Appendix — Pierce v. Sac & Fox Nation of Missouri

Supreme Court brief2001

Ask Donna

What actually matters in this document.

Text

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

SAC AND FOX NATION OF

MISSOURI; IOWA TRIBE OF KANSAS

AND NEBRASKA; THE KICKAPOO

TRIBE OF INDIANS, of the Kickapoo

Reservation in Kansas,

Plaintiffs - Appellees,

Vv No. 99-3019

KARLA PIERCE, Secretary Kansas

Department of Revenue,

Defendant - Appellant.

ORDER

Filed July 14, 2000

Before BALDOCK, BRORBY, and LUCERO, Circuit

Judges.

Appellees’ petition for rehearing is denied.

The petition for rehearing en banc was transmitted to all of

the judges of the court who are in regular active service as

required by Fed. R. App. P. 35. As no member of the panel

and no judge in regular active service on the court requested

that the court be polled, that petition is also denied.

Entered for the Court

PATRICK FISHER, Clerk of Court

by: /s/ Amy Frazier

Deputy Clerk

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

SAC AND Fox NATION OF MISSOURI; Iowa Tribe

of Kansas and Nebraska; The Kickapoo Tribe

of Indians, of the Kickapoo Reservat’on

in Kansas, Plaintiffs-Appellees,

KARLA PIERCE, Secretary,

Kansas Department of Revenue,

Defendant-Appellant.

No. 99-3019.

May 30, 2000.

Before BALDOCK, BRORBY, and LUCERO, Circuit

Judges.

BALDOCK, Circuit Judge.

The State of Kansas imposes a tax, subject to enumerated

exceptions, on the distribution of motor fuel to retailers within

the State. Kan. Stat. Ann. § 79-3408(a) (1999 Supp.). The

distributor, rather than the retailer, is responsible for remitting

the tax. Jd. § 79-3408(c). When the Kansas Department of

Revenue announced its intention to begin collecting tax on

motor fuel distributions to retail gasoline stations on Indian

lands within the State, three federally-recognized Indian Tribes,

the Sac and Fox Nation of Missouri; the Iowa Tribe of Kansas

and Nebraska; and the Kickapoo Tribe of Indians of the

Kickapoo Reservation in Kansas (the Tribes), filed suit in

federal district court to enjoin the State from collecting its tax

on fuel distributed to the Tribes’ retail stations. The principal

issue before us is whether the State of Kansas may impose its

motor fuel tax as currently designed on fuel distributed to these

retail stations on Indian lands within the State.

The facts underlying this case are not in dispute. The Tribes

are the beneficial owners of trust lands within the State of

Kansas. The United States holds legal title te the lands in trust

for the benefit of the Tribes. Each of the Tribes own and

operate retail gasoline stations on these lands. The stations are

located along or near Kansas state highways. Prior to May

1995, the Kansas Department of Revenue took the position

that the motor fuel tax law as written did not permit the State

to tax motor fuel distributed on Indian lands. After the Kansas

legislature amended the Kansas Motor Fuel Tax Act in 1995,

see Kan. Stat. Ann. §§ 79-3401 to 79-3464f (1997), however,

the department reversed its position and this litigation ensued.

In their complaint, the Tribes sought declaratory and

injunctive relief against the State based upon both federal and

state law. The Tribes invoked the district court’s jurisdiction

under U.S. Const. art. I, § 8, cl. 3 and 28 U.S.C. §§ 1331,

1362, 1367. The Tribes claimed that (1) federal law pre-

empted the motor fuel tax law as applied to the Tribes, (2) the

motor fuel tax law as properly construed did not apply to fuel

distributed to the Tribes, and (3) imposing the motor fuel tax

on the Tribes would irreparably harm their economic viability.

The district court issued both a temporary restraining order,

Sac and Fox Nation v. LaFaver, 905 F.Supp. 904

(D.Kan.1995), and a preliminary injunction, Sac and Fox

Nation v. LaFaver, 946 F.Supp. 884 (D.Kan. 1996), against

the State. The district court next denied both the State’s

motion to dismiss the Tribes’ complaint based on sovereign

immunity, Sac and Fox Nation v. Lafaver, 979 F.Supp. 1350

(D.Kan.1997), and its motion to reconsider, Sac and Fox

Nation v. LaFaver, 993 F.Supp. 1374 (D.Kan.1998). On

cross motions for summary judgment, the court entered

judgment for the Tribes and permanently enjoined the State

from enforcing its motor fuel tax law against the Tribes. Sac

and Fox Nation v. Lafaver, 31 F.Supp.2d 1298 (D.Kan. 1998).

Addressing a myriad of legal issues, the district court first

held the Tribes had standing to pursue their claims against the

State. Jd. at 1302. Turning to the merits, the court held that

(1) tax compacts between the Tribes and State did not prohibit

the State from imposing its fuel tax on fuel distributed to the

Tribes, id. at 1302-03, (2) the fuel tax exemption for fuel sold

or delivered to the United States and its agencies, Kan. Stat.

Ann. § 79-3408(d)(2) (1999 Supp.), did not encompass the

Tribes, Sac and Fox Nation, 31 F.Supp.2d at 1303-04,' but (3)

the fuel tax exemption for fuel exported from the State to

territories outside the State did encompass Indian lands:

The statute [Kan. Stat. Ann. § 79-3408(d)(1) (1999 Supp. ]

exempts any fuel transactions where the fuel is exported “to

any other state or territory or to any foreign country.” From

this reading, the court can only conclude that the intent of

the Kansas legislature was to exempt any transaction where

the fuel was to be sold outside the boundaries of the State

of Kansas. As the Act for Admission of Kansas into the

Union [Ch. XX, § 1, 12 Stat. 126 (1861) ] . . . clearly

exclude[s] the Indian reservations from the boundaries of

the State of Kansas, it is only reasonable that § 79-.

3408(d){1) provides for an exemption to the transactions

involved in this case where fuel is sold to tribal retailers on

the recognized reservations.

Sac and Fox Nation, 31 F.Supp.2d at 1304.

' On appeal, the Tribes do not challenge the district court’s conclusions

that (1) their tax compacts with the State of Kansas have expired and are

no longer of any legal force, and (2) the fuel tax exemption for fuel sold

or delivered to the United States and its agencies does not encompass

Indian tribes.

As an alternative basis for issuing a permanent injunction

against the State, the court relied on Oklahoma Tax Comm'n

v. Chickasaw Nation, 515 U.S. 450, 115 S.Ct. 2214, 132

L.Ed.2d¢ 400 (1995), to hold that although the legal incidence

of the fuel tax fell on the distributors rather than the Tribes, the

balance of tribal and state interests weighed in favor of the

Tribes, thus requiring the court to invalidate the tax as applied

to the Tribes. Sac and Fox Nation, 31 F.Supp.2d at 1304-08.

The district court subsequently denied the State’s motion to

alter the judgment, Sac and Fox Nation v. Pierce, 45

F.Supp.2d 859 (D.Kan.1999), and the State appealed. Our

jurisdiction arises under 28 U.S.C. § 1291. We address each

of the State’s several challenges to the district court’s judgment

in turn. We reverse the judgment of the district court and

remand for further proceedings.

II.

As a preliminary matter, we address the district court’s

power to adjudicate this case on the merits. The State

contends the district court had no jurisdiction over this

controversy because (1) the doctrine of sovereign immunity

bars the Tribes’ suit, and (2) the Tribes’ have no standing to

maintain their suit. The district court’s determination of

subject matter jurisdiction is a question of law which we review

de novo. Rosette Inc. v. United States, 141 F.3d 1394, 1395

(10th Cir.1998). Applying this standard, we reject the State’s

jurisdictional contentions, and conclude the district court

properly exercised jurisdiction over this cause.

In the district court, the Tribes alleged jurisdiction under

U.S. Const. art. I, § 8, cl. 3 and 28 U.S.C. § 1362, as well as

under the general federal question and supplemental

jurisdiction statutes, 28 U.S.C. §§ 1331, 1367. The Tribes rely

on Article I’s Indian Commerce Clause which gives Congress

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

Tribes.” Meanwhile, § 1362 is a specific grant of jurisdiction to

the district court in matters involving Indian tribes: “The

district courts shall have original jurisdiction of all civil actions,

brought by any Indian tribe . . . wherein the matter in

controversy arises under the Constitution, law, or treaties of

the United States.” The State asserts that neither of these

provisions is sufficient to overcome the State’s sovereign

immunity under the Eleventh Amendment, U.S. Const. amend.

XI.

The Eleventh Amendment, as construed by the Supreme

Court, generally proscribes federal jurisdiction over suits

against nonconsenting states unless Congress has abrogated the

states’ sovereign immunity in a clear and unequivocal manner

pursuant to a valid exercise of its power. Seminole Tribe of

Fla. v. Florida, 517 U.S. 44, 54-55, 116 S.Ct. 1114, 134

L.Ed.2d 252 (1996) (holding that Congress lacks power under

Article I to abrogate a state’s sovereign immunity from suits

brought by private parties.). In Blatchford v. Native Village of

Noatak, 501 U.S. 775, 111 S.Ct. 2578, 115 L.Ed.2d 686

(1991), the Supreme Court rejected the notion that the

Eleventh Amendment “only- restricts suits by individuals

against sovereigns, not by sovereigns against sovereigns.” Jd.

at 780, 111 S.Ct. 2578 (emphasis in original). The Court

likewise rejected the notion that the states waived their

immunity against Indian tribes when they adopted the

Constitution: “We have hitherto found a surrender of

immunity against particular litigants [inherent in the

constitutional compact] in only two contexts: suits by sister

States and suits by the United States.” /d at 781-82, 111 S.Ct.

2578 (internal citation omitted). Accordingly, the Court held

that the Eleventh Amendment barred an Indian tribe’s suit

under a state revenue sharing plan against an Alaskan state

Official, despite the tribe’s sovereign status. In so holding, the

Court also rejected the notion that 28 U.S.C. § 1362 operated

as a general waiver of a state’s sovereign immunity.

Paramount to our analysis, however, was the Court’s

recognition that in Moe v. Confederated Salish and Kootenai

Tribes, 425 U.S. 463, 96 S.Ct. 1634, 48 L.Ed.2d 96 (1976), a

case involving an Indian tribe’s access to federal court “for the

purpose of obtaining injunctive relief from state taxation,” the

Court had reached a different conclusion. Blatchford, 501 U.S.

at 784, 111 S.Ct. 2578.

In Moe, the Court upheld an Indian tribe’s right to seek

injunctive relief from state taxation in federal court. Moe

involved, among other things, an attack on Montana’s cigarette

sales tax as applied to cigarette sales to both Indians and non-

Indians on Indian lands. Before reaching the merits, the Court

addressed the district court’s jurisdiction to entertain the tribe’s

suit against a Montana sheriff responsible for enforcing the tax.

Moe, 425 U.S. at 470-475, 96 §.Ct. 1634. The Court held that

§ 1362 proscribed application of the Tax Injunction Act, 28

U.S.C. § 1341, to the tribe’s suit.2 The Court first noted that

§ 1341 did not apply to suits “brought by the United States ‘to

protect itself and its instrumentalities from unconstitutional

state exactions.’ “ Moe, 425 U.S. at 470, 96 S.Ct. 1634

(quoting Department of Employment v. United States, 385

U.S. 355, 358, 87 S.Ct. 464, 17 L.Ed.2d 414 (1966)). From

this principle, the Court reasoned:

Looking to the legislative history of § 1362... we find

an indication of congressional purpose to open the federal

courts to the kind of claims that could have been brought by

the United States as trustee, but for whatever reason were

not so brought. Section 1362 is characterized by the

reporting House Judicial Committee as providing “the

means whereby the tribes are assured of the same judicial

determination whether the action is brought in their behalf

? The Tax Injunction Act provides that federal “district courts shall not

enjoin, suspend or restrain the assessment, levy or collection of any tax

under State law where a plain, speedy and efficient remedy may be had in

the courts of such state.” 28 U.S.C. § 1341.

by the Government or by their own attorneys.” [H.R.Rep.

No.2040, 89th Cong., 2d Sess., 2-3 (1966), U.S. Code

Cong. & Admin. News at 3145, 3146-47 ]. While this is

hardly an unequivocal statement of intent to allow such

litigation to proceed irrespective of other explicit

jurisdictional limitations, such as § 1341, it would appear

that Congress contemplated that a tribe’s access to federal

court to litigate a matter arising “under the Constitution,

laws, or treaties” would be at least in some respects as

broad as that of the United States suing as the tribe’s

trustee.

Id. at 472-73, 96 S.Ct. 1634. See also United States v.

Rickert, 188 U.S. 432, 23 S.Ct. 478, 47 L.Ed. 532 (1903)

(upholding Government’s right to seek injunctive relief against

county taxation directed at improvements on and tools used to

cultivate Sioux Indian lands).

In Moe, the Court concluded that because § 1341 would not

bar the United States from seeking to enjoin enforcement of the

state tax law on the tribe’s behalf; the tribe itself could maintain

its suit against the state. Moe, 425 U.S. at 474-75, 96 S.Ct.

1634. The Court emphasized that its decision “ ‘rested upon

a broader foundation than the mere holding of a legal title to

land in trust, and embraced the recognition of the interest of

the United States in securing immunity to the Indians from

taxation conflicting with the measures it had adopted for their

protection.’ “ Moe, 425 U.S. at 473, 96 S.Ct. 1634 (quoting

Heckman v. United States, 224 U.S. 413, 441, 32 S.Ct. 424,

56 L.Ed. 820 (1912)).

Moe leads us to conclude that we have jurisdiction under 28

U.S.C. § 1362 to reach the merits of this case. Surely if an

Indian tribe may maintain suit on its own behalf in federal court

to enjoin collection of a state’s cigarette sales tax, it may

maintain a similar suit on its own behalf to enjoin collection of

a state’s motor fuel distribution tax. Neither the Tax Injunction

Act nor the Eleventh Amendment bars the Tribes’ suit in this

10a

case. Undoubtedly after Seminole Tribe, the Eleventh

Amendment generally bars an Indian tribe’s suit in federal

court against a state where the tribe’s claim rests solely on

Article I’s Indian Commerce Clause. As the Supreme Court

stated in both Blatchford and Moe, however, an Indian tribe’s

suit for injunctive relief against state taxation occurring on

trust lands is another matter. Blatchford expressly recognized

what Moe necessarily inferred from § 1362. Blatchford

explained that in Moe, the Court found in § 1362-

an implication that a tribe’s access to federal court to litigate

federal-question cases would be at least in some respects as

broad as that of the United States suing as the tribe’s

trustee. The “respect” at issue in Moe was access to federal

court for the purpose of obtaining injunctive relief from state

taxation.

Blatchford, 501 U.S. at 784, 111 S.Ct. 2578 (emphasis in

original) (internal citations, quotations, and brackets omitted).

Accordingly, we conclude that the Eleventh Amendment does

not bar the Tribes’ suit against the State to enjoin enforcement

of the Kansas motor fuel tax law.’

> The district court relied on the legal fiction established in Ex Parte

Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), to overcome the

State’s claim of sovereign immunity. Sac and Fox Nation, 979 F.Supp.

at 1352-54. Under the Ex Parte Young legal fiction, when an official of

a State agency is sued in her official capacity for prospective equitable

relief, she is generally not regarded as “the state” for purposes of the

Eleventh Amendment, and the case may proceed in federal court. See

ANR Pipeline Co. v. Lafaver, 150 F.3d 1178, 1188 (10th Cir. 1998).

Because we conclude that we have jurisdiction to reach the merits of this

case under 28 U.S.C. § 1362, we decline to address the question of Ex

Parte Young’s application to matters of state taxation affecting Indian

tribes.

lla

We next turn to the question of the Tribes’ standing to

maintain their suit against the State. The State argues that

because the district court determined the legal incidence of the

motor fuel tax fell on the distributors rather than on the tribal

retailers, Sac and Fox Nation, 31 F.Supp.2d at 1304-07, the

Tribes lack standing to challenge the motor fuel tax.

According to the State, the law does not confer standing upon

the Tribes merely because they either must absorb the overhead

cost of the fuel distributed to them or pass the cost along to

their consumers.

The standing inquiry requires us to consider “both constitu-

tional limitations on federal-court jurisdiction and prudential

limitations on its exercise.” Warth v. Seldin, 422 U.S. 490,

498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975). The constitu-

tional standing question is “whether the plaintiff has ‘alleged

such a personal stake in the outcome of the controversy’ as to

warrant [its] invocation of federal-court jurisdiction and to

justify exercise of the court’s remedial powers on [its] behalf.”

Id. at 498-99, 95 S.Ct. 2197 (quoting Baker v. Carr, 369 U.S.

186, 204, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962)). The Supreme

Court has identified three constitutional standing requirements.

A plaintiff must allege (1) a concrete and particularized actual

or imminent injury, (2) which is fairly traceable to defendant’s

conduct, and (3) which a favorable court decision will redress.

Northeastern Fla. Chapter of the Associated Gen. Contractors

of America v. City of Jacksonville, 508 U.S. 656, 663-64, 113

S.Ct. 2297, 124 L.Ed.2d 586 (1993).

Additionally, the Supreme Court has identified three

prudential standing principles. First, a plaintiff generally must

assert its own rights, rather than those belonging to third

parties. Warth, 422 U.S. at 499, 95 S.Ct. 2197. Second, “a

generalized grievance” shared by a large class of citizens

normally does not warrant a federal court’s exercise of

12a

jurisdiction. Jd* Third, the interests which a plaintiff seeks to

protect must “arguably [be] within the zone of interests to be

protected by the statute or constitutional guarantee.”

Association of Data Processing Serv. Orgs., Inc. v. Camp, 397

U.S. 150, 153, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970).

We have little difficulty concluding that the Tribes in this

case have constitutional standing to maintain their suit against

the State. First, the Tnbes have alleged particularized imminent

economic injury if the State imposes its motor fuel tax on fuel

distributed to the Tribes’ retail stations. The Tribes’ uncon-

troverted affidavits, albeit conclusory, support their allegations

of injury. See Warth, 422 U.S. at 501, 95 S.Ct. 2197 (plaintiff

may submit affidavits to particularize allegations of fact in

support of its standing). Second, the Tribes’ alleged injury is

directly traceable to the State’s desire to tax these distributions.

Finally, a decision in favor of the Tribes enjoining the State

from enforcing the motor fuel tax against their distributors

would likely redress the Tribes’ alleged injury since most

assuredly the distributors responsible for remitting the tax pass

the cost of the tax along to the Tribes. See Kan. Stat. Ann.

§ 79-3409 (1999 Supp.) (expressly permitting the distributor

to include the cost of the motor fuel tax in its selling price).

We likewise conclude that prudential standing principles do

not bar our exercise of jurisdiction in this case. Certainly the

Tribes assert their own rights under both federal and state law

to be free from the cost of the motor fuel tax, though any

decision in their favor undoubtedly will benefit their distribu-

tors and consumers as well. Thus, we do not agree with the

“In Warth, 422 U.S. at 499, 95 S.Ct. 2197, the Supreme Court indicated

that the standing principle against generalized grievances of citizen

groups, which implicitly includes taxpayer groups, was prudential rather

than constitutional. In Lujan v. Defenders of Wildlife, 504 U.S. 555, 559-

62, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992), however, the Court treated

the bar on such lawsuits as constitutional.

13a

State’s argument that because the district court determined the

legal incidence of the motor fuel tax falls upon the distributors

rather than the retailers, see id. § 79-3408(c) (expressly stating

that the incidence of the motor fuel tax is on the distributor),

the Tribes’ claims amount to little more than a “generalized

grievance” shared by all retailers to whom the distributors pass

the cost of the tax.

In resolving challenges to state taxation affecting tribal

businesses on Indian lands, the Supreme Court has addressed

the legal incidence of a tax as a question intertwined with the

merits of the case. E.g., California State Bd. of Equalization

v. Chemehuevi Indian Tribe, 474 U.S. 9, 10-12, 106 S.Ct. 289,

88 L.Ed.2d 9 (1985) (per curiam) (holding that because the

legal incidence of the state’s cigarette sales tax fell on non-

Indian consumers, the state could require the tribe to collect

the tax on the state’s behalf); AZoe, 425 U.S. at 481-83, 96

S.Ct. 1634 (same). In Chickasaw Nation, 515 U.S. at 459,

115 S.Ct. 2214, the Court recognized that where the legal

incidence of a tax falls on non-Indians, the tribe may still be

entitled to injunctive relief if federal law preempts state law or

the balance of federal, state, and tribal interests favors the tribe.

Chickasaw Nation’ s balancing requirement implicitly embraces

our conclusion that regardless of where the legal incidence of

the motor fuel tax falls, the Tribes at the very least have a

particularized claim of injury, rather than a “generalized

grievance,” with respect to the tax sufficient to confer standing

upon them. See Moe, 425 U.S. at 468 n. 7, 96 S.Ct. 1634.

Finally, the alleged economic interests of the Tribes in this

case are arguably within the zone of interests which federal law

seeks to protect. Consistent with the long standing recognition

of Indian tribes as “domestic dependent nations,” Cherokee

Nation v. Georgia, 30 U.S. (5 Pet.) 1, 17, 8 L.Ed. 25 (1831),

the federal government has sought to protect tribal self-

government from state interference, including state taxation.

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

l4a

170-71, 93 S.Ct. 1257, 36 L.Ed.2d 129 (1973). See also 25

U.S.C. § 1322(b) (refusing to extend state’s general civil

jurisdiction over Indians to matters of taxation). The Supreme

Court has repeatedly recognized the United States’ interest in

securing immunity to the Indians from state taxation which

threatens Indian tnbes’ unique status. Moe, 425 U.S. at 473, 96

S.Ct. 1634. Absent congressional consent through statute or

treaty, states have no power to directly tax tribal commerce on

tribal lands. Mescalero Apache Tribe v. Jones, 411 U.S. 145,

148, 93 S.Ct. 1267, 36 L.Ed.2d 114 (1973).° See also

California v. Cabazon Band of Mission Indians, 480 U.S. 202,

214-15 & n. 17, 107 S.Ct. 1083, 94 L.Ed.2d 244 (1987)

(noting per se rule precluding state jurisdiction absent

congressional consent over tribes and tribal members in the

“special area of state taxation”). The Indian Commerce Clause

gives Congress the power to regulate commerce with Indian

tribes. McClanahan, 411 U.S. at 172 n. 7, 93 S.Ct. 1257.

Surely the economic interests which the Tribes seek to protect

by enjoining application of the State’s motor fuel tax are

“arguably within the zone of interests to be protected by

th{at] . . . constitutional guarantee.” Camp, 397 U.S. at 153,

90 S.Ct. 827 (emphasis added). Whether the Kansas motor

> In Rice v. Rehner, 463 U.S. 713, 713, 718-19, 103 S.Ct. 3291, 77

L.Ed.2d 961 (1983), the Court explained:

Congressional authority and the semi-independent position of Indian

tribes are two independent but related barriers to the assertion of state

regulatory authority over tribal reservations and members. Although

the right of tribal self-government is ultimately dependent on and

subject to the broad power of Congress, we still employ the tradition of

Indian sovereignty as a backdrop against which the applicable treaties

and federal statutes must be read in our pre-emption analysis.

(internal quotations, citations, brackets and elipses omitted). Of course,

in addition to treaties and statutes, stare decisis requires us to look to

Supreme Court and Tenth Circuit decisions to define the limits of state

jurisdiction in matters of taxation affecting Indian tribes.

1Sa

fuel tax as applied interferes with that guarantee is a matter

for legitimate judicial inquiry. To that question, we now turn.

Il.

At the outset, the State argues that Congress, through

passage of the Hayden-Cartwright Act, 4 U.S.C. § 104, has

consented to the state’s taxing power in this instance.

According to the State, § 104 cedes taxing jurisdiction to the

states on motor fuel distributed on Indian lands. Section 104(a)

provides in relevant part:

All taxes levied by any State . . . upon, with respect to, or

measured by, sales, purchases, storage, or use of gasoline or

other motor vehicle fuels may be levied, in the same manner

and to the same extent, with respect to such fuels when sold

by or through post exchanges, ship stores, ship service

stores, commissaries, filling stations, licensed traders, and

other similar agencies, located on United States military or

other reservations, when such fuels are not for the exclusive

use of the United States. Such taxes, so levied, shall be paid

to the proper taxing authorities of the State .. . within

whose borders the reservation affected may be located.

Id. § 104(a). The State construes the phrase “located on

United States military or other reservations” as including

Indian lands. See State v. Keeley, 126 F.2d 863, 864-65 (8th

Cir. 1942) (discussing the history surrounding the enactment of

§ 104). We decline to address the State’s § 104(a) argument,

however, because the State did not properly present the

question of § 104(a)’s applicability vis-a-vis the Kansas motor

fuel tax to the district court, and thus the district court had no

opportunity to consider or decide the question.

A federal appeals court generally will not consider an issue

raised but not argued in the district court. Rademacher v.

Colorado Assoc. of Soil Conserv. Dist. Medical Benefit Plan,

16a

11 F.3d 1567, 1571 (10th Cir.1993). “The matter of what

questions may be taken up and resolved for the first time on

appeal is one left primarily to the discretion of the courts of

appeals.” Singleton v. Wulff, 428 U.S. 106, 121, 96 S.Ct.

2868, 49 L.Ed.2d 826 (1976). Where the question is one of

law, we may relax the general rule if the proper resolution is

beyond doubt or injustice might otherwise result. Jd. Accord

Cavic v. Pioneer Astro Indus., Inc., 825 F.2d 1421, 1425 (10th

Cir.1987). But we need not decide an issue otherwise waived

simply because it may be “outcome determinative.” First

Alabama Bank v. First State Ins. Co., 899 F.2d 1045, 1060 n.

8 (11th Cir.1990) (appeals court will decide waived issues

“only in instances where strict application of the rule would

result in patently unjust results”).

In this case, the State raised the § 104(a) defense in its

answer to the Tribes’ complaint, both which were filed in 1995.

Never again did the State raise the issue with the district court

although it had ample opportunity to do so by way of both its

motion to dismiss and its motion for summary judgment, as

well as its subsequent motions to reconsider. See Lazzara v.

Howard A. Esser, Inc., 802 F.2d 260, 269 (7th Cir. 1986) (“A

contention included in an answer, but not pressed before the

district court, may not be presented on appeal as ground for

reversal.”).° Suffice it to say that we are loath to resolve the §

104 issue for the first time on appeal. Neither the Supreme

® The State’s sole reference to § 104 in the district court read as follows:

Jf this court deve:mines that the incidence of motor fuel tax under

Kansas law is at the retail level and such incidence is determined by

this court to fall on plaintiffs, the defendant affirmatively asserts that

he is authorized by federal law, 4 U.S.C. § 104, to impose Kansas

motor fuel tax on plaintiffs.

Aplt’s App. at 97 (emphasis added). Presumably because the district court

held the legal incidence of the motor fuel tax fell on the distributors rather

than on the Tribes, the State felt no need to press its “conditional” § 104

defense.

17a

Court nor any of the circuit courts of appeals, nor any court as

far as we can discern, has addressed the difficult question of

whether Congress intended 4 U.S.C. § 104(a) to encompass

Indian lands. This being so, injustice would more likely result

than not by us deciding the issue without the Tribes having an

opportunity first to be heard on the merits in the district court.

See Singleton, 428 U.S. at 121, 96 S.Ct. 2868.

The district court relied on a combination of federal and

state law to justify its issuance of a permanent injunction

against the State. First, the court concluded that under the Act

for Admission of Kansas into the Union, Ch. XX, § 1, 12 Stat.

126 (1861), Indian lands were not within the boundaries of the

State of Kansas. The Act, the court reasoned, “make[s] it very

clear . . . that the Indian reservations are not to be considered

part of the State of Kansas in any way.” Sac and Fox Nation,

31 F.Supp.2d at 1304. The court then concluded that because

Indian lands were not within the State, the distributors’ motor

fuel tax exemption for fuel exported from Kansas “to any other

state or territory,” Kan. Stat. Ann. § 79-3408(d)(1) (1999

Supp.), applied to fuel distributed on Indian lands. Sac and

Fox Nation, 31 F.Supp.2d at 1304. Thus, the district court

enjoined the State from taxing such distributions. We review

the district court’s construction of federal and state law de

novo. United States v. LaHue, 170 F.3d 1026, 1028 (10th

Cir.1999). Applying this standard, we believe the district court

misconstrued the 1861 Act for Admission, and thus misapplied

the statutory exemption to the Kansas motor fuel tax.

The 1861 Act for Admission of Kansas into the Union

provides-

[N]othing contained in the said constitution respecting the

boundary of said State shall be construed . . . to include any

territory which, by treaty with such Indian tribe, is not,

without the consent of said tribe, to be included within the

18a

territorial limits or jurisdiction of any State or Territory; but

all such territory shall be excepted out of the boundaries,

and constitute no part of the State of Kansas.

12 Stat. 127 (emphasis added).’ To our knowledge, the only

federal decision construing the applicable provision of the 1861

Act is United States v. Ward, 28 F. Cas. 397 (C.C.D.Kan. 1863)

(No. 16,639). Ward involved the question of the United States’

criminal jurisdiction over the murder trial of a non-Indian

defendant whose victim was also non-Indian. The murder

occurred on lands of the Kansas Tribe of Indians within the

external boundaries of the State of Kansas. Holding the State

of Kansas, not the United States, had jurisdiction over the

matter, Supreme Court Justice Miller, riding circuit, reasoned

that under the Act, all territory not previously exempted from

the boundaries of the State of Kansas by treaty between the

United States and an Indian tribe “was included within the

state, within its jurisdiction and within its territory; and this

irrevocably, unqualifiedly, and exclusively.” Jd. at 399.

We agree with Justice Miller’s able construction of the 1861

Act for it is consistent with the Act’s plain language. The Act

for Admission excludes from the boundaries of the State of

Kansas only those lands which Indian tribes reserved unto

themselves “by treaty” with the United States. The Tribes fail

to identify any language in any of the treaties provided us

which we might construe as excluding their lands from the

boundaries of the State. See Aplt’s App. at 176-200. The

Tribes argue, however, that the question is not whether the

Indian lands at issue in this case are independent territories

separate from the State for all purposes. Instead, they contend

” The Organic Act of 1854, Ch. LIX, § 19, 10 Stat. 284, which established

the Territory of Kansas, contains nearly identical language. We need not

consider in detail the Organic Act because our construction of the Act for

Admission controls our construction of the Organic Act. See United States

v. Ward, 28 F. Cas. 397, 398 (C.C.D.Kan. 1863) (No. 16,639).

OETA Wags ANE MiP 85 wi Vm

19a

“[t]he question is whether Indian country is excluded from the

legal territory of Kansas for purposes of motor fuel taxation.”

Aples’ Br. at 26 (emphasis in original).

In a decision apparently overlooked by both the State and

the Tribes, the Kansas Supreme Court resolved this very

question in Kaul v. State Dept. of Revenue, 266 Kan. 464, 970

P.2d 60 (1998), cert. denied, — U.S. —, 120 S.Ct. 46, 145

L.Ed.2d 41 (1999). In Kaul, fuel retailers with businesses

located on Indian lands claimed an exemption from the motor

fuel tax under § 79-3408(d)(1), which provides: “No tax is

hereby imposed upon or with respect to the . . . sale or delivery

of motor-vehicle fuel . . . for export from the state of Kansas

to any other state or territory... .” Kan. Stat. Ann. § 79-

3408(d)({1) (1999 Supp.). The retailers made precisely the

same argument as do the Tribes in this case. The Kansas

Supreme Court rejected the argument, holding that “the

exemption from taxation provided by K.S.A. § 79-3408(d)(1)

did not apply to the retailers because Indian reservations within

the boundaries of the State are not included as territories

outside the boundaries of Kansas.” Kaul, 970 P.2d at 66-67.

Of course, absent some conflict with federal law or overriding

federal interest, the Kansas Supreme Court’s interpretation of

§ 79-3408(d)(1) is binding on us. See Wainwright v. Goode,

464 U.S. 78, 84, 104 S.Ct. 378, 78 L.Ed.2d 187 (1983). We

conclude that neither the Act for Admission of Kansas into the

Union, nor the statutory exemption contained in § 79-

3408(d)(1), lends any support to the Tribes’ challenge to the

Kansas motor fuel tax law.

As an alternative basis for issuing a permanent injunction

against the State, the district court applied the balancing of

interests test endorsed in Chickasaw Nation, 515 U.S. at 459,

115 S.Ct. 2214: “{I]f the legal incidence of the tax rests on

non-Indians, no categorical bar prevents enforcement of the

tax; if the balance of federal, state, and tribal interests favors

20a

the State, and federal law is not to the contrary, the State may

impose its levy.” Before balancing the parties’ respective

interest, however, the district court concluded that the legal

incidence of the Kansas motor fuel tax fell on the distributors

rather than on the Tribes. Sac and Fox Nation, 31 F.Supp.2d

_ at 1304-07. As the district court recognized, if the legal

incidence of the fuel tax falls on the Tribes for sales made on

Indian lands, the fuel tax is unenforceable absent congressional

consent:

[W]hen a State attempts to levy a tax directly on an Indian

tribe or its members inside Indian country, rather than on

non-Indians, we have employed, instead of a balancing

inquiry, “a more categorical approach: Absent cession of

jurisdiction or other federal statutes permitting it, we have

held a State is without power to tax reservation lands and

reservation Indians.”

Chickasaw Nation, 515 U.S. at 458, 115 S.Ct. 2214 (internal

brackets and quotations omitted) (quoting County of Yakima

v. Confederated Tribes and Bands of Yakima Indian Nation,

502 U.S. 251, 258, 112 S.Ct. 683, 116 L.Ed.2d 687 (1992)).

See also Cabazon Band, 480 U.S. at 215 n. 17, 107 S.Ct. 1083

(noting that where the legal incidence of a tax falls upon the

tribe or its members, rebalancing the state and tribal interests

in every case is unnecessary because “the federal tradition of

Indian immunity from state taxation is very strong and the state

interest in taxation is correspondingly weak”). Accord-ingly,

we now turn to the question of who bears the motor fuel tax

law’s legal incidence.

For our purposes, the question of where the legal incidence

of the Kansas motor fuel tax rests is one of federal law. See

United States v. Mississippi Tax Comm'n, 421 U.S. 599, 609

n. 7, 95 S.Ct. 1872, 44 L.Ed.2d 404 (1975); Kern-Limerick,

Inc. v. Scurlock, 347 U.S. 110, 121-122, 74 S.Ct. 403, 98

2la

L.Ed. 546 (1954). Otherwise, “a state court might interpret its

tax statute so as to throw tax liability where it chose, even

though it arbitrarily eliminated an exempt sovereign.” Kern-

Limerick, 347 U.S. at 121, 74 S.Ct. 403. But see Mescalero

Apache Tribe v. O’Cheskey, 625, F.2d 967, 968-69 (10th

Cir. 1980) (en banc) (citing Kern-Limerick for the proposition

that in federal court, “[t}he holding of a state court as to the

incidence of a [state] tax is generally determinative” of the

issue) (emphasis added). Federal courts are duty bound to

decide for themselves “facts and constructions” upon which

federal issues turn. Kern-Limerick, 347 U.S. at 121, 74 S.Ct.

403. To determine whether the motor fuel tax transgresses

federal law, we first “look through form and behind labels to

[the] substance” of state law. City of Detroit v. Murray Corp.,

355 U.S. 489, 492, 78 S.Ct. 458, 2 L-Ed.2d 441 (1958).

Mindful of how the tax operates under state law, we then apply

federal standards to determine where the legal incidence of the

tax rests. See Kern-Limerick, 347 U.S. at 121-22, 74 S.Ct.

403.

According to the Supreme Court, the legal incidence of a tax

does not always fall upon the entity legally liable for payment

of the tax. Mississippi Tax Comm'n, 421 U.S. at 607-10, 95

S.Ct. 1872. Rather, the legal incidence of a tax falls upon the

entity or individual necessarily responsible for paying the tax

under the taxing statutes. /d In the absence of dispositive

language indicating upon whom the legal incidence of a tax

rests, “the question is one of ‘fair interpretation of the taxing

statute as written and applied.”” Chickasaw Nation, 515 U.S.

at 461, 115 S.Ct. 2214 (quoting Chemehuevi Tribe, 474 U.S.

at 11, 106 S.Ct. 289). Applying these principles, we agree

with the district court that the legal incidence of the tax law as

presently written falls on the fuel distributors rather than on the

22a

Tribes.* But see Kaul, 970 P.2d at 67-69 (suggesting that the

legal incidence of the Kansas motor fuel tax fell on the retailers

where the distributors itemized the tax on retailers’ bills as

money due the State).

The Kansas Motor Fuel Tax Act provides that “[a] tax per

gallon or fraction thereof, at a rate computed as prescribed . . .

is hereby imposed on the use, sale or delivery of all motor

vehicle fuels .. . which are used, sold or delivered in this state

for any purpose whatsoever.” Kan. Stat. Ann. § 79-3408(a)

(1999 Supp.). Section 79-3408c appears to place a fuel tax

upon both licensed distributors and retailers: “A tax is hereby

imposed on the use, sale or delivery of all motor vehicle fuel

.. . by any licensed distributor or licensed retailer...” Jd. §

79-3408c(a). Notably, however, subsection (c) of § 79-3408c

excludes the Tribes from the retail tax: “The provisions of this

section shall not apply to any licensed retailer who is native

American whose licensed place of business or businesses are

located on such retailer’s reservation nor to any native

American tribes having licensed places of business or

businesses located on such tribe’s reservation.” Jd. § 79-

3408c(c). Perhaps most importantly, subsection 79-3408(b)

provides that “the incidence of this [motor fuel] tax is imposed

on the distributor of the first receipt of the motor fuel and such

taxes shall be paid but once.” Jd. § 79-3408(b).

* The State makes no counterclaim against the Tribes for taxes past due

under the Kansas Motor Fuel Tax Act, nor could it because the legal

incidence, and thus liability for payment of the tax, falls on the

distributors. Even if the legal incidence of the tax fell on the Tribes, no

such action would lie because the doctrine of sovereign immunity bars the

State from seeking recourse against the Tribes. See Oklahoma Tax

Comm'n v. Citizen Band Potawatomi Indian Tribe, 498 U.S. 505, 509-14,

111 S.Ct. 905, 112 L.Ed.2d 1112 (1991) (absent clear waiver or

congressional authorization, the sovereign immunity doctrine bars suits

against Indian tribes). Accordingly, we express no opinion on the legal

incidence of the fuel tax prior to the 1998 amendments to the Act. See

Kan. Stat. Ann. §§ 79-3401 to 79-3464f (1997).

23a

Despite their lack of legal liability for payment of the motor

fuel tax, the Tribes argue the legal incidence of the tax falls

upon them because the distributors simply pass on the cost of

the tax to the Tribes in the wholesale price. To be sure, the

motor fuel tax law presumes distributors will include the cost

of the tax in their wholesale price to the Tribes. Section 79-

3409 provides: “Every distributor paying such tax or being

liable for the payment shall be entitled to charge and collect an

amount, including the cost of doing business that could include

such tax on motor vehicle-fuels . . . sold or delivered by such

distributor, as a part of the selling price.” /d § 79-3409

(emphasis added). But § 79-3409 also presumes that retailers

will pass the cost of the tax along to their consumers: “When

the price of motor vehicle fuels or special fuels .. . posted on

a price sign does not include the state and federal tax which

such retail dealer’s distributor paid or for which the distributor

was liable, the total of the taxes must be shown in numbers the

same size as the price of the motor fuel.” Jd.

Significantly, the law’s pass-through provision about which

the Tribes complain is permissive rather than mandatory.

Compare Kern-Limerick, 347 U.S. at 111, 74 S.Ct. 403

(holding unconstitutional, as applied to sales to the United

States, a state sales tax statute which purported to tax the

seller, but provided that the seller “shall collect the tax levied

hereby from the purchaser”). Section 79-3409 does not require

distributors to pass the cost of the motor fuel tax to retailers;

it simply permits them to do so by stating the obvious. Even

in the absence of § 79-3409, distributors could (and most

assuredly would) pass along the cost of the fuel tax to retailers;

but it is not necessary that they do so. As we said of an

Oklahoma beer tax imposed on wholesalers who sold beer to

tribal retailers on tribal lands:

Even if it were true that the economic burden of the tax falls

on the Tribe because the wholesalers simply incorporate the

tax into the wholesale cost, this would not be determinative

24a

of the question of the legal incidence of the tax. Just as a

nondiscriminatory tax imposed on a private entity that does

business with the United States and that passes the cost of

that tax on to the United States does not violate federal

sovereign immunity, so a nondiscriminatory tax imposed on

non-exempt private entities that do business with Indian

tribes and that pass the cost of those taxes on to the tribes

does not violate tribal sovereign immunity.

Chickasaw Nation v. Oklahoma Tax Comm'n, 31 F.3d 964,

970 (10th Cir.1994) (emphasis added) (internal citations

omitted), aff'd in part, rev'd in part on other grounds, 515

U.S. 450, 115 S.Ct. 2214, 132 L.Ed.2d 400 (1995).

The Tribes ask us to substitute economic assumptions for

the language of the Kansas statutes. But “[t]he question of

who bears the ultimate economic burden of the tax is distinct

from the question of on whom the tax has been imposed.” /d.

at 972. “[FJocus on a tax’s legal incidence accommodates the

reality that tax administration requires predictability.”

Chickasaw Nation, 515-U.S. at 459-60, 115 S.Ct. 2214. “[I]f

a State is unable to enforce a tax because the legal incidence of

the impost is on Indians or Indian tribes, the State generally is

free to amend its law to shift the tax’s legal incidence.” Jd. at

460, 115 S.Ct. 2214.

Certainly, if the fuel tax law required distributors to include

the amount of the fuel tax in their wholesale price, we would

be justified in concluding that the legal incidence of the tax falls

upon the Tribes. See Chickasaw Nation, 31 F.3d at 971.? But

* In Chickasaw Nation, we held that the legal incidence of an Oklahoma

motor fuel tax fell on the tribal retailers because the governing statutes

indicated that the distributors remitted the fuel tax “on behalf of” licensed

retailers. 31 F.3d at 971-72. The Supreme Court agreed with our

construction of the Oklahoma statutes. Chickasaw Nation, 515 U.S. at

461-62, 115 S.Ct. 2214. Contrary to the Tribes’ assertions, we cannot

reasonably construe the Kansas statutes as requiring distnibutors to collect

25a

the law does not require distributors to charge retailers the cost

of the tax. Kansas law expressly states that the legal incidence

of the motor fuel tax is upon the distributors and they are

responsible for remitting the tax. Kan. Stat. Ann. § 79-3408(c)

(1999 Supp.). See Moe, 425 U.S. at 482, 96 S.Ct. 1634.

Moreover, the law expressly exempts the Tribes from the

requirements of any retail fuel tax. /d. § 79-3408c(c). We

conclude a fair reading of the motor fuel tax law supports the

district court’s determination that as applied in this case the

legal incidence of the motor fuel tax falls upon the distributors.

In the alternative, the Tribes argue that even if the legal

incidence of Kansas’ motor fuel tax falls upon the distributors,

the Indian Trader Statutes, 25 U.S.C. §§ 261-264, constitute

a comprehensive federal statutory scheme which preempts the

State’s fuel tax law. See Chickasaw Nation, 515 U.S. at 459,

115 S.Ct. 2214 (if the legal incidence of a tax falls on non-

Indians, a state may assess the tax if the balance of interests

weighs in favor of the state “and federal law is not to the

contrary”) (emphasis added). Although the Tribes raised and

argued the trader statutes’ applicability in the district court, the

court appears to have referred to the issue only cursorily. Sac

and Fox Nation, 946 F.Supp. at 889 (order granting

preliminary injunction). While the question of the trader

statutes’ applicability is not wholly separate from the balancing

inquiry, see Department of Taxation and Finance v. Milhelm

Attea & Bros., 512 U.S. 61, 73, 114 S.Ct. 2028, 129 L.Ed.2d

52 (1994), we address this issue before we proceed to our

discussion of the balancing of interests.'"° We review federal

and remit the motor fuel tax “on behalf of” the tribal retailers.

In Department of Taxation and Finance of New York v. Milhelm Attea

& Bros., Inc., the Court explained:

Resolution of conflicts of this kind [a challenge to state regulations

26a

statutes de novo. Ben Ezra, Weinstein, and Co. v. America

Online, Inc., 206 F.3d 980, 984 (10th Cir. 2000). We

conclude that the Kansas motor fuel tax law is not inconsistent

with the Indian Trader Statutes."

allegedly preempted by the trader statutes] does not depend on rigid

rules or on mechanical or absolute conceptions of state or tribal

sovereignty, but instead on a particularized inquiry into the nature of

the state, federal, and tribal interests at stake, an inquiry designed to

determine whether, in the specific context, the exercise of state

authority would violate federal law.

512 US. 61, 73, 114 S.Ct. 2028, 129 L.Ed.2d 52 (1994) (internal brackets

and quotations omitted).

" As a preliminary matter, we note that the actual Indian traders subject

to the motor fuel tax, i.e., the wholesale fuel distributors, are not parties

to this suit. Thus, the question of their joinder necessarily arises, see

Fed.R.Civ.P. 19, and we address it sua sponte. While it might have been

preferable to join the distributors as parties in the district court (at least for

purposes of adjudicating the question of the traders statutes’ applicability),

neither the State nor the Tribes ever raised that possibility over the course

of four years of district court litigation. Nor did the distributors, who

surely are apprised of this litigation, seek to intervene. While the

distributors appear to be necessary parties under Rule 19(a), they

technically are not indispensable parties under Rule 19») because their

joinder appears feasible, that is to say the distributors may be joined

without destroying our subject matter jurisdiction over this cause. See

Provident Tradesmens Bank v. Patterson, 390 U.S. 102, 118-119 & n. 15,

88 S.Ct. 733, 19 L.Ed.2d 936 (1968).

Nevertheless, at this late date we are unwilling to require the

distributors’ joinder because pragmatic considerations dictate otherwise.

See id. at 106-107, 88 S.Ct. 733. First, the State is foreclosed from

asserting the non-joinder issue for the first time on appeal and cannot now

be heard to complain of possible relitigation with the distributors or

possible inconsistent obligations. See id. at 110, 88 S.Ct. 733; Martin v.

Wilks, 490 U.S. 755, 765, 109 S.Ct. 2180, 104 L.Ed.2d 835 (1989)

(burden is on the parties to a lawsuit to join necessary additional parties).

Second, any judgment we render regarding the trading statutes is

nonbinding as to the distributors in the context of res judicata. See

Provident Tradesmens, 390 U.S. at 110, 88 S.Ct. 733. Third, the

27a

Consistent with its power under the Indian Commerce

Clause, U.S. Const. art. I, § 8, cl. 3, Congress enacted the

Indian Trader Statutes “to prevent fraud and other abuses by

persons trading with Indians.” Milhelm Attea, 512 U.S. at 70,

114 S.Ct. 2028. The statutes give the Commissioner of Indian

Affairs seemingly broad power to regulate trade with Indian

tribes. Specifically, 25 U.S.C. § 261 states:

The Commissioner of Indian Affairs shall have the sole

power and authority to appoint traders to the Indian tribes

and to make such rules and regulations as he may deem just

and proper specifying the kind and quantity of goods and the

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

In Warren Trading Post v. Avizona Tax Comm'n, 380 U.S.

685, 85 S.Ct. 1242, 14 L.Ed.2d 165 (1965), the Court

interpreted the trader statutes to bar state taxation of federally

licensed retail Indian traders “on their sales to reservation

Indians on a reservation.” Id. at 690, 85 S.Ct. 1242 (emphasis

added). See also Central Machinery Co. v. Arizona Tax

Comm'n, 448 U.S. 160, 161-66, 100 S.Ct. 2592, 65 L-Ed.2d

684 (1980) (barring the state from taxing unlicensed retailer’s

sale of farm machinery to the tribe on its reservation).

Subsequently, in White Mountain Apache Tribe v. Bracker,

448 U.S. 136, 100 S.Ct. 2578, 65 L.Ed.2d 665 (1980), the

Court held that a comprehensive federal regulatory scheme

(unrelated to the trader statutes) governing the harvest of

Indian timber preempted Arizona’s “use fuel” tax law as

applied to a logging contractor operating exclusively on federal

and tribal roads within the reservation. /d. at 145-53, 100

preference for joinder in the district court on efficiency grounds has all but

disappeared at this late date. See id. at 116, 88 S.Ct. 733. We simply find

no compelling reason to set aside the district court’s judgment in this case

on the basis of the distributors’ non-joinder “just because [the judgment]

did not theoretically settle the whole controversy.” /d.

28a

S.Ct. 2578. Balancing the parties’ respective interests, the

Court concluded:

The roads at issue have been built, maintained, and policed

exclusively by the Federal Government, the Tribe, and its

contractors. We do not believe that [the State’s]

generalized interest in raising revenue is in this context

sufficient to permit its proposed intrusion into the federal

regulatory scheme with respect to the harvesting and sale of

tribal timber.

Id. at 150, 100 S.Ct. 2578.

More recently, in Milhelm Attea, the Court narrowed its

interpretation of the trader statutes. In that case, the Court

upheld a state regulatory scheme that imposed recordkeeping

requirements and quantity limitations on cigarette wholesalers

who sold untaxed cigarettes to reservation Indians. The Court

relied on its decisions in Moe, 425 U.S. at 463, 96 S.Ct. 1634,

and Washington v. Confederated Tribes of the Colville Indian

Reservation, 447 U.S. 134, 100 S.Ct. 2069, 65 L.Ed.2d 10

(1980), to reject “the submission that 25 U.S.C. § 261 bars any

and all state-imposed burdens on Indian traders.” Milhelm

Attea, 512 U.S. at 74, 114 S.Ct. 2028. In Moe, 425 US. at

481-83, 96 S.Ct. 1634, the Court upheld Montana’s

requirement that tribal retailers collect a cigarette sales tax

validly imposed on non-Indian consumers. In Colville, 447

U.S. at 150-161, 100 S.Ct. 2069, the Court upheld the State of

Washington’s similar but more detailed tobacco sales tax

against a tribal challenge. From these decisions, the Court

reasoned that “[i]t would be anomalous to hold that a State

could impose tax collection and bookkeeping burdens on

reservation retailers who are themselves enrolled tribal

members, including stores operated by the tribes themselves,

but that similar burdens could not be imposed on wholesalers

29a

who often... are not.” Milhelm Altea, 512 U.S. at 74, 114

S.Ct. 2028."

Our en banc decision in O'Cheskey, 625 F.2d at 967,

decided after Warren Trading and Central Machinery, is

consistent with the Supreme Court’s narrowing of the Indian

Trader Statutes in Milhelm Attea. In O’Cheskey, the State of

New Mexico imposed its gross receipts tax on contractors who

had done construction work for the Mescalero Apache Tribe

on reservation lands. We upheid the tax on the contractors

despite the presence of an indemnity agreement under which

the tribe agreed to indemnify the contractors for the tax.

O'Cheskey, 625 F.2d at 969. Rejecting the tribe’s argument

that the Indian Trader Statutes preempted the state tax, id. at

990-91, we noted that nothing in the record indicated the

contractors performed all their work on the reservation. Jd. at

968. We reasoned that the legal incidence of the tax was on

the contractors, and concluded:

An indirect burden obviously is initially on the one for whom

the services are performed-thus on the Tribe or the

Government. However, it is equally apparent that this

indirect burden is again passed on to the users of the resort

'2 In Oklahoma Tax Comm'n v. Citizen Band Potawatomi Indian Tribe,

498 U.S. 505, 111 S.Ct. 905, 112 L.Ed.2d 1112 (1991), the Court held

that sovereign immunity barred the State of Oklahoma’s suit against a

tribe to recover cigarette taxes owed for sales to non-Indians at the tribe’s

convenience store located on the reservation. In addressing alternative

remedies for the State, the Court stated:

[U]nder today’s decision, States may of course collect the sales tax

from cigarette wholesalers, either by seizing unstamped cigarettes off

the reservation, Colville, supra, at 161-162, 100 S.Ct. 2069, or by

assessing wholesalers who supplied unstamped cigarettes to the tribal

stores, City Vending of Muskogee, Inc. v. Oklahoma Tax Comm'n, 898

F.2d 122 (C.A.10 1990).

Citizen Band, 498 U.S. at 514, 111 S.Ct. 905 (emphasis added).

30a

and again by them. The tax becomes dispersed. There is no

way of telling where the ultimate economic burden falls.

This is the reason why the initial incidence of the tax must

be the determinative factor. It is the only significant matter

for our consideration.

O’Cheskey, 625 F.2d at 970.

Unlike Warren Trading and its progeny, the Kansas motor

fuel tax law does not impose a tax upon retail traders for

trading with Indians. Milhelm Attea, 512 U.S. at 74, 114

S.Ct. 2028. Unlike White Mountain Apache Tribe, no com-

prehensive federal regulatory scheme governs the wholesale

distribution of motor fuel to Indian tribes. Rather, the Kansas

motor fuel tax law imposes a non-discriminatory tax on all

wholesale fuel distributors for fuel distributions to retailers

within the State of Kansas-Indian or otherwise. Nothing in the

record indicates the Tribes’ distributors distribute all their fuel,

or even a significant portion of it, to the Tribes. See

O 'Cheskey, 625 F.2d at 968. Thus, the threat of the distribu-

tors perpetrating fraud or abuse upon the Tribes appears

negligible. See Milhelm Attea, 512 U.S. at 70, 114 S.Ct.

2028. Based upon the foregoing authorities, we conclude that

the Indian Trader.Statutes do not so pervade the field that they

preempt the Kansas motor fuel tax, the legal incidence of

which falls upon the distributors and which imposes only an

indirect burden on the Tribes. The only remaining question in

this case then is whether the indirect economic burden of the

motor fuel tax constitutes such an interference with the Tribes’

internal affairs as to be unlawful under Chickasaw Nation’s

balancing of interests test.

The district court concluded that the balance of tribal and

state interests weighed in favor of the Tribes because (1) the

State “would clearly not suffer a great deal of harm if it were

enjoined from collecting the tax” on fuel distributed to the

3la

tribal retailers, but (2) if imposed, the tax “will have a real and.

direct impact on the tribes’ incomes.” Sac and Fox Nation, 31

F Supp.2d at 1307. Accordingly, the court granted the Tribes’

motion for summary judgment and invalidated the motor fuel

tax “as it relates to transactions involving tribal retailers.” Jd.

at 1308. We review the grant of summary judgment de novo.

Seamons v. Snow, 206 F.3d 1021, 1026 (10th Cir.2000). We

conclude the district court overlooked the dictates of Supreme

Court precedent and thus failed to adequately develop the

factual record before balancing the parties’ respective interests.

The Tribes’ primary argument in this case is economic. See

Aples’ App. at 20-49 (affidavits of tribal members). The Tribes

assert that the motor fuel tax jeopardizes their retail fuel sales

and other revenues generated by those sales at their

convenience stores located on tribal lands which support

essential tribal services to their members. Both the Sac and

Fox and Kickapoo Tribes also impose a tribal tax on their retail

sale of fuel, generating still further revenues. According to the

Tribes, if the State is allowed to tax the Tribes’ fuel

distributors, the wholesale cost of fuel to the Tribes will

necessarily increase and the revenues from their retail stores

will correspondingly decrease, interfering with their sovereign

right to self-government.

This is largely the same argument the Supreme Court

addressed and rejected in Colville, 447 U.S. at 154-59, 100

S.Ct. 2069, where the State of Washington sought to impose

a cigarette sales tax on on-reservation purchases by

nonmembers of the Tribes. In Colville, the Court phrased the

issue as “whether an Indian tribe ousts a State from any power

to tax on-reservation purchases by nonmembers of the tribe by

imposing its own tax on the transactions or by otherwise

earning revenues from the tribal business.” Colville, 447 U.S.

at 138, 100 S.Ct. 2069. The Court phrased the Tribes’

argument as follows:

32a

If the State is permitted to impose its taxes, the Tribes will

no longer enjoy any competitive advantage vis-a-vis

businesses in surrounding areas. Indeed, because the Tribes

themselves impose a tax on the transaction, if the state tax

is also collected the price charged will neces-sarily be higher

and the Tribes will be placed at a competitive disadvantage

as compared to businesses elsewhere. Tribal smokeshops

will lose a large percent-age of their cigarette sales and the

Tribes will forfeit substantial revenues. Because of this

economic impact, it is argued, the state taxes are (1) pre-

empted by federal statutes regulating Indian affairs; (2)

inconsistent with the principle of tribal self-government;

and (3) invalid under negative implications of the Indian

Commerce Clause.

Id. at 154, 100 S.Ct. 2069 (emphasis in original). The Court

was unpersuaded:

It is painfully apparent that the value marketed by the

smokeshops to persons coming from outside is not

generated on the reservations by activities in which the

tribes have a significant interest. What the smokeshops offer

these customers, and what is not available elsewhere, is

solely an exemption from state taxation. The Tribes assert

the power to create such exemptions by imposing their own

taxes or otherwise earning revenues by participating in the

reservation enterprises. If this assertion were accepted, the

Tribes could impose a nominal tax and open chains of

discount stores at reservations borders, selling goods of all

descriptions at deep discounts and drawing customers from

surrounding areas. We do not believe that principles of

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

tribal self-government, or otherwise, authorize Indian tribes

thus to market an exemption from state taxation to persons

who would normally do their business elsewhere.

Id. at 155, 100 S.Ct. 2069.

33a

We are well aware that the tax at issue in Colville was a

sales tax imposed down stream on purchases made by non-

tribal consumers only. Because the legal incidence of the tax

in Colville fell on the purchaser, the state had no power to tax

tribal members making purchases on the reservation. See

Chickasaw Nation, 515 U.S. at 453, 115 S.Ct. 2214. In our

case, the legal incidence of the motor fuel tax is imposed up

stream on the wholesale distributor and no exemption is

allowed for retail fuel sales to tribal members.’* Important

similarities, however, also exist between Colville and this case-

(1) a tax the legal incidence of which falls on non-Indians and

(2) tribal complaints based on the realities of the marketplace.

In both cases, the ultimate economic burden of the tax most

assuredly falls on the consumer.

We acknowledge that Kansas’ motor fuel tax law as

presently applied might sweep too broadly. In other words, if

a substantial portion of the Tribes’ retail fuel sales are to tribal

members, the Tribes’ argument that the indirect burden of the

fuel tax improperly interferes with their internal affairs would

not be without force. Based on the record before us, however,

we are unable to discern what portion of tribal fuel sales are to

tribal members as opposed to consumers traveling from outside

Indian land.'* Compare Colville, 447 U.S. at 145, 100 S.Ct.

'3 A prior version of the motor fuel tax law exempted from the tax-

The sale or delivery of motor-vehicle fuel . . . to the United States

of America and such of its agencies as are not or hereafter exempt by

law from liability to state taxation, except that this exemption shall not

be allowed if the sale or delivery of motor-vehicle fuel . . . is to a retail

dealer located on an Indian reservation in the state and such motor-

vehicle fuel . . . is sold or delivered to a nonmember of such

reservation.

Kan. Stat. Ann. § 79-3408g(d)(2) (1997) (repealed).

' In his affidavit, Corbin Shuckahosse, Chairperson of the Sac and Fox

Nation, states:

“ote

34a

2069 (noting that Indian tobacco dealers made a “large

majority” of their reservation sales to non-Indians seeking to

take advantage of the claimed tnbal exemption from the state’s

cigarette sales tax).

While we are not unsympathetic to the Tribes’ quandary, the

Supreme Court has never “gone so far as to grant tribal

enterprises selling goods to nonmembers an artificial

competitive advantage over all other businesses.” Colville, 447

U.S. at 155, 100 S.Ct. 2069. In fact, a tax on non-Indians

“may be valid even if it seriously disadvantages or eliminates

the Indian retailer’s business with non-Indians.” /d. at 151,

100 S.Ct. 2069 “[T]he Tribes have no vested right to a certain

volume of sales to non-Indians, or indeed to any such sales at

all.” Jd. at 151 n. 27, 100 S.Ct. 2069.

To be sure, the Tnbes have an interest in raising revenues to

support essential tribal services to benefit their members.

“That interest is strongest when the revenues are derived from

value generated on the reservation by activities involving the

Tribes and when the taxpayer is the recipient of tribal services.”

Id. at 156-57, 100 S.Ct. 2069. At the same time, “Congress

[T]he pricing of the [Tribe’s] fuel draws customers into the Trad’N

Post, as the sale of other miscellaneous items at the Trad’N Post .. . is

also attributable to the fuel sales. Without the draw of the lost-cost

fuel, customers would no longer bring their business to the Trad’N

Post, and the additional revenue would be lost to the Nation.

Aples’ App. at 21. Similarly, N7.ncy Bear, Chairperson of the Kickapoo

tribe, attests-

[T]he sale of |fuel and oil] products draws customers and creates

business that also generates the sale of other miscellaneous items. . ..

Without the draw of the sale of fuel at a competitive price, customers

would no longer bring their business to the Kickapoo Tribe Trading

Post and the additional revenues from the trading post would be lost to

the Tribe. .

Id. at 25.

35a

has made it clear in no uncertain terms that a state has a special

and fundamental interest in its tax collection system.” ANR

Pipeline Co. v. Lafaver, 150 F.3d 1178, 1193 (10th Cir. 1998).

A state’s interest is “strongest when the tax is directed at off-

reservation value and when the taxpayer is the recipient of state

services.” Colville, 447 U.S. at 157, 100 S.Ct. 2069."°

Like the tribe’s cigarette sales in Colville, in this case the

revenues resulting from the Tribes’ retail fuel sales to non-

Indian consumers traveling from outside Indian lands is not

derived from value “generated on the reservations by activities

in which the Tribes have a significant interest.” Jd. at 155, 100

S.Ct. 2069. Although the result of the motor fuel tax may be

to lessen, or even eliminate, tribal commerce with non-

members, that market exists only because of the Tribes’

claimed exemption from the fuel tax. See id. at 157, 100 S.Ct.

2069. However, until the Tribes provide us with verifiable

projections based upon historic statistics indicating what

portion of the Tribes’ retail fuel sales is made to tribal members

as compared to the general public, see Oklahoma Tax Comm'n

v. Sac and Fox Nation, 508 U.S. 114, 128, 113 S.Ct. 1985,

124 L.Ed.2d 30 (1993) (remanding for a determination of

“whether the tribal members on whom Oklahoma attempts to

impose its income and motor vehicle fuel taxes live in Indian

country”), and what the precise economic realities of the

'S The express purpose of the motor fuel tax appears to benefit all who use

the public highways in the State of Kansas-wholesalers who deliver the

fuel over state highways, retailers whose businesses are located on or near

state highways, and consumers who drive on state highways:

Purpose of tax. The tax imposed by this act is levied for the

purpose of producing revenue to be used by the state of Kansas to

defray in whole, or in part, the cost of constructing, widening,

purchasing of right-of-way, reconstructing, maintaining, surfacing,

resurfacing and repairing the public highways . . . and for no other

purpose whatever.

Kan. Stat. Ann. § 79-3402 (1999 Supp.).

36a

situation are both in the presence and absence of the motor fuel

tax, we cannot adequately balance the federal, tribal, and state

interests as Supreme Court authority at this point requires."®

But see Colville, 447 U.S. at 176-181, 100 S.Ct. 2069

(Rehnquist, J., dissenting in part) (criticizing the balance of

interests test as too fact specific and endorsing an inquiry based

solely on congressional intent). In this regard, we note that on

remand the burden is on the Tribes to show whether and to

what extent the motor fuel tax would burden commerce

derived from value generated on Indian lands. See id. at 157-

58, 100 S.Ct. 2069 (placing burden on the tribe to show that

absent a credit for tribal taxes paid, business at the smokeshops

would be significantly reduced).

Accordingly, the judgment of the district court is

REVERSED and this cause REMANDED for further

proceedings consistent with this opinion.

'6 Because the district court considered only the enforceability of the

Kansas motor fuel tax on its face, we do not address the question of

whether the tax, even if it survives Chickasaw Nation’s balancing test

generally, is invalid insofar as it is applied to fuel sold by the Tribes to

customers who are tribal members and reservation residents. See Moe,

425 U.S. at 480-81, 96 S.Ct. 1634. We leave consideration of that

question in the first instance to the district court on remand.

;

37a

IN THE UNITED STATE DISTRICT COURT

FOR THE DISTRICT OF KANSAS.

SAC AND FOX NATION OF

MISSOURI, Iowa Tribe of Kansas

and Nebraska, Kickapoo

Tribe of Indians of the

Kickapoo Reservation in

Kansas, Plaintiffs,

Karla PIERCE, Secretary,

Kansas Department of Revenue,

Defendant.

No. Civ.A. 95-4152-DES.

March 15, 1999.

MEMORANDUM AND ORDER

SAFFELS, District Judge.

This matter is before the court on the defendant’s Motion

for Reconsideration (Doc. 103) of the court’s Memorandum

and Order dated December 17, 1998, which granted the

plaintiffs’ motion for summary judgment and denied the

defendant’s motion for summary judgment. Both parties have

submitted briefs on this matter and the court is ready to rule.

I. FACTUAL BACKGROUND

The plaintiffs, who are all federally recognized Indian tribes |

located in the state of Kansas, filed suit seeking an injunction

to prevent the defendant from collecting taxes from motor-fuel |

distributors for fuel sold to the plaintiffs. On December 17, |

1998, the court issued an order granting the plaintiff's motion

for summary judgment and denying the defendant’s motion for

38a

summary judgment. The court also issued a permanent

injunction against the defendant, preventing the collection these

taxes. The defendant filed the current motion asking the court

to reconsider its previous order.

Il. STANDARD FOR A MOTION FOR RECON-

SIDERATION

A motion for reconsideration provides the court with an

opportunity to correct “manifest errors of law or fact and to

review newly discovered evidence.” Dees v. Wilson, 796

F.Supp. 474, 475 (D.Kan.1992). A court has discretion

whether to grant or deny a motion for reconsideration.

Hancock v. City of Oklahoma City, 857 F.2d 1394, 1395 (10th

Cir.1988). There are three circumstances in which a court may

appropriately grant a motion for reconsideration: (1) where

the court made a manifest error of fact or law; (2) where there

is newly discovered evidence; and (3) where there has been a

change in the law. Renfro v. City of Emporia, Kan., 732

F Supp. 1116, 1117 (D.Kan.1990).

A motion for reconsideration is not to be used as a vehicle

for the losing party to rehash arguments previously considered

and rejected. Voelkel v. GMC, 846 F.Supp. 1482, 1483

(D.Kan.1994). Indeed, “[a] party’s failure to present his

strongest case in the first instance does not entitle him to a

second chance in the form of a motion to amend.” Paramount

Pictures Corp. v. Video Broadcasting Sys., Inc., No. 89-1412-

C, 1989 WL 159369, at *1 (D.Kan. Dec. 15, 1989) (citing

United States v. Carolina Eastern Chem. Co., Inc., 639

F Supp. 1420, 1423 (D.S.C.1986)). Such motions are

therefore not appropriate if the movant intends only that the

court hear new arguments or supporting facts. Van Skiver v.

United States, 952 F.2d 1241, 1243 (10th Cir. 1991).

39a

Iii. DISCUSSION

A. Eleventh Amendment Immunity

The defendant raises four issues in the motion for

reconsideration. The first basis is that the case should be

dismissed for lack of jurisdiction based upon the case of

Seminole Tribe of Florida v. Florida, 517 U.S. 44, 116 S.Ct.

1114, 134 L.Ed.2d 252 (1996). The defendant claims that

Seminole Tribe, along with Ellis v. University of Kansas

Medical Center, 163 F.3d 1186 (1998) and Jdaho v. Coeur

d'Alene Tribe of Idaho, 521 U.S. 261, 117 S.Ct. 2028, 138

L.Ed.2d 438 (1997), requires the dismissal of this case based

on Eleventh Amendment immunity. The court previously

addressed the application of Seminole Tribe to this case and

found that it did not provide a bar to the plaintiffs’ claims. Sac

& Fox Nation of Missouri v. Lafaver 979 F.Supp. 1350

(1997). To the extent Ellis relies upon Seminole Tribe, the

court finds that it is similarly inapplicable.

The defendant’s reliance on Coeur d'Alene is similarly

misplaced. In Coeur d'Alene, the Court held that a federal

court cannot grant prospective relief under the Ex parte Young

doctrine when that relief implicates special sovereignty interests

that results in an intrusion functionally equivalent to an award

of money damages. Ellis, 163 F.3d at 1198. The issues in this

case do not “implicate special sovereignty issues” as is required

by Coeur d’Alene.

The court has previously ruled that this case is not barred by

the Eleventh Amendment. The defendant has not produced

any new legal or factual contentions which would cause the

court to come to a different conclusion today. The motion for

reconsideration is denied as it relates to the issue of Eleventh

Amendment immunity.

40a

B. Standing

The defendant next claims that the plaintiffs do not have

standing in this case. On page 12 of the motion for

reconsideration, the defendant states:

In its December 17, 1998 Memorandum and Order, the

court correctly determined that the Motor Fuel Tax Act

clearly places the legal incidence of the tax on distributors,

not on retailers such as plaintiffs. However, legal incidence

and standing are two sides of the same coin and this case

should be analyzed form that perspective.

The defendant’s theory is that if the legal incidence of the

tax does not fall on the tribes, they cannot have standing to

bring suit. The court disagrees. The Court in Oklahoma Tax

Comm'n v. Chickasaw Nation, 515 U.S. 450, 458, 115 S.Ct.

2214, 132 L.Ed.2d 400 (1995), set out a two-prong test for

determining whether taxes impacting Indian tribes are proper.

The first prong of the test is to determine where the legal

incidence of the tax falls. If the legal incidence of the tax is on

the tribes, then the tax is invalid. If not, the courts are to move

on to the second prong of the test and balance the state’s

interest in assessing the tax with the federal and tribal interest

in barring the tax. The defendant’s analysis would make this

two-prong test a nullity. Under the defendant’s theory, the first

prong would always be dispositive of the case. If the court

found that the tribes lacked standing every time the legal

incidence of the tax fell on the distributor instead of the tribe,

the balancing test would never come into play.

The court has previously decided that the plaintiffs do have

standing to bring this case. The defendant is simply rehashing

the prior arguments brought before this court. The motion for

reconsideration is denied as it relates to the standing issue.

4la

C. The Interpretation of the Organic Act and Act for

Admission to the Union

The defendant has not produced any new legal or factual

issues in regard to its motion to reconsider on this issue. All of

the defendant’s arguments were previously considered and are

no basis to overturn this court’s prior ruling. The defendant

has asked the court to withdraw its decision on this issue as it

is not necessary for the determination of the case. The court

declines to do so. In the alternative, the defendant has asked

the court to certify the question of whether the reservations

should be considered within the state of Kansas to the Kansas

Supreme Court for a ruling. The court finds that this is

unnecessary and denies that request.

D. The Balancing of State, Tribal and Federal Interests

The defendant’s final basis for the defendant’s motion to

reconsider concerns the court’s analysis of the balancing of

state, federal and tribal interests. Under the Chickasaw Nation

two-prong test, the court is to balance these competing interest

in determining whether to uphold a tax where the legal

incidence of the tax does not fall on the Indian tribes. The

court found then, as it does now, that there was sufficient

evidence before the court to make a ruling on this balancing

issue.

The defendant claims that according to the Report of the

Parties’ Planning Meeting, filed with the court on February 19,

1997, the parties agreed that if the court determined that the

legal incidence of the tax did not fall on the plaintiffs, then

discovery would be necessary to bring forth facts for the court

to balance tribal and state interests. The defendant did not

raise this issue in any of the briefs filed in support of its motion

for summary judgment or in response to the plaintiffs’ motion.

The defendant discusses this issue in its response to the

plaintiffs motion for summary judgment without once

indicating that further discovery was needed. To rule that the

42a

issue was not ready for ruling would allow the defendant to

take two bites at the apple. The defendant argued its case

about the balancing of interests and the court ruled against the

defendant. The defendant now wants to have another shot at

this issue. Because the defendant argued this issue in its

response to the plaintiffs’ motion for summary judgment

without raising the issue of the parties agreeing to conduct

further discovery, the court finds that the defendant has waived

any right to rely on the parties’ agreement and denies the

motion for reconsideration on this issue.

IV. CONCLUSION

The defendant has not produced any additional legal

arguments or factual contentions that would cause the court to

reverse its earlier decision to grant the plaintiffs’ motion for

summary judgment and deny the defendant’s motion for

summary judgment. The court finds that each of the four areas

the defendant claims were in error were properly decided and

took into account all of the necessary facts.

IT IS THEREFORE BY THIS COURT ORDERED that

the defendant’s Motion for Reconsideration (Doc. 103) is

denied.

43a

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF KANSAS

SAC AND FOX NATION OF

MISSOURI, Iowa Tribe of Kansas

and Nebraska, Kickapoo

Tribe of Indians of the

Kickapoo Reservation in

Kansas, Plaintiffs,

Vv.

John D. LAFAVER, Secretary

Kansas Department of Revenue,

Defendant.

No. Civ.A. 95-4152-DES.

United States District court,

D. Kansas

Dec. 17, 1998.

MEMORANDUM AND ORDER

SAFFELS, District Judge. |

This matter is before the court on defendant’s Motion for

Summary Judgment (Doc. 93) and plaintiffs’ Motion for

Summary Judgment (Doc. 94).

I. BACKGROUND

The basic facts in this case are not in dispute. The plaintiffs

are three federally-recognized Indian Tribes: the Sac and Fox

Nation of Missouri (“Sac and Fox’); the Iowa Tribe of Kansas

and Nebraska (“Iowa”); and the Kickapoo Tribe of Indians of

the Kickapoo Reservation in Kansas (“Kickapoo”) (collectively

the “Tribes”). Sac and Fox is the beneficial owner of and

44a

exercises jurisdiction over the Sac and Fox Indian Reservation,

as well as land located at Reserve, Kansas, which land is held

in trust for Sac and Fox by the United States of America. Iowa

is the beneficial owner of and exercises jurisdiction over the

Iowa Tribe of Kansas and Nebraska Indian Reservation. A

part of the Iowa land is held in trust for Iowa by the United

States of America. Kickapoo is the beneficial owner of and

exercises jurisdiction over land within the Kickapoo Nation’s

federally recognized boundaries, which land is held in trust for

Kickapoo by the United States of America. All three plaintiffs

operate retail gasoline stations on their reservations, and assess

tribal taxes on their motor-vehicle fuel sales.

On May 7, 1995, the Kansas Legislature passed Senate Bill

88 (“SB 88”), which is codified at Kan.Stat.Ann. § 79-

3408g(d)(2).' Section 79-3408g(d)(2) provides as follows:

No tax is hereby imposed upon or with respect to the

following transactions: ... (2) The sale or delivery of motor-

vehicle fuel or special fuel to the United States of America and

such of its agencies as are now or hereafter exempt by law

from liability to state taxation, except that this exemption shall

not be allowed if the sale or delivery of motor-vehicle fuel or

special fuel is to a retail dealer located on an Indian reservation

in the state and such motor-vehicle fuel or special fuel is sold

or delivered to a nonmember of such reservation.

On May 17, 1995, the legislature passed House Bill 2161

(“HB 2161”), which is codified at Kan.Stat.Ann. § 79-

3408(d)(2). Section 79-3408(d)(2) contains the exemption

language of section 79-3408g(d)(2), but does not contain the

exception for deliveries to nonmembers of Indian reservations.

' Senate Bill 421, which was passed by the Kansas Legislature in 1998,

repealed Kan.Stat.Ann. § 79-3408g. However, as this statute was

applicable during a portion of the time relevant to this case, it will still be

discussed.

45a

Section 79-3408(d)(2) reads as follows: “No tax is hereby

imposed upon or with respect to the following transactions:

. . . (2) The sale or delivery of motor-vehicle fuel or special fuel

to the United States of America and such of its agencies as are

now or hereafter exempt by law from liability to state

taxation.”

On September 6, 1995, the Kansas Department of Revenue

(“DOR”) announced its intention to begin collecting tax on

motor-vehicle fuel sales from distributors to plaintiffs.

Plaintiffs challenged the imposition of this tax and alleged that

the Kansas statutes purporting to subject the Tribes to the

state’s motor-vehicle fuel tax are unconstitutional and

preempted by federal law. On October 5, 1995, this court

entered a temporary restraining order enjoining and restraining

DOR from applying and enforcing the collection of any motor-

vehicle fuel tax on tribal retail motor-vehicle fuel sales on

Indian lands, including sales from distributors to plaintiffs, as

outlined in Senate Bill No. 88, signed on May 7, 1995, and

House Bill No. 2161, signed on May 17, 1995, and

_ implemented on September 6, 1995. The court further ordered

that the temporary restraining order would be effective until

such time as the court had ruled on plaintiffs’ motion for

preliminary injunction. The court ordered a preliminary

injunction on October 30, 1996.

Il. SUMMARY JUDGEMENT STANDARD

A court shall render summary judgment upon a showing that

there is no genuine issue of material fact and that the movant

is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c).

The rule provides that “the mere existence of some alleged

factual dispute between the parties will not defeat an otherwise ©

properly supported motion for summary judgment; _ the

requirement is that there be no genuine issue of material fact.”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106

S.Ct. 2505, 91 L.Ed.2d 202 (1986). The substantive law

identifies which facts are material. /d. at 248, 106 S.Ct. 2505.

46a

A dispute over a material fact is genuine when the evidence is

such that a reasonable jury could find for the nonmovant. /d.

“Only disputes over facts that might affect the outcome of the

suit under the governing law will properly preclude the entry of

summary judgment.” /d.

The movant has the initial burden of showing the absence of

a genuine issue of material fact. Shapolia v. Los Alamos Nat'l

Lab., 992 F.2d 1033, 1036 (10th Cir.1993). The movant may

discharge its burden “by ‘showing’--that is, pointing out to the

district court--that there is an absence of evidence to support

the nonmoving party’s case.” Celotex Corp. v. Catrett, 477

U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) The

movant need not negate the nonmovant’s claim. Jd. at 323,

106 S.Ct. 2548.

Once the movant makes a properly supported motion, the

nonmovant must do more than merely show there is some

metaphysical doubt as to the material facts. Matsushita Elec.

Indus. Co., Lid. v. Zenith Radio Corp., 475 U.S. 574, 586, 106

S.Ct. 1348, 89 L.Ed.2d 538 (1986). The nonmovant must go

beyond the pleadings and, by affidavits or depositions, answers

to interrogatories, and admissions on file, designate specific

facts showing there is a genuine issue for trial. Celotex, 477

US. at 324, 106 S.Ct. 2548 (interpreting Fed.R.Civ.P. 56(e)).

Rule 56(c) requires the court to enter summary judgment

against a nonmovant who fails to make a showing sufficient to

establish the existence of an essential element to that party’s

case, and on which that party will bear the burden of proof. /d.

at 322, 106 S.Ct. 2548. Such a complete failure of proof on an

essential element of the nonmovant’s case renders all other

facts immaterial. Jd. at 323, 106 S.Ct. 2548.

A court must view the facts in the light most favorable to the

nonmovant and allow the nonmovant the benefit of all

reasonable inferences to be drawn from the evidence. See, e.g.,

U.S. v. O'’Block, 788 F.2d 1433, 1435 (10th Cir. 1986) (stating

that “(t]he court must consider factual inferences tending to

47a

show triable issues in the light most favorable to the existence

of those issues”). The court’s function is not to weigh the

evidence, but merely to determine whether there is sufficient

evidence favoring the nonmovant for a finder of fact to return

a verdict in that party’s favor. Anderson, 477 U.S. at 249, 106

S.Ct. 2505. Essentially, the court performs the threshold

inquiry of determining whether a trial is necessary. /d. at 250,

106 S.Ct. 2505.

Ill. ANALYSIS

A. Standing

[1] Under the United States Constitution, federal courts

only have jurisdiction to hear a matter if there is a “case or

controversy.” U.S. Const. art. III, § 2. One element of the

case or controversy requirement is that the plaintiff must

establish that they have standing to sue. Raines v. Byrd, 521

U.S. 811, 117 S.Ct. 2312, 2317, 138 L.Ed.2d 849 (1997). The

standing inquiry focuses on whether the plaintiffs are the

proper parties to bring this suit. /d. In order to meet the

standing requirements of Article III, “ ‘[a] plaintiff must allege

personal injury fairly traceable to the defendant’s allegedly

unlawful conduct and likely to be redressed by the requested

relief.’” Jd. (quoting Allen v. Wright, 468 U.S. 737, 751, 104

S.Ct. 3315, 82 L.Ed.2d 556 (1984)).

[2] The defendant claims that the plaintiffs cannot meet the

threshold requirement of standing to maintain this suit. In

support of this contention, the defendant states that the

distributors of the motor-vehicle fuel are the proper party

because they are responsible for the payment of the taxes to the

state.

[3] Standing contains three requirements. First, there must

be an “injury in fact”—a harm suffered by the plaintiffs that is

“concrete” and “actual or imminent.” The second requirement

is Causation—a traceable connection between the plaintiffs’

48a

injuries and the defendant’s actions. Finally, there must be

redressability,—or a likelihood that the requested relief will

redress the alleged injury. Stee/ Co. v. Citizens for a Better

Environment, 523 U.S. 83, 118 S.Ct. 1003, 1016-17, 140

L.Ed.2d 210 (1998).

The court finds that the plaintiffs in this action meet the

constitutional requirements for standing. The court has no

doubt that the tax in question will be passed along to the tribal

retailers if it is paid by the distributors. As discussed below,

this is specifically allowed by the laws in question. The

plaintiffs would then be left with two choices. First, the tribe

could pass the tax along to the consumer, which would raise

the price of fuel and undoubtedly lower sales. The other

option would be to absorb the tax themselves in an effort to

keep sales up. In either case, the plaintiffs would suffer a real

economic loss if the tax is charged to the distributor. This

satisfies the first requirement of “injury in fact.” There is no

causation concern in this case. Clearly it is the tax in question

that would cause the plaintiffs’ injuries. Finally, the court finds

that by granting a permanent injunction and finding the tax in

question unenforceable, the court can adequately redress the

plaintiffs’ injuries. Having met the three requisite showings for

standing, the court finds that this case is properly brought by

the plaintiffs and should proceed on its merits.

B. Tax Compacts

[4] The plaintiffs claim that the tax in question is barred by

tax compacts entered into by the respective tribes and the state

of Kansas. In 1991 and 1992, the respective tribal counsel, the

governor of the state of Kansas, and the secretary of the

Kansas Department of Revenue entered into these compacts.

According to the terms of the compacts, the state agreed not

to tax certain transactions which involved the tribes, provided

that the tribes placed a tax on the consumers. The plaintiffs

allege that these compacts prohibit the state from taxing the

fuel purchased by the tribes for resale. The defendant claims

49a

that, because these compacts were never approved or ratified

by the Kansas Legislature, they have no legal effect.

As an initial note, these compacts, by their own language,

were effective only until 1996, if at all. No compacts have

been entered into by the tribes and the state since 1996.

Therefore, this argument only pertains to the portion of the

taxes in question which relate to dates prior to 1996.

The leading case in Kansas concerning the governor’s ability

to bind the state under a compact is State ex rel. Stephan v.

Finney, 251 Kan. 559, 836 P.2d 1169 (1992). In Finney, the

Kansas Supreme Court invalidated gaming compacts entered

into by then Governor Finney and certain Indian tribes located

in Kansas. The court held that the compacts in question would

have created substantive changes in the state’s government by

creating a new agency and substantively changing the state law.

This, held the court, was the function of the state legislature,

not the governor.

The plaintiffs claim that the Finney case is not controlling

because it is distinguishable. One of the major concerns the

Kansas Supreme Court had with the compacts at issue in

Finney was that the compacts would create a new set of duties

and responsibilities on a state agency. Clearly the Finney case

is distinguishable on this point. The compacts in this case

would have no impact on the duties or functions of any existing

state agency and would not have the effect of creating a new

state agency. Therefore, the court’s holding that creating such

additional duties on a state agency is beyond the authority of

_ the governor does not provide any guidance when the governor

does not undertake such a task, as is the case presently before

the court. Another problem discussed by the court in Finney

was that the compacts would have made substantive changes

to the state laws. While the plaintiffs claim that the compacts

in this case would not alter state law, the court disagrees.

50a

Although the current compacts would not have created any

new government agencies in the state of Kansas, the compacts

would have made a substantive change to state law. If the

compacts were to be applied as is requested by the plaintiffs in

this case, the compacts would have created an exemption to

the existing state tax laws. The creation of tax exemptions is

function for the state legislature, not the governor. The

legislature clearly considered whether certain transactions

involving motor-vehicle fuel should be given a tax exemption,

as evidenced by the fact that many are included in the tax

statutes. To allow the governor to create new tax exemptions

without the approval of the state legislature would be a

violation of the Kansas Constitution. As the Kansas Supreme

Court held in Finney, this court holds that although the

governor of Kansas had the authority to negotiate the

compacts in question with the Indian tribes, only the legislature

has the authority to make those compacts binding. Therefore,

the tax compacts at issue in this case are of no legal effect.

C. Statutory Exemptions

The plaintiffs discuss at length in their briefs that the

statutes, upon which the state of Kansas is relying upon to

collect the tax, exempt transactions involving Indian tribes.

According to the plaintiffs, the two different provisions of

Kan Stat.Ann. § 79-3408 justify an exemption to transactions

involving Indian tribes. First, the plaintiffs claim that the

provision found in subsection (d)(2) of § 79-3408 allows such

an exemption. According to the plaintiffs, subsection (d)(2)

should be read as it appears in § 79-3408 and not as it appears

in § 79-3408g. The court agrees.

This issue has become extremely confusing because the

Kansas Statutes contain two versions of the same statute.

Section 79-3408 was amended twice in 1995. Rather than

containing only the controlling version of the statute, which the

court finds is clearly the version created by House Bill 2161 as

it was the latter bill to be passed into law, the bound volume of

S5la

the Kansas Statutes Annotated contains both versions. The

controlling version of the statute provides an exemption from

the fuel tax laws on any transactions involving “[t]he sale or

delivery of motor-vehicle fuel or special fuel to the United

States of America and such of its agencies as are now or

hereafter exempt by law from liability to state taxation.”

Kan.Stat.Ann. § 79-3408(d)(2) (1997) What is not contained

in this version is the following language, “except that this

exemption shall not be allowed if the sale or delivery of motor-

vehicle fuel or special fuel is to a retail dealer located on an

Indian reservation in the state and such motor-vehicle fuel or

special fuel is sold or delivered to a nonmember of such

reservation.” Kan.Stat.Ann. § 79-3408g(d)(2) (1997).

The court finds that this language is immaterial to the

plaintiffs’ case. The exemption at issue in § 79-3408(d)(2)

applies to the United States of America and its agencies. The

court is unaware of any legal authority which indicates that

federally recognized Indian tribes are agencies of the United

States. Plaintiffs have indicated that it was this exemption that

was relied upon by the state of Kansas to exempt transactions

involving tribal retailers in the past. However, the fact that the

state of Kansas had erroneously interpreted the statute to

provide an exemption in the past is not sufficient to require

them to do so now. Kan.Stat.Ann. § 79-3408(d)(2) does not

exempt from the motor-vehicle fuel tax those transactions

involving retailers located on Indian reservations.

The plaintiffs also claim that Kan.Stat.Ann. § 79-3408(d)(1)

provides an exemption to the motor-vehicle fuel taxes in

transactions involving tribal retailers. The section states that

no tax is imposed upon transactions involving “[t]he sale or

delivery of motor-vehicle fuel or special fuel for export from

the state of Kansas to any other state or territory or to any

foreign country.” Kan.Stat.Ann. § 79-3408(d)(1> (1997).

The question which has been debated at length by both

parties is whether the Indian reservations located within the

52a

borders of the state of Kansas should be considered another

“state or territory” as is provided for in § 79-3408(d)(1). The

plaintiffs base their argument in the Act for Admission of

Kansas Into the Union and the Organic Act. Both of these acts

make it very clear to the court that the Indian reservations are

not to be considered part of the state of Kansas in any way.

The plain language of both acts states that “all such territory

shall be excepted out of the boundaries, and constitute no part

of the territory [state] of Kansas.”

The defendant claims that the language contained in § 79-

3408(d)(1) was not meant to exclude transactions involving

Indian tribes. The statute exempts any fuel transactions where

the fuel is exported “to any other state or territory or to any

foreign country.” From this reading, the court can only

conclude that the intent of the Kansas Legislature was to

exempt any transaction where fuel was to be sold outside the

boundaries of the state of Kansas. As the Act for Admission

of Kansas into the Union and the Organic Act both clearly

exclude the Indian reservations from the boundaries of the state

of Kansas, it is only reasonable that § 79-3408(d)(1) provides

for an exemption to the transactions involved in this case where

fuel is sold to tribal retailers on the recognized reservations.

Based on this ruling, the court finds that the plaintiff's

request for a permanent injunction prohibiting the state of

Kansas from taxing any and all transactions involving the sale

of motor-vehicle fuel to retailers located on reservations must

be granted. Although the court finds that the injunction should

be granted based upon the exemptions contained in the Kansas

statutes, the court will also discuss whether federal law permits

the application of the tax, as well.

D. Legal Incidence of the Tax

The first step in determining whether federal law prohibits

Kansas from imposing the tax in question is to determine where

the legal incidence of the tax falls. Oklahoma Tax Comm'n v.

53a

Chickasaw Nation, 515 U.S. 450, 458, 115 S.Ct. 2214, 132

L.Ed.2d 400 (1995). If the legal incidence of the tax falls on

the tribal retailers, the state will be prohibited from assessing

the taxes. /d. at 459, 115 S.Ct. 2214. However, if the legal

incidence of a tax falls on non-tribal members, then there is no

categorical bar to the tax. Jd.

In Chickasaw Nation, the Court found that the legal

incidence of the fuel tax in question fell on the tribes, and thus

held that Oklahoma could not enforce the tax. The defendant

argues that the tax in question in this case is substantially

different from that imposed in the Chickasaw Nation case and

that the legal incidence of the tax is on the distributors of

motor-vehicle fuels, not on the tribal retailers. The plaintiff

contends that, although the two tax statutes are different in

some ways, certain key elements remain in the Kansas tax

which have the effect of placing the legal incidence of the tax

on the tribes. The court agrees with the defendant and holds

that the tax in question is legally imposed on the distributors,

not on the retailers.

1. Status Prior to 1998 Amendments

In order to determine who the legal incidence of the tax is

imposed upon, the court will compare some of the key

provisions discussed by both the United States Supreme Court

and the Tenth Circuit Court of Appeals in reaching their

determination that Oklahoma’s tax was legally imposed on the

tribes with the Kansas law in question. In Chickasaw Nation,

the Oklahoma tax concerned motor-vehicle fuel taxes “remitted

by a distributor on behalf of a licensed retailer.” Chickasaw

Nation v. State of Oklahoma, 31 F.3d 964, 971 (1994)

(emphasis added). The Kansas law contains no provision

which states that the distributor is remitting the tax “on behalf

of a licensed retailer.” In Chickasaw Nation, the Tenth Circuit

also notes that the distributor is allowed a credit for any taxes

that are uncollectible from the retailer. Jd. Although the

Kansas law does allow distributors to deduct a 2.5 percent

54a

allowance from the amount of motor-vehicle fuel subject to

taxes, it is apparent from the statute that this allowance is for

losses incurred in actually handling the fuel, such as spillage,

and not losses as a result of not collecting taxes from retailers

as was the case in Chickasaw Nation.

The tribes argue that the provision in the Kansas legislation

which allows distributors to pass the amount of the tax along

to the tribes as part of the purchase price has the effect of

imposing the legal incidence of the tax on the retailers.

Initially, the court wishes to point out that this provision is not

mandatory on the distributors. No distributor is required to

pass the amount of tax along to the retailer. The fact that the

language appears unnecessary due to the fact that the

distributors would be able to pass the cost along to retailers

even without the statutory authorization in no way affects the

plain language of the statute. Distributors have the option of

passing the tax along if they wish, but are in no way required

to do so by the statute. Contrary to plaintiffs claims, this

provision cannot reasonably be read to require distributors to

“collect and remit” the taxes in question on behalf of the

retailer.

The fact that the amount of the tax may ultimately be

funneled down to the tribal retailers has no effect on the legal

incidence of the tax. In the Tenth Circuit’s opinion in

Chickasaw Nation, the legal incidence of the tax did not fall on

the tribal retailer because the amount of the tax would

ultimately be passed along to the consumer. In response to this

argument, the court stated:

While it may well be that the tax is ultimately passed on to

the consumer at the pump, the question is whether the

statutes in question legally impose the taxes on the Tribe.

The question of who bears the ultimate economic burden of

the tax is distinct from the question of on whom the tax has

been imposed.

55a

Id. at 972.

Plaintiffs claim that several other provisions of the Kansas

tax statutes impose the legal incidence of the taxes on the

retailer. Plaintiffs claim that the provision of Kan.Stat.Ann. §

79-3408(a) which states that the tax is imposed on all fuel

which is “used, sold, or delivered in this state for any purpose

whatsoever” is similar to a provision in the Oklahoma tax

which was relied upon by the Court to invalidate the Oklahoma

tax. The court disagrees. The discussion about the similar

provision in the Oklahoma tax by the Court in Chickasaw

Nation was centered around the issue of whether the retailer

could be considered a mere collection agent for the consumer

just as the distributor was a collection agent for the retailer.

That analysis is irrelevant here because the court has already

determined that, under the Kansas law, the distributor is not

acting as a collection agent of the retailer, thus making a

determination of whether the retailer was, in turn, simply a

collection agent for the consumer unnecessary.

Another provision of the Kansas law which Plaintiff claims

is an indication that the legal incidence of the tax falls on the

Tribal retailers is the exemption from taxes on sales between

distributors, Kan.Stat.Ann. § 79-3408(d)(5). In Chickasaw

Nation, the Court construed a similar provision of the

Oklahoma tax to indicate that the legal incidence fell on the

retailer not the distributor. However, after reading § 79-3408

as a whole, the court comes to a different conclusion in regard

to the Kansas exemption. Section 79-3408(c) states “[sJuch tax

shall be paid but once.” If sales between distributors were not

given an exemption from the fuel tax, each transfer of the fuel

between distributors would result in a tax assessment for the

amount of fuel transferred. This would clearly lead to multiple

taxes on the same fuel as it is passed from distributor to

distributor and eventually to a retailer. The court finds that the

provision of the Kansas tax which exempts sales between

56a

distributors serves the purpose of preventing multiple taxation,

and not imposing the legal incidence of the tax on the retailer.

The plaintiffs further point to several provisions of the

Kansas Session Laws which they claim places the legal

incidence of the tax on the retailer. For example, in Plaintiffs’

Reply to Defendant’s Response to Plaintiffs’ Motion for

Summary Judgment, the plaintiffs quote the following passage

from the Kansas Session Laws:

It shall be unlawful for any . . . retailer to: (3) fail, neglect

or refuse to pay the director within the time required by the

act, any tax, taxes, interest or penalties for which such

person is liable under the provisions of this act.

1995 Kan.Sess.Laws Ch. 262, § 11. The eliminated portion of

this bill states that it applies to any “distributor, importer,

exporter, manufacturer, retailer, user, carrier, transporter or

any other person.” Jd. The full text of the section also lists

seventeen other actions which are made illegal by the bill.

Clearly, some of these eighteen illegal acts pertain to only

certain groups enumerated in the bill. The language of

subsection (3), on which the plaintiffs rely, does not, in any

way, impose a tax liability on the retailer. The section states

that it is unlawful for any person to “fail, neglect or refuse to

pay the director, within the time required by this act, any tax,

taxes, interest or penalties for which such person is liable

under the provisions of this act.” Id. (Emphasis added). This

provision does not create or impose any tax liability on any

person or entity. Rather, it makes it a criminal offense not to

pay taxes that are required under the act. Therefore, unless

some other provision in the act places a direct tax burden on

the retailer, this section does not apply to retailers.

The next section of the Kansas law which the plaintiffs claim

imposes the fuel tax on the retailer is quoted by the plaintiffs as

follows:

57a

If any . . . retailer . . . shall fail, neglect, or refuse to render

any report required by the provisions of this act within the

period specified, or if the director is not satisfied of the

correctness of any report or tax payment made by any . . .

retailer . . . the director is hereby authorized and empowered

to determine . . . the true amount of taxes, penalties, and

interest due the state from such . . . retailer... . Promptly

after making such determination the director shall send . . .

a statement to such . . . retailer and shall proceed to collect

the amount so determined.

1995 Kan. Sess.Laws Ch. 262, § 33. When read in context, this

provision does not impose any tax liability on the retailers. The

section applies to any “distributor, manufacturer, importer,

exporter or retailer.” Jd. This provision does not impose a tax

liability on anyone. It simply gives the director the ability to

use any information in the director’s possession to determine

the correct amount of tax that is owing on the sale of motor-

vehicle fuels when an improper amount has been paid. Because

no other provision in the act requires the retailer to pay these

taxes, the portion pertaining to taxes in this section of the bill

does not apply to retailers. However, retailers are required to

file reports on the amount of fuel received, thus explaining the

inclusion of retailers in this section.

Plaintiffs quote a third section of the Kansas Session Laws

which, they claim, imposes the Kansas fuel taxes on the

retailer. This section is quoted by the plaintiffs as follows:

Whenever any . . . retailer . . . is 10 days delinquent in the

making of any such report or the payment of any such tax,

penalty, or interest . . . the director upon conducting a

hearing as provided in this section and upon finding to the

director’s satisfaction upon such hearing, that such retailer

. . . has been delinquent, or has violated provisions of this

act, may revoke any or all licenses issued to such . . .

retailer.

58a

1995 Kan. Sess.Laws Ch. 262, § 29. As with the other sections

of this bill cited by the plaintiffs, the court finds that, despite

the plaintiffs’ artful method of selectively quoting the law so as

to take the quote completely out of context, this section does

not impose the tax in question on retailers. The section states

that when any “distributor, manufacturer, importer, exporter or

retailer” fails to either pay taxes that are required to be paid, or

to file required reports, the director can repeal their licenses.

It does not require anyone to pay taxes. Instead, it gives the

director power to enforce the tax scheme. As has been stated

above, and clearly provided in the Kansas laws, the retailers are

required to make reports concerning the amount of fuel they

receive, but not to pay or remit any taxes. Therefore, this

section of the law is only applicable to retailers insomuch as it

relates to the failure to make the required reports. It clearly

does not impose the legal incidence of any taxes on the retailer.

2. After 1998 Amendments

. In 1998, the Kansas Legislature amended the Kansas tax

laws in an effort to clarify where the legal incidence of the

motor-vehicle fuel tax fell. These amendments remove most of

the language concerning retailers complained of by the

plaintiffs in the above section. In addition, the new version of

Kan. Stat.Ann. § 79-3408 states:

Unless otherwise specified in K.S.A. 79-3408c, and amend-

ments thereto, the incidence of this tax is imposed on the

distributor of the first receipt of the motor fuel. . ..

1997 Kan. Sess.Laws Ch. 421, § 2.

The court has found nothing in the Kansas tax laws, either

prior to or after the 1998 amendments, which places the legal

incidence of this tax on the retailer. Rather, the statutes are

extremely clear in providing that the tax in question is imposed

upon the distributor. This, however, does not end the analysis

of whether the tax in question should be upheld. Even if the

legal incidence of the tax does not fall on the tribal retailers, the

59a

court can still invalidate the tax upon a finding that federal and

tribal interests in not having the tax enforced outweighs the

interests of the state of Kansas in collecting such taxes. See

Chickasaw Nation, 515 U.S. at 459, 115 S.Ct. 2214 (holding

that a balancing test is used to determine the validity of the tax

when the legal incidence of the tax does not fall on the tribe).

F. Balancing of Federal, Tribal and State Interests

The first step in analyzing the balancing test is determining

what impact would be sustained by the state of Kansas if the

tax in question is invalidated. As an initial point, the court

wishes to stress that Kansas has never in the past taxed motor-

vehicle fuel transactions involving the Indian tribes. A ruling

invalidating the tax would not take money out of the state

coffers that had been relied upon in the past. Instead, it would

only result in a prohibition on collecting new taxes. In

addition, although no evidence is currently before the court

concerning what percentage of motor-vehicle fuel sales involve

tribal retailers, it is obvious to the court that such transactions

make up a very small part of the transactions which would fall

under the taxing statute. Invalidating the tax as it applies to

transactions involving tribal retailers would not undermine the

taxing scheme set up by the tax laws. The state of Kansas

would clearly not suffer a great deal of harm if it were enjoined

from collecting the tax in question.

The second step in the balancing test would be to determine

the impact of the tax on the tribal retailers. It is clear to the

court that the each of the plaintiffs in this case rely heavily on

the sale of motor-vehicle fuel on their reservations for income.

The court has no doubt that the distributors who provide the

fuel to the tribal retailers will pass the price of the tax on as a

portion of the price. In fact, this practice is specifically

authorized in the legislation. See, Kan.Stat.Ann. § 79-3409

(1997). This will leave the tribal retailers with two options:

continue to sell the motor-vehicle fuel at the same cost and

absorb the cost of the tax that is passed on to them, or pass the

60a

tax on to the consumer by increasing prices, which will in all

likelihood reduce sales. In either case, the tax will have a real

and direct impact on the tribes’ incomes. The court finds that

the balancing test discussed in Chickasaw Nation shows that

the tax must be invalidated. The impact the loss of revenue

would have on tribal functions would be much greater than the

impact on the state of Kansas. Tribal autonomy is an important

concern not only for the tribes, but for the federal government

as well. Without sufficient revenue, tribal autonomy would

clearly be compromised. For this reason, the court finds that

the tax in question must be invalidated as it relates to

transactions involving tribal retailers.

IV. CONCLUSION

Having examined the motions and briefs filed in this case,

the court makes the following findings and conclusions. The

court finds that the plaintiffs have met the constitutional

requirement of standing to bring this lawsuit. The court also

finds that the tax compacts entered into between the governor

of the state: of Kansas and the plairtiffs are of no legal effect.

However, Kan. Stat. Ann. § 79-3408(d)(1) provides an

exemption from taxation for transactions where motor-vehicle

fuel is sold to retailers located on Indian reservations.

As a separate basis for granting the injunction, the court

finds that although the legal incidence of the tax in question

falls upon the distributors of the motor-vehicle fuel, and not on

the tribal retailers, the interests of the plaintiffs in not having

the taxes collected far outweighs the interests of the state of

Kansas in collecting the tax on transactions involving Indian

tribes.

IT IS THEREFORE BY THIS COURT DECLARED

that Kan Stat.Ann. § 79-3408 is invalid insomuch as it applies

to the collection of taxes on any and all transactions involving

the sale of motor-vehicle fuels to all federally recognized Indian

6la

tribes which in turn sell the fuel as a retailer on reservations and

trust land located within the state of Kansas.

IT IS THEREFORE BY THIS COURT ORDERED that

plaintiffs’ Motion for Summary Judgment (Doc. 94) is granted

and defendant’s Motion for Summzry Judgment (Doc. 93) is

denied.

IT IS FURTHER ORDERED that the State of Kansas is

permanently enjoined from enforcing Kan.Stat.Ann. § 79-3408

and collecting taxes from distributors on the sale of motor-

vehicle fuel in all transactions involving the federally

recognized Indian tribes who are plaintiffs to this action.

62a

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF KANSAS.

SAC AND FOX NATION OF MISSOURI,

Iowa Tribe of Kansas and Nebraska,

Kickapoo Tribe of Indians of

the Kickapoo Reservation in Kansas, Plaintiffs,

John D. LaFAVER, Secretary

Kansas Department of Revenue, Defendant.

Civil Action No. 95-4152-DES.

Feb. 12, 1998.

MEMORANDUM AND ORDER

SAFFELS, Senior District Judge.

This matter is before the court on defendant’s Motion for

Reconsideration (Doc. 72). For the reasons set forth below,

defendant’s motion is denied.

I. BACKGROUND

The plaintiffs are three federally-recognized Indian Tribes:

The Sac and Fox Nation of Missouri (“Sac and Fox”); the

Iowa Tribe of Kansas and Nebraska (“Iowa”); and the

Kickapoo Tribe of Indians of the Kickapoo Reservation in

Kansas (“Kickapoo”) (collectively the “Tribes”). Sac and Fox

is the beneficial owner of and exercises jurisdiction over the

Sac and Fox Indian Reservation, as well as land located at

Reserve, Kansas, which land is held in trust for Sac and Fox by

the United States of America. Iowa is the beneficial owner of

and exercises jurisdiction over the Iowa Tribe of Kansas and

Nebraska Indian Reservation. A part of the Iowa land is held

in trust for lowa by the United States of America. Kickapoo

63a

is the beneficial owner of and exercises jurisdiction over land

within the Kickapoo Nation’s federally recognized boundaries,

which land is held in trust for Kickapoo by the United States of

America. All three plaintiffs operate retail gasoline stations on

their reservations, and assess tribal taxes on their motor fuel

sales.

On May 7, 1995, the Kansas Legislature passed Senate Bill

88 (“SB 88”), which is codified at Kan Stat.Ann. § 79-

3408g(d)(2). Section 79-3408g(d)(2) provides as follows:

No tax is hereby imposed upon or with respect to the

following transactions: .. . (2) The sale or delivery of

motor-vehicle fuel or special fuel to the United States of

America and such of its agencies as are now or hereafter

exempt by law from liability to state taxation, except that

this exemption shall not be allowed if the sale or delivery of

motor-vehicle fuel or special fuel is to a retail dealer located

on an Indian reservation in the state and such motor-vehicle

fuel or special fuel is sold or delivered to a nonmember of

such reservation.

On May 17, 1995, the legislature passed House Bill 2161

(“HB 2161”), which is codified at Kan.Stat.Ann. § 79-

3408(d)(2). Section 79-3408(d)(2) contains the exemption

language of section 79-3408g(d)(2), but does not contain the

exception for deliveries to nonmembers of Indian reservations.

Section 79-3408(d)(2) reads as follows: “No tax is hereby

imposed upon or with respect to the following transactions:

. (2) The sale or delivery of motor-vehicle fuel or special fuel

to the United States of America and such of its agencies as are

now or hereafter exempt by law from liability to state

taxation.”

On September 6, 1995, the Kansas Department of Revenue

(“DOR”) announced its intention to begin collecting tax on

motor fuel sales on Indian lands, including sales from

distributors to plaintiffs. Plaintiffs challenged the imposition of

64a

this tax and alleged that the Kansas statutes purporting to

subject the Tribes to the state’s motor fuels tax are

unconstitutional and preempted by federal law. On October 5,

1995, this court entered a temporary restraining order enjoining

and restraining DOR from applying and enforcing the

collection of any motor fuels tax on tribal retail motor fuel sales

on Indian lands, including sales from distributors to plaintiffs,

as outlined in Senate Bill No. 88, signed on May 7, 1995, and

House Bill No. 2161, signed on May 17, 1995, and

implemented on September 6, 1995. The court further ordered

that the temporary restraining order would be effective until

such time as the court had ruled on plaintiffs’ motion for

preliminary injunction.

After several requests for continuance from the parties, the

court heard arguments on the preliminary injunction on

September 30, 1996. On October 30, 1996, the court granted

plaintiffs’ Motion for Issuance of Preliminary Injunction (Doc.

3) and enjoined DOR from applying or enforcing the Kansas

motor fuels tax on motor fuel sales on Indian lands, including

sales from distributors to the Tribes, as implemented on

September 6, 1995, pending adjudication of the plaintiffs’

claims. On October 31, 1996, defendant LaFaver moved to

dismiss the action, pursuant to Fed.R.Civ.P. 12(b)(1), for lack

of jurisdiction. This court issued a Memorandum and Order on

September 4, 1997, denying defendant’s motion to dismiss.

Defendant now moves the court to reconsider its September 4,

1997, order, or, alternatively, to permit defendant to file an

interlocutory appeal to the Tenth Circuit Court of Appeals.

Ii. DISCUSSION

A motion for reconsideration provides the court with an

opportunity to correct “manifest errors of law or fact and to

review newly discovered evidence.” Dees v. Wilson, 796

F.Supp. 474, 475 (D.Kan. 1992), aff'd, 13 F.3d 405 (1993). A

court has discretion whether to grant or deny a motion for

reconsideration. Hancock v. City of Oklahoma City, 857 F.2d

65a

1394, 1395 (10th Cir.1988). There are three circumstances in

which a court may appropriately grant a motion for

reconsideration: (1) where the court made a manifest error of

fact or law; (2) where there is newly discovered evidence; and

(3) where there has been a change in the law. Renfro v. City of

Emporia, Kan., 732 F.Supp. 1116, 1117 (D.Kan.), aff'd, 948

F.2d 1529 (1991).

A motion for reconsideration is not to be used as a vehicle

for the losing party to rehash arguments previously considered

and rejected. Voelkel v. GMC, 846 F.Supp. 1482, 1483

(D.Kan.), aff'd, 43 F.3d 1484 (10th Cir.1994). Indeed, “[a]

party’s failure to present his strongest case in the first instance

does not entitle him to a second chance in the form of a motion

to amend.” Paramount Pictures Corp. v. Video Broadcasting

Sys., Inc., No. 89-1412-C, 1989 WL 159369, at *1 (D.Kan.

Dec.15, 1989) (citing United States v. Carolina Eastern Chem.

Co., Inc., 639 F.Supp. 1420, 1423 (D.S.C.1986)). Such

motions are therefore not appropriate if the movant intends

only that the court hear new arguments or supporting facts.

Van Skiver v. United States, 952 F.2d 1241, 1243 (10th

Cir.1991), cert. denied, 506 U.S. 828, 113 S.Ct. 89, 121

L.Ed.2d 51 (1992).

“The party moving for reconsideration has the ‘burden to

show that there has been a change of law, that new evidence is

available, or that reconsideration is necessary to correct clear

error or prevent manifest injustice.’”” Mackey v. IBP, Inc., No.

95-2288-GTV, 1996 WL 417513 at *2 (D.Kan. July 22, 1996)

(quoting Jnterrutional Bhd. of Teamsters, Local 955 v. Sambol

Meat Packing Co., No. 92-2338-JWL, unpublished op. at 2

(D.Kan. Sept. 30, 1993)). Here, defendant does not allege a

change in law or the availability of new evidence. Accordingly,

his arguments require the court to decide whether

reconsideration is necessary to correct any clear error or

prevent manifest injustice.

66a

The court finds no proper grounds for reconsideration.

Although defendant disagrees with the court’s interpretation of

the law, his arguments do not establish the court’s prior ruling

to be “clearly erroneous.” Nor does defendant demonstrate

clear error which should be corrected to prevent manifest

injustice.

The court has also examined defendant’s request for

permission to file an interlocutory appeal, and finds that

defendant has failed to satisfy the requirements for this court to

permit such an appeal. Accordingly, plaintiff's motion must be

denied.

IT IS THEREFORE BY THE COURT ORDERED that

defendant’s Motion to Reconsider (Doc. 72) is denied.

67a

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF KANSAS.

SAC AND FOX NATION OF MISSOURI,

Iowa Tribe of Kansas and Nebraska,

Kickapoo Tribe of Indians of the

Kickapoo Reservation in Kansas, Plaintiffs,

John D. LAFAVER, Secretary

Kansas Department of Revenue, Defendant.

No. CIV.A. 95-4152-DES.

Sept. 4, 1997.

MEMORANDUM AND ORDER

SAFFELS, District Judge.

This matter is before the court on defendant’s Motion to

Dismiss (Doc. 55). For the reasons set forth below,

defendant’s motion is denied.

I. BACKGROUND

The plaintiffs are three federally-recognized Indian Tribes:

The Sac and Fox Nation of Missouri (“Sac and Fox”); the

Iowa Tribe of Kansas and Nebraska (“Iowa”); and the

Kickapoo Tribe of Indians of the Kickapoo Reservation in

Kansas (“Kickapoo”) (collectively the “Tribes”). Sac and Fox

is the beneficial owner of and exercises jurisdiction over the

Sac and Fox Indian Reservation, as well as land located at

Reserve, Kansas, which land is held in trust for Sac and Fox by

the United States of America. Iowa is the beneficial owner of

and exercises jurisdiction over the Iowa Tribe of Kansas and

Nebraska Indian Reservation. A part of the Iowa land is held

in trust for lowa by the United States of America. Kickapoo

is the beneficial owner of and exercises jurisdiction over land

68a

within the Kickapoo Nation’s federally recognized boundaries,

which land is held in trust for Kickapoo by the United States of

Amenca. All three plaintiffs operate retail gasoline stations on

their reservations, and assess tribal taxes on their motor fuel

sales.

On May 7, 1995, the Kansas Legislature passed Senate Bill

88 (“SB 88”), which is codified at Kan. Stat. Ann. § 79-

3408g(d)(2). Section 79-3408g(d)(2) provides as follows:

No tax is hereby imposed upon or with respect to the

following-transactions: ... (2) The sale or delivery of

motor-vehicle fuel or special fuel to the United States of

America and such of its agencies as are now or hereafter

exempt by law from liability to state taxation, except that

this exemption shall not be allowed if the sale or delivery of

motor-vehicle fuel or special fuel is to a retail dealer located

on an Indian reservation in the state and such motor-vehicle

fuel or special fuel is sold or delivered to a nonmember of

such reservation.

On May 17, 1995, the legislature passed House Bill 2161

(“HB 2161”), which is codified at Kan. Stat. Ann. § 79-

3408(d)(2). Section 79-3408(d)(2) contains the exemption

language of section 79-3408g(d)(2), but does not contain the

exception for deliveries to nonmembers of Indian reservations.

Section 79-3408(d)(2) reads as follows: “No tax is hereby

imposed upon or with respect to the following transactions:

_. . (2) The sale or delivery of motor-vehicle fuel or special fuel

to the United States of America and such of its agencies as are

now or hereafter exempt by law from liability to state

taxation.”

On September 6, 1995, the Kansas Department of Revenue

(“DOR”) announced its intention to begin collecting tax on

motor fuel sales on Indian lands, including sales from

distributors to plaintiffs. Plaintiffs challenged the imposition of

this tax and alleged that the Kansas statutes purporting to

69a

subject the Tmbes to the state’s motor fuels tax are

unconstitutional and preempted by federal law. On October 5,

1995, this court entered a temporary restraining order enjoining

and restraining DOR from applying and enforcing the

collection of any motor fuels tax on tribal retail motor fuel sales

on Indian lands, including sales from distributors to plaintiffs,

‘as Outlined in Senate Bill No. 88, signed on May 7, 1995, and

House Bill No. 2161, signed on May 17, i995, and

implemented on September 6, 1995. The court further ordered

that the temporary restraining order would be effective until

such time as the court had ruled on plaintiffs’ motion for

preliminary injunction.

After several requests for continuance from the parties, the

court heard arguments on the preliminary injunction on

September 30, 1996. On October 30, 1996, the court granted

plaintiffs’ Motion for Issuance of Preliminary Injunction (Doc.

3) and enjoined DOR from applying or enforcing the Kansas

motor fuels tax on motor fuel sales on Indian lands, including

sales from distributors to the Tribes, as implemented on

September 6, 1995, pending adjudication of the plaintiffs’

claims. Defendant now moves the court to dismiss the action,

pursuant to Fed.R.Civ.P. 12(b)(1), for lack of jurisdiction.

II. 12(b)(1) MOTION TO DISMISS STANDARDS

Federal courts are courts of limited jurisdiction and may only

exercise jurisdiction when specifically authorized to do so.

Castaneda v. INS, 23 F.3d 1576, 1580 (10th Cir.1994). “A

court lacking jurisdiction must dismiss the cause at any stage

of the proceeding in which it becomes apparent that jurisdiction-

is lacking.” Scheideman v. Shawnee County Bd. of County

Comm'rs, 895 F.Supp. 279, 280 (D.Kan. 1995) (citing Basso

v. Utah Power and Light Co., 495 F.2d 906, 909 (10th

Cir.1974)); Fed.R.Civ.P. 12(h)(3). The party seeking to

invoke a federal court’s jurisdiction sustains the burden of

establishing that such jurisdiction is proper. Jd. When federal

jurisdiction is challenged, the plaintiff bears the burden of

70a

showing why the case should not be dismissed. Jensen v.

Johnson County Youth Baseball, 838 F.Supp. 1437, 1439-40

(D.Kan. 1993).

Il, DISCUSSION

Plaintiffs bring their claims for declaratory and injunctive

relief pursuant to 28 U.S.C. § 1362, which grants to the district

courts original jurisdiction over civil actions brought by

federally-recognized Indian Tribes wherein the matter in

controversy arises under the Constitution, laws, or treaties of

the United States. Here, plaintiffs assert claims arising under

the Constitution and laws of the United States, particularly the

Indian Commerce Clause of Article I, Section 8, Clause 3 of

the United States Constitution. In support of his motion,

defendant contends the court has no jurisdiction to hear this

matter because plaintiffs’ suit is barred by the Eleventh

Amendment to the United States Constitution. Specifically,

defendant argues that the Eleventh Amendment bars

application of the Indian Commerce Clause to the state of

Kansas.

The defendant is correct in that the Eleventh Amendment

restricts suits in federal court by private parties “seeking to

impose a liability which must be paid from public funds in the

state treasury.” Quern v. Jordan, 440 U.S. 332, 337, 99 S.Ct.

1139, 1143, 59 L.Ed.2d 358 (1979) (citing Edelman v. Jordan,

415 US. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662, (1974)). See

Kennecott Copper Corp. v. State Tax Comm'n, 327 U.S. 573,

66 S.Ct. 745, 90 L.Ed. 862 (1946). However, injunctive relief

may be obtained against a state so long as the action is against

a state official allegedly acting in violation of federal law. Ex

parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714

(1908); see Quern, 440 U.S. at 337, 99 S.Ct. at 1143 (“a

federal court, consistent with the Eleventh Amendment, may

enjoin state officials to conform their future conduct to the

requirements of federal law, even though such an injunction

may have an ancillary effect on the state treasury.”). “The

T7la

distinction between that relief permissible under the doctrine of

Ex parte Young and that found barred in Edelman was the

difference between prospective relief on one hand and

retrospective relief on the other.” Quern, 440 U.S. at 337, 99

S.Ct. at 1143.

This case appears to fall within the exception created under

Ex parte Young. Plaintiffs are not seeking damages from the

state of Kansas. They are instead requesting the court to

enjoin the Kansas Director of Revenue to conform his future

conduct to the requirements of federal law. This is the type of

“prospective relief’ contemplated by the Supreme Court as

consistent with the Eleventh Amendment. Any ancillary effect

the lawsuit may have on the Kansas treasury is irrelevant. See

Quern, 440 U.S. at 337, 99 S.Ct. at 1143.

This conclusion is also consistent with the long line of Indian

tax cases. The Supreme Court has adjudicated suits by Indian

tribes and others challenging state taxation of tribal activities at

least since Worcester v. Georgia, 6 Pet. 515, 8 L.Ed. 483

(1832). See, e.g., Oklahoma Tax Com’n v. Citizen Band

Potawatomi Indian Tribe of Oklahoma, 498 U.S. 505, 111

S.Ct. 905, 112 L-Ed.2d 1112 (1991); Oklahoma Tax Com’n

v. Sac and Fox Nation, 508 U.S. 114, 113 S.Ct. 1985, 124

L.Ed.2d 30 (1993); Department of Taxation and Finance of

New York v. Milhelm Attea & Bros., Inc., 512 U.S. 61, 114

S.Ct. 2028, 129 L.Ed.2d 52 (1994). The Supreme Court

recently addressed a similar issue in Oklahoma Tax Com'n v.

Chickasaw Nation, 515 U.S. 450, 115 S.Ct. 2214, 132 L.Ed.2d

400 (1995), and proscribed application of a state fuel tax

comparable to the Kansas fuel tax at issue in the present action.

The Chickasaw Court gave no indication that the Eleventh

Amendment would pose any sort of restraint on the power of

the federal courts to hear such a case. Indeed, in none of the

numerous Indian tax cases reviewed by this court has the

Supreme Court or any other federal court indicated that the

72a

Eleventh Amendment presents any limitation that would

prevent the court from hearing the instant lawsuit.

Defendant contends that the recent Supreme Court ruling in

Seminole Tribe of Florida v. Florida, 517 U.S. 609, 116 S.Ct.

1114, 134 L.Ed.2d 252 (1996) compels a different conclusion.

The court disagrees. The issue in Seminole turned on the

ability of Congress to abrogate state sovereign immunity by

authorizing Indian tribes to sue states to enforce tribal statutory

rights under the detailed provisions of the Indian Gaming

Regulatory Act (“IGRA”), 25 U.S.C. § 2710 et seq. Jd. The

Court concluded that Congress had no such power under the

Indian Commerce Clause and therefore the IGRA could not

grant jurisdiction over a state that does not consent to be sued.

Id.

The Seminole case did not involve, however, a situation

analogous to the present case in which a state attempts to

impose a tax on an Indian tribe allegedly in violation of federal

law. Jd. Nor did it involve a suit for prospective injunctive

relief in order to end an alleged continuing federal-law

violation. /d. Whether Congress has the power under the

Indian Commerce Clause to enact a statute that abrogates a

state’s Eleventh Amendment immunity is an entirely different

question than whether the Indian Commerce Clause and federal

case law, absent any intervention by Congress, prohibit a state

from asserting a tax on an Indian nation. It is the latter

question which the Seminole Court had no occasion to address,

and which the Supreme Court already answered in its long line

of Indian tax cases. /d.

The court also disagrees with defendant that the Seminole

decision somehow diluted the Ex parte Young doctrine as it

applies to the present case. The Seminole Court expressly

distinguished the situation in that case from that giving rise to

the traditional Ex parte Young action. Id. at —, 116 S.Ct. at

1131-33. In the Seminole case, the “continuing violation of

federal law” alleged by the petitioner was the Governor’s

73a

failure to bring the state into compliance with Section

2710(d)(3) of the IGRA. /d. at —, 116 S.Ct. at 1132. The

Seminole Court noted that “Congress passed § 2710(d)(3) in

conjunction with the carefully crafted and intricate remedial

scheme set forth in § 2710(d)(7),” and found that “where

Congress has prescribed a detailed remedial scheme for the

enforcement against a State of a statutorily created right, a

court should hesitate before casting aside those limitations and

permitting an action against a state officer based upon Ex parte

Young.” Id. In cases where Congress has not enacted a

remedial scheme specifically designed for the enforcement of

a particular right, “[a]n individual may obtain injunctive relief

under Ex parte Young in order to remedy a state officer’s

ongoing violation of federal law.” /d. at — n. 16, 116 S.Ct. at

1132 n. 16.

IT IS THEREFORE BY THE COURT ORDERED that

_ defendant’s Motion to Dismiss (Doc. 55) is denied.

74a

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF KANSAS.

SAC AND FOX NATION OF MISSOURI,

Iowa Tribe of Kansas and Nebraska,

Kickapoo Tribe of Indians of the

Kickapoo Reservation in Kansas, Plaintiffs,

John D. LAFAVER, Secretary

Kansas Department of Revenue, Defendant.

Civil Action No. 95-4152-DES.

Oct. 30, 1996.

MEMORANDUM AND ORDER

SAFFELS, District Judge.

This matter is before the court on the plaintiffs’ Motion for

Issuance of Preliminary Injunction (Doc. 3). The plaintiffs

challenge the Kansas Department of Revenue’s (“DOR”)

imposition of a tax on motor fuel sales on Indian lands,

including sales from distributors to the plaintiffs. On October

5, 1995, this court entered a temporary restraining order

enjoining and restraining DOR from applying and enforcing the

collection of any motor fuels tax on tribal retail motor fuel sales

on Indian lands, including sales from distributors to the

plaintiffs, as outlined in Senate Bill No. 88, signed on May 7,

1995, and House Bill No. 2161, signed on May 17, 1995, and

implemented on September 6, 1995. The court further ordered

that the temporary restraining order would be effective until

such time as the court had ruled on the plaintiffs’ motion for

preliminary injunction.

After several requests for continuance from the parties, the

court heard arguments on the preliminary injunction on

September 30, 1996. At the conclusion of the hearing, the

75a

court took the matter under advisement. Having reviewed the

pleadings and the arguments of counsel, the court is now

prepared to rule.

I. BACKGROUND

The plaintiffs are three federally-recognized Indian Tribes:

The Sac and Fox Nation of Missouri (“Sc and Fox”); the

Iowa Tribe of Kansas and Nebraska ( .owa’); and the

Kickapoo Tribe of Indians of the Kickapoo Reservation in

Kansas (“Kickapoo”) (collectively the “Tribes”). Sac and Fox

is the beneficial owner of and exercises jurisdiction over the

Sac and Fox Indian Reservation, as well as land located at

Reserve, Kansas, which land is held in trust for Sac and Fox by

the United States of America. Iowa is the beneficial owner of

and exercises jurisdiction over the Iowa Tribe of Kansas and

Nebraska Indian Reservation. A part of the Iowa land is held

in trust for Iowa by the United States of America. Kickapoo

is the beneficial owner of and exercises jurisdiction over land

within the Kickapoo Nation’s federally recognized boundaries,

which land is held in trust for Kickapoo by the United States of

America. All three plaintiffs operate retail gasoline stations on

their reservations, and assess tribal taxes on their motor fuel

sales.

On May 7, 1995, the Kansas Legislature passed Senate Bill

88 (“SB 88”), which is codified at Kan Stat.Ann. § 79-

3408g(d)(2). Section 79-3408g(d)(2) provides as follows:

No tax is hereby imposed upon or with respect to the

following transactions: . . . (2) The sale or delivery of

motor-vehicle fuel or special fuel to the United States of

America and such of its agencies as are now or hereafter

exempt by law from liability to state taxation, except that

this exemption shall not be allowed if the sale or delivery of

motor-vehicle fuel or special fuel is to a retail dealer located

on an Indian reservation in the state and such motor-vehicle

76a

fuel or special fuel is sold or delivered to a nonmember of

such reservation.

On May 17, 1995, the legislature passed House Bill 2161

(“HB 2161”), which is codified at Kan Stat.Ann. § 79-

3408(d)(2). Section 79-3408(d)(2) contains the exemption

language of section 79-3408g(d)(2), but does not contain the

exception for deliveries to nonmembers of Indian reservations.

Section 79-3408(d)(2) reads as follows: “No tax is hereby

imposed upon or with respect to the following transactions:

_. . (2) The sale or delivery of motor-vehicle fuel or special fuel

to the United States of America and such of its agencies as are

now or hereafter exempt by law from liability to state

taxation.” j

On September 6, 1995, DOR announced its intention to

begin collecting tax on motor fuel sales on Indian lands. The

plaintiffs allege that the Kansas statutes purporting to subject

the Tribes to the State’s motor fuels tax are unconstitutional

and preempted by federal law.

II. DISCUSSION

To obtain a preliminary injunction, the movant must

establish that:

(1) the moving party will suffer irreparable injury unless the

injunction issues; (2) the threatened injury to the moving

party outweighs whatever damage the proposed injunction

may cause the opposing party; (3) the injunction, if issued,

would not be adverse to the public interest; and (4) there is

a substantial likelihood that the moving party will eventually

prevail on the merits.

Resolution Trust Corp. v. Cruce, 972 F.2d 1195, 1198 (10th

Cir.1992) (quoting 7ri-State Generation & Transmission

Ass'n, Inc. v. Shoshone River Power, Inc., 805 F.2d 351, 355

(10th Cir.1986)). If the moving party satisfies the first three

elements, the standard for meeting the fourth requirement,

77a

substantial likelihood of success on the merits, becomes more

lenient. In such a case, the movant need only show “questions

going to the merits so serious, substantial, difficult and

doubtful as to make them a fair ground for litigation.” Jd. at

1199. Whether to issue a preliminary injunction is committed

to the sound discretion of the trial court. Jd. at 1198.

The court found in its October 5, 1995, memorandum and

order that the plaintiffs satisfied all four elements. The

defendant has failed to present any argument which would

require the court to reconsider its finding as to the first three

elements. DOR acknowledges that the plaintiffs may face

economic hardship if the preliminary injunction does not issue,

but maintains that the plaintiffs’ claims of lost revenue are

speculative. In order to issue a preliminary injunction,

however, the court need not find that the claimed injury is

certain to result--a likelihood of irreparable injury is sufficient.

Bath Indus., Inc. v. Blot, 427 F.2d 97, 111 (7th Cir.1970).

Furthermore, where, as here, the plaintiffs allege deprivation

of a constitutional right, no further showing of irreparable

injury is generally necessary. 11A Charles A. Wright and

Arthur R. Miller, Federal Practice and Procedure § 2948.1,

at 161 (1995); see also Elrod v. Burns, 427 U.S. 347, 373,

96 S.Ct. 2673, 2689-90, 49 L.Ed.2d 547 (1976); Community

Communications Co. v. City of Boulder, Colo., 660 F.2d 1370,

1376 (10th Cir.1981).

Whether the Tribes have satisfied the fourth requirement for

a preliminary injunction, though, requires further analysis. The

court based its October 5, 1995, order, in part, on the existence

of tax compacts between DOR and the Tribes. The compacts

precluded the state of Kansas from taxing transactions

occurring on the reservations which were subject to tribal tax.

The compacts with Iowa and Kickapoo have now expired,

however, and the compact with Sac and Fox will expire on

January 3, 1997.

78a

The Tribes argue that notwithstanding the expiration of the

tax compacts, the State of Kansas cannot impose its motor

fuels tax on Indian reservations. The plaintiffs maintain that

the Kansas Legislature sought to eliminate the tax exemption

for sale of motor fuels to retail dealers on Indian reservations

by passing SB 88. According to the plaintiffs, the subsequent

passage of HB 2161, which did not contain the exception for

sales on Indian reservations, served to repeal SB 88. The

Tribes also cortend that the motor fuels tax is precluded by

Kan.Stat.Ann. §§ 79-3408(d)(1) and 79-3408g(d)(1). Those

sections provide that “[n]o tax is hereby imposed upon or with

respect to the following transactions . . . (1) The sale or

delivery of motor-vehicle fuel or special fuel for export from

the state of Kansas to any other state or territory or to any

foreign country.” The Act for Admission of Kansas Into the

Union, section 1, states that “all [Indian] territory shall be

excepted out of the boundaries, and constitute no part of the

state of Kansas.”

The defendar: counters that the legislature did not intend

that HB 2161 repeal SB 88, but rather that the two bills were

passed with different purposes in mind. DOR contends that the

legislature passed SB 88 to clarify the fact that it did not

consider Indian tribes to be agencies of the United States for

purposes of the exemption, while HB 2161 was passed to curb

fuel tax evasion by requiring retailers to maintain records of

fuel deliveries.

The defendant argues, in the alternative, that even if HB

2161 did repeal SB 88, and even if the Tribes are considered

territories under sections 79-3408(d)(1) and 79-3408g(d)(1),

or agencies under sections 79-3408(d)(2) and 79-3408g(d)(2),

the statutes still do not operate to exempt motor fuel sales to

the Tribes. DOR maintains that sections 79-3408(a) and 79-

3408g(a) tax distributors, not retailers such as the Tribes, and

the exemptions thus do not apply to the plaintiffs. DOR asserts

that its prior practice of exempting distributors which sold to

79a

the Tribes from the motor fuels tax was based on the existence

of tax compacts between the Tribes and the State, not on any

construction of section 79-3408(d)(2) that the Tribes were

exempted as agencies of the United States.

The court is not convinced that, absent SB 88, the State

could impose its tax on the plaintiffs. If the Tribes are not

agencies of the United States within the meaning of section 79-

3408(d)(2), then the exemption contained in that statute never

exempted sales to the Tribes, and the exception added by SB

88 was therefore unnecessary. The court is reluctant to

interpret the statute in a manner which would render part of the

statute superfluous. See Fuller v. Norton, 86 F.3d 1016, 1024

(10th Cir.1996). It is not necessary for the court to determine,

however, whether the language of either SB 88 or HB 2161

permits the tax, in order to decide that the plaintiff has raised

“questions going to the merits so serious, substantial, difficult

and doubtful as to make them a fair ground for litigation,”

Cruce, 972 F.2d at 1199. The court finds that there exist

substantial questions as to whether the state of Kansas has

jurisdiction to impose its motor fuels tax on Indian land.

“[A]bsent cession of jurisdiction or other federal statutes

permitting it . . . a State is without power to tax . . . reservation

Indians.” Oklahoma Tax Comm’n v. Chickasaw Nation, —

U.S. — —, 115 S.Ct. 2214, 2220, 132 L.Ed.2d 400 (1995);

see also McClanahan v. State Tax Comm’n, 411 U.S. 164,

177, 93 S.Ct. 1257, 1265, 36 L.Ed.2d 129 (1973) (25 U.S.C.

§ 1322(a) prohibits states from exercising jurisdiction over

reservation Indians without the tribe’s consent). On the other

hand, if the legal incidence of the tax rests on non-Indians, the

tax may be enforceable. Chickasaw, — U.S. at —, 115 S.Ct.

at 2220. If the incidence of the tax does not fall on Indians,

and “the balance of federal, state, and tribal interests favors the

State, and federal law is not to the contrary, the State may

impose its levy, and may place on a tribe or tribal members

80a

‘minimal burdens’ in collecting the toll.” /d. (citations

omitted).

DOR maintains that the incidence of the Kansas motor fuels

tax falls on the distributor, not the Indian retailer. The

defendant refers the court to Kan.Stat.Ann. § 79-3410(a),

which provides that “[e]very distributor, manufacturer or

importer . . . shall compute and shall pay to the director . . . the

amount of taxes due to the state.” Like the Oklahoma motor

fuels tax statute construed in Chickasaw, the Kansas act does

not expressly identify who bears the tax’s legal incidence.

Chickasaw, 515 U.S. at —, 115 S.Ct. at 2221. Kan. Stat.Ann.

§§ 79-3408(a) and 79-3408g(a) state only that “[a] tax per

gallon or fraction thereof. . . is hereby imposed on the use, sale

or delivery of all motor vehicle fuels or special fuels which are

used, sold or delivered in this state for any purpose

whatsoever.” The defendant argues that the Kansas statute is

distinguishable from the Oklahoma statute, however, in that the

Oklahoma statute directed the distributor to remit the motor

fuels tax “on behalf of a licensed retailer.” Chickasaw, —

U.S. at — —, 115 S.Ct. at 2221-22 (quoting Okla. Stat. tit.

68, § 505(C) (1991)). The Court inferred from this language

that the tax obligation was legally the retailer’s, not the

distributor’s. Jd. at —, 115 S.Ct. at 2222.

The plaintiffs respond that the Kansas act contains a similar

pass-through provision. Kan.Stat.Ann. § 79-3409 states that

“fe]very distributor paying such tax or being liable for the

payment shall be entitled to charge and collect such tax . . . as

a part of the selling price.” The plaintiffs argue that because

distributors would be free to add the tax to their selling price

without any statutory authorization, the inclusion of the pass-

through language, coupled with the absence of comparable

language entitling retailers to similarly pass along the tax to

consumers, evidences the legislature’s intent that the tax be .

born by the retailer.

8la

The Tribes point to other sections of the Kansas tax law

which also impose duties on the retailer. Section 79-3408(c)

provides as follows: “Such taxes shall be paid but once. Such

tax shall be computed on all motor-vehicle fuels or special fuels

received by each distributor, manufacturer, importer or retailer

in this state. ...” Section 79-3464e(a) provides that “[i}t shall

be unlawful for any distributor, importer, exporter,

manufacturer, retailer, user, carrier, transporter or any other

person to: ... fail, neglect or refuse to pay the director, within

the time required by this act, any tax . . . for which such person

is liable under the provisions of this act.” ;

Some tax statutes expressly identify who bears the tax’s

legal incidence. See, e.g., Moe v. Confederated Salish &

Kootenai Tribes of Flathead Reservation, 425 U.S. 463, 482,

96 S.Ct. 1634, 1645, 48 L.Ed.2d 96 (1976) (Montana statute

provided that cigarette tax was “conclusively presumed to be

[a] direct [tax] on the retail consumer”). When the statute is

not so specific, the question of legal incidence is one of

interpretation of the statute as written and applied. Chickasaw,

— US. at —, 115 S.Ct. at 2221. Reading the motor fuels tax

act in its entirety, the court finds that the Tribes have raised

sufficient questions as to the incidence of the motor fuels tax

SO as to render the issue a fair ground for litigation.

Even if the court were to agree with the defendant that the

incidence of the tax falls on the distributor, the State might still,

under Chickasaw, lack jurisdiction to apply its motor fuels tax

on Indian land. The state may impose its tax only “if the

balance of federal, state, and tribal interests favors the State,

and federal law is not to the contrary.” Chickasaw, — US. at

—, 115 S.Ct. at 2220.

The plaintiffs cite Central Machinery Co. v. Arizona State

Tax Comm'n, 448 U.S. 160, 100 S.Ct. 2592, 65 L.Ed.2d 684

(1980), for the proposition that the Indian trader laws, 25

U.S.C. §§ 261-264, constitute a comprehensive federal -

82a

statutory scheme which preempts the State’s assessment of the

motor fuels tax on Indian land. 25 U.S.C. § 261 provides that:

[t]he Commissioner of Indian Affairs shall have the sole

power and authority to appoint traders to the Indian tribes

and to make such rules and regulations as he may deem just

and proper specifying the kind and quantity of goods and the

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

In Central Machine y, the Supreme Court held that the

Indian trader laws preempted a state tax on the sale of

machinery to Indian tribes. 448 U.S. at 165, 100 S.Ct. at

2596.

The plaintiffs also submit that the balance of federal, state,

and tribal interests favors the Tribes. The Tribes claim that if

they are forced to collect the Kansas motor fuels tax, in

addition to the tribal motor fuels tax which they already charge,

they will realize decreased sales and a significant loss of

revenue. The Tribes project resulting unemployment and a

curtailment of social and medical services on the reservations,

which in turn would render Tribal members more dependent on

federal assistance. The plaintiffs submit that these tribal and

federal interests outweigh the State’s interests. According to

the plaintiffs, the State’s interest in reducing tax fraud does not

extend into Indian land, which was excluded from the territorial

limits and jurisdiction of the state of Kansas by the Act for the

Admission of Kansas Into the Union. The plaintiffs also argue

that imposition of the Kansas tax on Indian land would

generate minimal additional revenue for the State.

The court finds that under Chickasaw, the plaintiffs have

raised questions concerning the incidence of the proposed tax,

the balance of federal, state, and tribal interests, and

preemption under federal law which are so serious, substantial,

difficult and doubtful as to make such issues a fair ground for

litigation.

83a

IT IS THEREFORE BY THE COURT ORDERED that

the plaintiff's Motion for Issuance of Preliminary Injunction

(Doc. 3) is granted. The defendant Kansas Department of

Revenue is enjoined and restrained from applying or enforcing

the Kansas motor fuels tax on motor fuel sales on Indian lands,

including sales from distributors to the Tribes, as implemented

on September 6, 1995, pending adjudication of the plaintiffs’

claims.

IT IS FURTHER ORDERED that the court has

considered the issue and determined that a bond, pursuant to

Fed.R.Civ.P. 65(c), is unnecessary because “there is an absence

of proof showing a likelihood of harm” to the defendant.

Continental Oil Co. v. Frontier Refining Co., 338 F.2d 780,

782 (10th Cir. 1964).

84a

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF KANSAS.

SAC AND FOX NATION OF MISSOURI,

Iowa Tribe of Kansas and Nebraska,

Kickapoo Tribe of Indians of the

Kickapoo Reservation in Kansas, Plaintiffs,

John D. LaFAVER, Secretary

Kansas Department of Revenue, Defendant.

Civ. A. No. 95-4152-DES.

Oct. 5, 1995.

Order Denying Remedial Relief and Denying

Modification of Order Oct. 27, 1995.

MEMORANDUM AND ORDER

SAFFELS, District Judge.

This matter is before the court on the motion of the plaintiffs

for a temporary restraining order and a preliminary injunction

(Doc. 3). This action was filed September 25, 1995. The

court heard arguments from all parties at a hearing on October

4, 1995. At the conclusion of the hearing, the court took the

matter under advisement.

Having further reviewed the pleadings and the arguments of

counsel, the court is now prepared to rule on the motion for a

temporary restraining order.

This case is brought by three federally recognized Indian

Tribes: The Sac and Fox Nation of Missouri (“Sac and Fox”);

the Iowa Tribe of Kansas and Nebraska (“Iowa”); and the

Kickapoo Tribe of Indians of the Kickapoo Reservation in

Kansas (“Kickapoo”) (collectively the “Tribes”). The Sac and

85a

Fox Tribe is the beneficial owner of and exercises jurisdiction

over the Sac and Fox Indian Reservation, as well as land

located at Reserve, Kansas, which land is held in trust for the

Sac and Fox by the United States of America. The Iowa Tribe

is owner of and exercises jurisdiction over the Iowa Tribe of

Kansas and Nebraska Indian Reservation. A part of the land is

held in trust for the lowa by the United States of America. The

Kickapoo Tribe is the beneficial owner of and exercises

jurisdiction over land within the Kickapoo Nation federally

recognized boundaries, which land is held in trust for the

Kickapoo by the United States of America.

In this action, the Tribes challenge the imposition of a motor

fuel tax by the Kansas Department of Revenue (“Department”)

on the retail sales of gasoline/diesel fuel on Indian lands. The

imposition of the tax is a result of amendments to the state of

Kansas’ fuel tax laws passed by the Kansas Legislature on May

7, 1995, and May 17, 1995.

The Kansas Department of Revenue delayed collection of

the tax for two months. However, on September 6, 1995, the

Department began collecting taxes on motor fuels sold by

Indians on Indian lands. All three Tribes operate gas stations

on their trust land.

The Tribes raise numerous reasons why the imposition of

the tax is in violation of the law. These include: (1) the Act

for the Admission of Kansas Into the Union, § 1 excludes

Indian land from the territorial boundaries and civil jurisdiction

of the state of Kansas; (2) the Tribes have not subsequently

consented to the civil jurisdiction over their respective Indian

lands of the Kansas State courts; (3) unless Congress instructs

otherwise, a state’s excise tax is unenforceable if its legal

incidence falls on an Indian tribe or its members for sales made

within Indian country; and (4) all three Tribes have entered

into Tax Compacts with the Department and the Governor of

the state of Kansas.

86a

The revenue generated from the sale of motor fuel is a

primary revenue source for the Tribes. The imposition of the

tax would severely diminish the capacity of the Tribes to fund

necessary services and programs to the members of the Tribes.

There is also every likelihood that Tribal employees and

administrative staff in the Tribes’ business offices will be laid

off as a result of the lost revenue. The loss of revenue,

therefore, has potentially devastating effects for people who are

already impoverished. Consequently, the Tribes seek a

temporary restraining order to bar the collection taxes by the

Department.

The issuance of a temporary restraining order or other

preliminary injunctive relief is within the sound discretion of the

district court. Tri-State Generation & Transmission Ass'n,

Inc. v. Shoshone River Power, Inc., 805 F.2d 351, 354 (10th

Cir.1986). When the opposing party has been notified and a

hearing held prior to the issuance of a temporary restraining

order, the specific requirements of Fed.R.Civ.P. 65(b),

including the ten-day limitation on the duration of such an

order, do not apply. See 11 Charles A. Wright & Arthur R.

Miller, Federal Practice and Procedure § 2951, at 500 (1973).

In such a case the court, in addressing a motion seeking a

temporary restraining order, follows the same procedure as for

a preliminary injunction motion. /d. at 499.

To obtain a temporary restraining order or a preliminary

injunction in federal court, the movant has the burden of

establishing that:

(1) the party will suffer irreparable injury unless the injunc-

tion issues; (2) the threatened injury to the moving party

outweighs whatever damage the proposed injunction may

cause the opposing party; (3) the injunction, if issued,

would not be adverse to the public interest; and (4) there is

a substantial likelihood that the moving party will eventually

prevail on the merits.

87a

Resolution Trust Corp. v. Cruce, 972 F.2d 1195, 1198 (10th

Cir.1992). Ifthe moving party satisfies the first three elements,

the standard for meeting the fourth requirement, likelihood of

success on the merits, generally becomes more lenient. In such

a case, the movant need only show that the issues are so

serious, substantial, difficult, and doubtful as to make them a

fair ground for litigation. See Franklin Savings Ass'n v. Office

of Thrift Supervision, 732 F.Supp. 1123, 1124-25

(D.Kan.1990).

1. Irreparable Injury. The Tribes contend that they will

be irreparably harmed if the tax collection continues because

the loss of revenue will result in decreased services and

programs to tribal members and the loss of employment for

specific Tribal members. The Tribes further contend that such

devastating losses of revenue may well mean the complete

elimination of social service, medical and education payments

to tribal members. Even such basic services as law enforce-

ment and fire protection ma

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.