized that state
interests prevail over Tribal interests even where a State
seeks to tax a transaction involving a Tribal enterprise. For
example, in Cotton Petroleum the Court upheld the imposi-
tion of an eight percent oil and gas severance tax on lessees
of Indian lands. It noted that while it is

reasonable to infer that the New Mexico taxes have at
least a marginal effect on the demand for on-reservation
leases, the value to the Tribe of those leases, and the
ability of the Tribe to increase its tax rate[,] [a]ny
impairment to the federal policy favoring the exploita-
tion of on-reservation oi] and gas resources by Indian
tribes that might be caused by these effects . . . is simply
too indirect and too insubstantial to support Cotton’s
claim of pre-emption.
490 U.S. at 186-87.

To similar effect are Colville and Moe v. Confederated
Salish & Kootenai Tribes, 425 U.S. 463 (1976). In Moe, the
Court upheld the application of state sales taxes to on-
the-reservation transactions between Indian retailers and
non-Indian customers. See 425 U.S. at 482. In Colville, the
Court held that a State can impose tax on sales to Indians
resident on the reservation who were not enrolled in the
Tribe. See 447 U.S. at 160-61. As the Court noted in Colville:

Nor would the imposition of Washington’s tax on
these purchasers contravene the principle of tribal self-
government, for the simple reason that nonmembers are

21

lf state taxation of BIA’s contractors unduly inter-
feres with the administration of the agency’s pro-
grams, it can seek legislation from Congress preempt-
ing such taxes. Cf. 25 U.S.C. § 465 (exempting lands
acquired by the Secretary of the Interior for Tribes
from state and local taxation).? For more than sixty
years, however, the Federal Government has managed
to function notwithstanding that its contractors must
pay state gross receipts taxes. See Dravo Contract-
ing, 302 U.S. at 161. That Congress has not pro-

not constituents of the governing Tribe. For most prac-
tical purposes those Indians stand on the same footing
as non-Indians resident on the reservation. There is no
evidence that nonmembers have a say in tribal affairs or
significantly share in tribal disbursements. We find,
therefore, that the State’s interest in taxing these pur-
chasers outweighs any tribal interest that may exist in
preventing the State from imposing its taxes.
Id. at 161.

7 While Tribal interests are not relevant in assessing the
validity of Arizona’s assessment of Blaze, the Arizona Court
of Appeals apparently accepted Blaze’s contention that be-
cause Tribal contractors are immune from state tax, taxation
of BIA contractors conflicts with BIA’s regulations because
it “attaches an undesirable consequence to a tribe’s decision
not to seek to administer construction programs in the BIA’s
place by effectively reducing the road-improvement services
that the tribes can receive in return for the available federal
funding.” Pet. App. 13a (citing 25 C.F.R. § 271.4(d) & (e)).

The same, however, could be said for numerous other non-
discriminatory state laws which, under Indian sovereignty
principles, might be unenforceable when a Tribe itself con-
tracts. That requiring federal contractors to comply with
other state laws might make Tribal contracting more advan-
tageous does not justify holding them preempted. Tribes,
after all, retain the choice as to whether to contract directly
or through the offices of the authorized federal agency.

should be reversed.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0170%3A09. Public record. Not legal advice.