Amicus Curiae Brief — Atkinson Trading Co. v. Shirley

= (44) FILR

FEB IY reo | CY b

No. 00-454 FEB 14 2001

IN THE OPMCFOPTEZCURRK |

Supreme Court of the United States

ATKINSON TRADING COMPANY, INC.,

Petitioner,

We

JOE SHIRLEY, JR., VICTOR JOE, DERRICK B. WATCHMAN, AND

ELROY DRAKE, MEMBERS OF THE NAVAJO TAX COMMISSION;

AND STEVEN C. BEGAY, EXECUTIVE DIRECTOR OF

THE NAVAJO TAX COMMISSION,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Tenth Circuit

BRIEF OF AMICI CURIAE

CONFEDERATED TRIBES OF THE UMATILLA

INDIAN RESERVATION, THREE AFFILIATED

TRIBES OF THE FORT BERTHOLD RESERVATION,

MENOMINEE INDIAN TRIBE OF WISCONSIN,

PUEBLO OF POJOAQUE, SALT RIVER PIMA-

MARICOPA INDIAN COMMUNITY, MANZANITA

BAND OF MISSION INDIANS, AND SEMINOLE

TRIBE OF FLORIDA IN SUPPORT OF

RESPONDENTS

JEFFREY D. LERNER MICHAEL L, ROY

3000 Iron Stone Court Counsel of Record

Arlington, Texas 76006 HOBBS, STRAUS, DEAN

(817)723-7349 & WALKER, LLP

2120 L. Street, N.W., Suite 700

WASHINGTON, D.C. 20037

(202) 822-8282

Counsel for Amici Curiae

Additional Counsel Listed on Inside Cover

Rae ARERR HEIR ASR ARBRE: EM, CRORE SS PNET EE AD DE SE ER? NRA EA SRNR ANS TS

WILSON-EPES PRINTING Co., INC. — (202) 789-0096 - WASHINGTON, D. C. 20001

J.D. WILLIAMS

MANAGING ATTORNEY

Office of Legal Counsel

Confederated Tribes of the

Umatilla Indian Reservation

P.O. Box 638

Pendleton, Oregon 97801

GEOFFREY D. STROMMER

STARLA K. ROFLS

HOBBS, STRAUS, DEAN

& WALKER, LLP

851 S.W. 6th Ave., Suite 1650

Portland, Oregon 97204

(503) 242-1745

QUESTION PRESENTED

Whether an Indian tribe has sovereign authority to impose

a tax on nonmember activities and transactions taking place

on fee lands within the borders of the tribe’s reservation

where the tax does not regulate the nonmember’s conduct but

is imposed to raise revenue to support tribal governmental

services. ‘

(i)

]

4

TABLE OF CONTENTS

QUIRES TRIN PIRI 1 ESE) wovorescsvssqresecesecesnesanniemnttsnyatacs

TABLE OF Al TIRURRE ESS secccesccssesweonssrosesieniondiaiioeniiie

INTEREST OF ABGICT CURIAEL: ...srcccorsscocscenscessscossosnees

SUMMARY OF ARGUMENT ..............ccccccsssssssssseseres

I.

I.

MERRION PROVIDES THE ANALYTIC

FRAMEWORK FOR DETERMINING THE

VALIDITY OF NON-REGULATORY

TRIBAL TAXATION OF NON-MEMBERG.....

A. A Tribe’s Power To Tax Derives From Its

B.

GS

Power To Govern And Raise Kevenues—

Not From Its Power To Exclude..................

Under Merrion, A Tribe May Exercise Its

Power To Tax In Accordance With

General Principles Of Taxation Applicable

To Other Government Entities ...............0000

Under Merrion, A Tribe’s Power To Tax

Non-member Activity Is Not Dependent

On Trust Status Of The Land On Which

The Activity Occurs And Is Not Limited

To Transactions With The Tribe Or Its

THE MONTANA TEST DOES NOT APPLY

TO

NON-REGULATORY TRIBAL TAX-

A. The Montana Test, Which Applies When

Determining If A Tribe Can Regulate The

Conduct Of Non-members, Does Not

Apply To Determining The Validity Of A

Tribal Tax Designed To Raise Revenue.....

(iii)

H

13

14

iV

TABLE OF CONTENTS—Continued

Page

B. The Court Has Repeatedly Distinguished

Between Taxation That Is Regulatory In

Nature And Taxation That Has Only A

Revenue-Raising Purpose, And Has

Specifically Made This Distinction In The

Context Of Tribal Taxation ...........cceseeeeees 18

Ill. UNDER MERRION, THE NAVAJO HOTEL

OCCUPANCY TAX IS A VALID NON-

REGULATORY TAX LEVIED FOR THE

PURPOSE OF RAISING REVENUES TO

PAY FOR THE COST OF LEGITIMATE

GOVERNMENT SERVICES ........:csscesssesseseeeees 24

NSCS ADNAN GING POT OE 30

Vv

TABLE OF AUTHORITIES

CASES Page

Big Horn County Elec. Coop. v. Adams, 219 F.3d

O44 (Sthi Cir. 2000). ceccssescseoscsssccosesssevesnscccessncnsees eS

Brendale v. Confederated Tribes and Bands of

Yakima Indian Nation, 492 U.S. 408 (1989). ..... 16-17

Burlington Northern R.R. Co. v. Blackfeet Tribe

of Blackfeet Indian Reservation, 924 F.2d 899

COU Ce: BBE on ceviecinseensncccrnvssccncsinitepvciintanemntinncls 26-27

Burlington Northern R.R. Co. v. Red Wolf, 196

F.3d 1059 (9th Cir. 1999), rehearing denied,

opinion amended, 2000 U.S. App. LEXIS 92,

cert. denied, 120 S. Ct. 1964 (2000). .........seesee 26-27

Buster v. Wright, 135 F. 947 (8th Cir. 1905),

appeal dismissed, 203 U.S. 599 (1906) ........... 8-10, 13

Chickasaw Nation v. Oklahoma ex rel. Oklahoma

Tax Comm'n, 1995 U.S. App. LEXIS 24517

COM: Cle. SG DS) cessisisnnscesssinserecenccnsmnsancnnscoonsnvvane 20

Collins Holding Corp. v. Jasper County, 123

FBek TOT (4s Cie. 1997). nocscescosnrececssercovesnnsesoseee 21

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

BG CITI A, intniesiccssassnnssacsionseservecncscontnassnniieenentins passim

Dept. of Taxation & Fin. v. Milhelm Attea &

Bros., lnc. $12 US. G1 (1994). ccersccoresersossevenees 28

Exxon Corp. v. Wisconsin Dept. of Revenue, 447

ETS. DOT CEFBD) .cicsrcsrescesercsonesssoseenseavavesasoonine 11-12, 30

Gibbons v. Ogden, 9 Wheat. 1, 199 (1824). ........ k 10

Hager v. City of W. Peoria, 84 F.3d 865 (7th Cir.

SID ivsnserscnissasecivaccrasisinssenieceniacesnmebapncsonbessiecis 21-22

Hill v. Wallace, 259 U.S. 20 (1922).......scssceeseeeees 21-22

Japan Line, Ltd. v. County of Los Angeles, 441

US ASA CAG TO), vesseccivecssvsosnveicascconsonssenssnnsctsoneoes 11

Jefferson County v. Acker, 527 US. 423

CAD ID) vncisisninsniassiiseriareinsaniarinsimnaniniasmcnnnainninitd 6, 20, 26

Kerr-McGee Corp. v. Navajo Tribe of Indians,

STE US. 1S CEIRS), cxcncvccsccnsaseosncssecncutvasnosestnve 10

vi

TABLE OF AUTHORITIES—Continued

Page

Marchetti v. United States, 390 U.S. 39 (1968)..... 21

Marcus v. Kansas Dept. of Revenue, 170 F.3d

1305 (10th Cir. 1999),.c.cccccccossssvecssccesesseocsscessees 21

Merrion v. Jicarilla Apache Tribe, 455 U.S. 130

(TSB). xevesessesevssopensonianonsnenanpeneaseubehonensenneysbormentoe passim

Merrion v. Jicarilla Apache Tribe, 617 F.2d 537

(1G RRs Cir. 1D). nneesserrevvssesescesssineresssreccnassvnersoeys 29

Michelin Tire Corp. v. Wages, 423 U.S. 276

CRIED. cicrccossccrpesinnessctabensiectingmnccmesteinesiceencnsaonen 20

Mobil Oil Corp. v. Commissioner of Taxes, 445

US. 425 (TBO) ov vnscrsesecesindnncsvesesonncnninsnsrnenennes 11-12, 23

Moe v. Confederated Salish and Kootenai Tribes

of the Flathead Reservation, 425 U.S. 463

CRI sas ccesinesesisiintathsinnsnsiitteesstieneninsicineinmannidnnbinion 28

Montana v. United States, 450 U.S. 544 (1981).... passim

Morris v. Hitchcock, 194 U.S. 384 (1904)............. 10

New Town v. United States, 454 F.2d 121 (8th

Ne, 1G TR) ven eseceensittsnsenicstirnnsancainsieinnnanspainestihetin ]

Oklahoma Tax Comm'n vv. “Ci itizen Band

Potawatomi Indian Tribe of Oklahoma, 498

OFS, SEB AS asccnrecsnsepeisasisnsensvatnetnensnnmnissamanns 28

Snow v. Quinault Indian Nation, 709 F.2d 1319

(9th Cir. 1983), cert. denied, 467 U.S. 1214

EPID, cevcttissiscensisisisniigdiansnicapantitiehientnsntenninmitinabciieomnes 26

South Carolina v. Baker, 485 U.S. 505 (1988)...... 21

South Dakota v. Bourland, 508 U.S. 679 (1993)... 16-17

Strate v. A-1 Contractors, 520 U.S. 438

RIPE F cciconstnhicininncniesisahiastninhitinnliciemninapiinntinens 9, 16-18, 26

United States v. Butler, 297 U.S. 1 (1936)............. 21

United States v. Darby, 312 U.S. 100 (1941). ....... 21

United States v. Kahriger, 345 U.S. 22 (1953)...... 20

United States v. Sandoval, 231 U.S. 28 (1913)...... 2

Vii

TABLE OF AUTHORITIES—Continued

Page

Washington v. Confederated Tribes of the

Colville Indian Reservation, 447 U.S. 134

CRIN cintitiannadiiibacccicnaslnildiaiiad banincciagaiace aaa veeseee DASSIN

Wisconsin v. J.C. Penney Co., 311 U.S. 435

nae wessseviuciiidiciovsisicnsinainlanebietiltihicinsahaletibbaiuiaeesitei 11-12

STATUTES

Oe ac Ae a is siniehtereaisetphesicheniasnistiiidetenlliptiniilainta 2

= BLD. S oh Oy g AARSMes ce Oe a OE Se 2

BF St a AE et sisnecciaseisbicticcdainnceeishnioviiaieidaees attentions 2

ae Sat Oe ee cenincsiniinnsiisieliiehainanitaitagtiabicilasanbisahens 21

Tax Injunction Act, 28 U.S.C. § 1341 (2000)........ 21

24 Navajo Tribal Code §§ 101-142 ....... eee passim

MISCELLANEOUS

Department of the Interior Solicitor’s Opinion,

Powers of Indian Tribes, 55 I.D. 14 (1934). ...... 10

ac 4 As By ot ... | A eemeenior on 10

eat Ws Se LL |) enemy ean 10

et. FR. SIO, BUSTIN ccisivnivewsinservesesseeeunees 10

S. Rep. No. 698, 45th Cong., 3d Sess., (1879). ..... 10

a ee Se TOIT iictiinceeesenvnsttintdieinerninivenninainiceante 2

RT, FOO erp nsteoiensinsisriietecsannntniicitanebisoinamerigiih 4

ee

INTEREST OF AMICI CURIAE

The Confederated Tribes of the Umatilla Indian

Reservation (Umatilla Tribes) are federally recognized Indian

tribes.' The Umatilla Reservation, some 172,000 acres, is

located in Oregon. Approximately two-thirds of the Umatilla

Tribes’ 2,262 members live on or near the Reservation, along

with approximately 1,000 members of other tribes and 1,700

non-Indians. The Taxation Code of the Umatilla Tribes

includes a “Transient Lodging Tax” similar to the Navajo

Nation’s Hotel Occupancy Tax, which is at issue before the

Court. In addition, the Taxation Code includes a “Utility Tax”

that applies to non-Indian businesses operating within the

exterior boundaries of the Umatilla Reservation. The revenue

raised through these taxes supports essential government

services provided by the Umatilla Tribes, including police

and fire protection and emergency response services.

Amicus Three Affiliated Tribes of the Fort Berthold

Reservation (Three Affiliated Tribes) are federally-

recognized Indian tribes residing on the Fort Berthold Indian

Reservation in North Dakota. The Fort Berthold Reservation

contains land held in trust for the Three Affiliated Tribes and

their members, as well as lands owned in fee by non-

members. See New Town v. United States, 454 F.2d 121, 127

(8th Cir. 1972). Through its Tribal Tax Code, the Three

Affiliated Tribes imposes a “possessory interest tax” on

certain real and personal property within the Reservation, and

' Pursuant to Supreme Court Rule 37.6, amici curiae state that no

counsel for any party to this dispute authored this brief in whole or in part

and no person or entity, other than amici curiae and their members, made

any monetary contribution to the preparation or submission of this brief.

All parties have consented to the filing of this brief, and a joint letter

evidencing their consent is on file with the Office of the Clerk of this

Court.

2

an oil and gas gross production tax.” These taxes are imposed

to raise revenue for the promotion of the health, security,

economic and general welfare of both. members and non-

members residing or doing business on the Reservation, for

government operations, for the delivery of services on the

Reservation, and for the development of the Reservation

economy.

Amicus Menominee Indian Tribe of Wisconsin

(Menominee Tribe) is a federally recognized tribe located in

northeastern Wisconsin. The Menominee Tribe’s reservation,

established on May 12, 1854 in the Treaty of 1854, 10 Stat.

1064, and recognized by statute, 25 U.S.C. § 903d(b),

comprises some 325,000 acres of land. Approximately 10-

15% of that land consists of fee land held by non-Indians.

The Menominee Tribe imposes a “hotel room tax” like the

Navajo Hotel Occupancy Tax at issue in this case, and a use

tax on construction materials brought onto the reservation.

Revenues generated by these taxes are used to support tribal

programs and services.

Amicus Pueblo of Pojoaque (Pueblo) is a_federally-

recognized Indian tribe residing on its Pueblo in New

Mexico. Like other pueblos in New Mexico, the Pueblo

derives its title from Spanish grants, and holds its lands in fee

simple. The Pueblo’s lands are therefore not a “reservation,”

though they do constitute “Indian country” over which the

Pueblo has jurisdiction. See United States v. Sandoval, 231

U.S. 28 (1913); 18 U.S.C. § 1151(b). There are some 13,500

acres within the exterior boundaries of the Pueblo. Of these,

approximately 2,800 acres are held in fee by nonmembers;

the remainder is held in fee simple by the Pueblo, subject to a

restraint on alienation imposed by 25 U.S.C. § 177. In

addition, the Pueblo is the beneficial owner of two parcels

? Portions of the Three Affiliated Tribes’ Tax Code are included in the

record at 138a.

3

totaling some 237 acres that are held in trust by the United

States for the Pueblo. The Pueblo imposes several taxes,

including a “lodgers tax” like the hotel occupancy tax at issue

in this case, a gross receipts tax, an ad valorem tax on the

property of utility companies (including rights-of-way over

the Pueblo’s lands), and cigarette and gasoline taxes.

Receipts from the taxes collected are paid into the Pueblo’s

general fund, and are used for the provision of tribal services

and programs.

Amicus Salt River Pima-Maricopa Indian Community

(“SRPMIC” or “Community”)- is a federally-recognized

Indian tribe residing on a reservation in Arizona. Of the

approximately 52,000 acres that comprise the Reservation, a

small portion is owned in fee by members and non-members.

About one-half of this fee land is situated along a commercial

corridor. There is significant commercial development within

the Community that may be owned and managed by the

Community itself, a Community member or a fee land owner.

There are also non-member lessees of tribally or individually

owned trust lands. Commercial development is expected to

grow considerably in the future.

The SRPMIC imposes various taxes such as possessory

interest, business privilege (sales), tobacco and utility taxes

on commercial businesses to raise revenues to support

essential services provided by the Community. These

services include but are not limited to police and fire

protection, emergency response services, public health

inspections building code enforcement, health and safety

enforcement, and public transportation. These services are

provided to member and non-members alike, and to business

and residences. The State and local governments provide

next to no governmental services within the boundaries of the

Salt River Pima-Maricopa Indian Community Reservation. If

the gas station on fee land is robbed, if there is a fire at the

convenience store on leased Community-owned trust land, or

4

if someone has a heart attack at a restaurant at the Pavilions

shopping center on leased member-owned trust land, it is the

Community that will provide assistance through its

governmental services. Additionally, in order to support

further economic development, the Community needs

revenue sources to help fund the construction of infrastructure

such as water, sewers and roads. For the above-described and

other governmental purposes, all of which respond to the

health, safety and welfare needs of individuals regardless of

whether they are members or non-members, the Community

must continue to raise revenues through taxes.

Amicus Seminole Tribe of Florida (Seminole Tribe) is a

federally recognized tribe with approximately 85,285 acres of

trust land existing within six counties in Florida, including the

following reservations: the Hollywood Reservation in

Broward County (497 acres); the Big Cypress Reservation in

Hendry and Broward Counties (52,338 acres); the Brighton

Reservation in Glades County (35,805 acres); the Immokalee

Reservation in Collier County (600 acres); and the Tampa

Reservation in Hillsborough County (39 acres). The

Seminole Tribe does not have any fee land within these

reservations, but does have land outside of the reservations

over which it exercises tribal authority. The Seminole Tribe

imposes a tax on cigarettes sold at retail outlets on tribal

lands. Revenues from the taxes collected are used for tribal

services.

Amicus Manzanita Band of Mission Indians (Manzanita

Band) is a federally recognized tribe located in San Diego

County in the western Carrizo Desert in Southern California.

The Manzanita Band’s reservation, established by the Act of

January 11, 1891, 26 Stat. 712-714, encompasses some 3,600

acres, of which 140 acres are held in fee by non-Indians.

Though the Manzanita Band has not yet imposed any taxation

on the fee lands or activities taking place on such lands within

its borders, it reserves its power to tax or regulate on such

lands.

5

The Court’s decision in this case could have a significant

impact on the current tax systems of amici tribes, and could

jeopardize an important source of tribal revenue for those

tribes. Loss of such revenues would lead to a decrease in

services provided by the tribes. In addition,all of the amici

tribes—including those that do not now tax the activities of

non-members on non-members’ fee lands—have an interest

in maintaining their powers to tax such activities in the fufure

in order to raise revenues for tribal services, and in the

broadest interpretation of tribal powers over non-Indians and

limited exclusions from those powers.

SUMMARY OF ARGUMENT

Tribal authority to tax non-Indians has long been

recognized by the United States Supreme Court. In Merrion

v. Jicarilla Apache Tribe, 455 U.S. 130 (1982), the Court

upheld the Jicarilla Apache Tribe’s right to impose a

severance tax on non-Indian oil and gas production. The

taxable activity took place on trust land but pursuant to leases

that granted the lessees the exclusive and perpetual right to

extract oil and gas from the property. The lessees argued that

the tribe had ceded its power to exclude them from the

property when it entered into the leases and that it therefore

lacked the power to impose the tax. The Court rejected the

assertion that a tribe’s authority to tax non-Indians who do

business on the reservation stems exclusively from its power

to exclude. Instead, the Court held that the Tribe’s authority

to tax derives from its power to govern and to pay for the

costs of self-government. /d. at 143-44. The Court cited

several landmark non-Indian tax cases that outline the

“general principles of taxation” under which governmental

entities, like tribes, may exercise their power to tax. /d. at

137-38, 140.

Montana v. United States, 450 U.S. 544 (1981), decided

less than a year before Merrion, and the case relied on by the

Tenth Circuit Court of Appeals and the Petitioner in this case,

6

dealt with the validity of legislation enacted by the Crow

Tribe preventing non-members from hunting and fishing on

its reservation, including that part of the reservation owned in

fee simple by non-members. The Court found that the Tribe

haJ lost the right to absolute use and occupation of lands that

had been conveyed in fee to non-members and therefore as a

general rule no longer possessed the incidental power to

regulate the use of the lands by non-Indians. The Court

acknowledged, however, that “Indian tribes retain sovereign

power to exercise some forms of civil jurisdiction over non-

Indians on their reservations, even on non-Indian fee lands.”

Id. at 565. In particular, the Court noted that a tribe “may

regulate, through taxation, licensing or other means, the

activities of nonmembers who enter consensual relationships

with the tribe or its members” and may “exercise civil

authority over the conduct of non-Indians on fee lands within

its reservation when that conduct threatens or has some direct

effect on the political integrity, the economic security, or the

health or welfare of the tribe.” /d. at 565-66.

Montana is not a tax case; it is a case delineating

regulatory authority. The context of the Court’s reference to

taxation in Montana is in connection with a tribe’s attempt to

“regulate . . . the activities of nonmembers ....” /d. at 565.

Taxation can indeed be regulatory in nature. However, in its

more common form, it is simply a means of raising revenue

to pay for the cost of government and is not intended to

circumscribe the activities or conduct of taxpayers. The

Court has long recognized the distinction between regulatory

taxation and revenue-raising taxation, each of which is

subject to different standards and analysis. It made just such a

distinction in Washington v. Confederated Tribes of the

Colville Indian Reservation, 447 U.S. 134 (1980), which

involved tribal taxation and was handed down only ten

months prior to Montana. The Court recently reaffirmed this

distinction in a non-tribal context in Jefferson County v.

Acker, 527 U.S. 423 (1999). This distinction is a critical one.

7

Unlike tribal regulatory power, which is derived in large part

from the power to exclude non-Indians from the reservation, a

- tribe’s revenue raising power of taxation is derived from its

sovereign power to govern and the concomitant authority to

raise revenues to pay for the costs of government. In sum, the

power of a tribe to tax non-Indian activity is analyzed under

Merrion, not Montana, and the exercise of that power is not

dependent on whether the activity occurs on trust land, fee

land, or fee-equivalent land.

The Tenth Circuit reached the correct result but employed

the wrong analysis. The court should have upheld the

application of the Navajo Tribe’s Hotel Occupancy Tax, 24

Navajo Tribal Code §§ 101-142, to hotel guests on fee lands

within the reservation boundaries under Merrion. There was

no need to determine whether the hotel guests had entered

into “consensual relations” with the Navajo Tribe sufficient to

uphold tribal regulation under Montana. To the extent that

the Montana analysis applies to taxes at all, it is limited in

application to regulatory taxation. Montana has no

applicability to the Navajo Hotel Occupancy Tax, which has

only a revenue raising purpose. This court should affirm the

judgment of the lower courts, but should do so on the basis

that the Navajo Tribe has the power under Merrion to tax

hotel guests on fee lands to raise revenues for tribal services.

ARGUMENT

I. MERRION PROVIDES THE ANALYTIC

FRAMEWORK FOR DETERMINING THE

VALIDITY OF NON-REGULATORY TRIBAL

TAXATION OF NON-MEMBERS

A. A Tribe’s Power To Tax Derives From Its

Power To Govern And Raise Revenues—Not

From Its Power To Exclude

In Merrion v. Jicarilla Apache Tribe, the Court upheld the

Jicarilla Apache’s right to impose a severance tax on non-

Indian oil and gas production on the reservation. 455 U.S.

8

130 (1982). The activity on which the tax was levied took

place on trust land, but pursuant to leases giving the lessees

exclusive right to extract oil and gas on the property for so

long as they continued to conduct that activity. The lessees

argued that while the activity took place on trust land, the

tribe lacked authority to impose the tax because it had ceded

its power to exclude them when it entered into the leases.

The Court rejected the assertion that an Indian tribe’s

authority to tax non-Indians who do business on the

reservation stems exclusively from its power to exclude such

persons from tribal land:

We disagree with the premise that the power to tax

derives only from the power to exclude . . . . The power

to tax is an essential attribute of Indian sovereignty

because it is a necessary instrument of self-government

and territorial management. This power enables a tribal

government to raise revenues for its essential services.

The power does not derive solely from the Indian tribe’s

power to exclude non-Indians from tribal lands.

Id. at 137.

The Court rejected the notion that earlier decisions

upholding tribal power to tax non-members limited the

exercise of that power to a tribe’s power to exclude:

[T]he decision in Buster v. Wright (3) actually under-

mines the theory that the tribes’ taxing authority derives

> Buster v. Wright, 135 F. 947 (8th Cir. 1905), appeal dismissed, 203

U.S. 599 (1906). In Buster, the Court of Appeals focused on tribal

sovereign authority as the source of the Creek Nation’s powers of taxation

within its borders regardless of the underlying form of land ownership.

Id. at 951-52. The right to exclude was irrelevant to the holding in Buster

because the Creek Nation had lost the ability to require the non-member

taxpayers to leave the reservation if they failed to pay the taxes. See id. at

954. This Court has cited Buster to illustrate that a tribe may legitimately

exercise its inherent sovereign authority to tax non-members even on non-

Indian fee land within the reservation. Merrion, 455 U.S. at 143-44;

Washington v. Confederated Tribes of the Colville Indian Reservation,

9

solely from the power to exclude non-Indians from tribal

lands .... Even though the ownership of land and the

creation of local governments by non-Indians established

their legitimate presence on Indian land, the court held

that the Tribe retained its power to tax. The court

concluded that “[neither] the United States, nor a state,

nor any other sovereignty loses the power to govern the

people within its borders by the existence of towns and

cities therein endowed with the usual powers of

municipalities, nor by the ownership nor occupancy of

the land within its territorial jurisdiction by citizens or

foreigners.” This result confirms that the Tribe’s

authority to tax derives not from its power to exclude,

but from its power to govern and to raise revenues to pay

for the costs of government.

Id. at 143-44 (quoting Buster, 135 F. at 952).

The Merrion Court continued:

We choose not to embrace a new restriction on the

extent of the tribal authority to tax .. . . Instead, based on

the views of each of the federal branches, general

‘ principles of taxation, and the conception of Indian

tribes as domestic, dependent nations, we conclude that

the Tribe has the authority to impose a severance tax on

the mining activities of petitioners as part of its power to

govern and to pay for the costs of self-government.

Id. at 144 (emphasis added).

447 U.S. 134, 153 (1980). See also Montana, 450 U.S. at 566; Strate v. A-

1 Contractors, 520 U.S. 438, 457 (1997). Furthermore, Buster cannot be

legitimately distinguished from Atkinson on a factual basis as Petitioner

has argued at page 29 of its brief. See Pet. App. 20a-24a (noting that the

relevant factual connection between Buster and Atkinson is the non-

member being situated on fee land within the boundaries of a tribe’s

reservation and finding other factual distinctions irrelevant); Buster, 135

F. at 950 (stating that tribal powers to tax do not emanate from a treaty or

federal statute, but stem from inherent sovereign authority).

10

Thus, either a tribe’s power to exclude or its status as a

sovereign government is alone sufficient to allow taxation

within Indian country. The Merrion Court relied on and

approved of a long and enduring lineage of judicial precedent

and other authorities (pre-dating Montana v. United States,

450 U.S. 544 (1981)) upholding broad powers of tribal

taxation intended to raise revenue to fund government

services.”

Just three years after it decided Merrion, this Court

reiterated that tribes could tax non-Indians in order to raise

revenues for tribal programs: “The power to tax members

and non-Indians alike is surely an essential attribute of [tribal]

self-government; the Navajos can gain independence from the

Federal Government only by financing their own police force,

schools, and social programs.” Kerr-McGee Corp. v. Navajo

Tribe of Indians, 471 U.S. 195, 201 (1985).

* See, e.g., Merrion, 455 U.S. at 137 (citing Gibbons v. Ogden, 9

Wheat. 1, 199 (1824) for support that a tribe has sovereign authority to

“control economic activity within its jurisdiction, and to defray the cost of

providing governmental services by requiring contributions from persons

or enterprises engaged in economic activities within that jurisdiction.”);

id. at 139 (citing a Department of the Interior Solicitor’s Opinion, Powers

of Indian Tribes, 55 I.D. 14, 46 (1934) (from Colville, 447 U.S. at 153) for

its recognition that a tribe’s sovereign power to tax “may be exercised

over members of the tribe and over nonmembers, so far as such

nonmembers may accept privileges of trade, residence, etc., to which

taxes may be attached as conditions.”); id. (citing 23 Op. Atty. Gen. 214

(1900); 17 Op. Atty. Gen. 134 (1881); 7 Op. Atty. Gen. 174 (1855) (from

Colville, 447 U.S. at 152-53), for the Attorney General’s repeated

recognition of broad tribal authority, including taxation, over activities of

non-Indians within a reservation); id. at 139-40 (quoting S. Rep. No. 698,

45th Cong., 3d Sess., 1-2 (1879) to demonstrate congressional

acknowledgement of the validity of a tribal tax imposed on non-members

by a tribe within its territory); id. at 141-42 (discussing Morris v.

Hitchcock, 194 U.S. 384 (1904) to demonstrate approval of a revenue

raising tax imposed on non-Indians); and id. at 141, 143-44 (discussing

Buster, 135 F. 947, as confirmation that a tribe’s authority to tax derives

from its power to “raise revenues and pay for the costs of government.”).

11

B. Under Merrion, A Tribe May Exercise Its

Power To Tax In Accordance With General

Principles Of Taxation Applicable To Other

Government Entities

The Merrion Court relied on several landmark non-Indian

tax cases to outline the circumstances under which a tribe’s

power to tax can be exercised:

The petitioners avail themselves of the “substantial

privilege of carrying on business” on the reservation.

Mobil Oil Corp. v. Commissioner of Taxes, 445 U.S.

425, 437 (1980); Wisconsin v. J.C. Penney Co., 311 U.S.

435, 444-45 (1940). They benefit from the provision of

police protection and other governmental services, as

well as from “the advantages of a civilized society” that

are assured by the existence of tribal government. Exxon

Corp. v. Wisconsin Dept. of Revenue, 447 U.S. 207, 228

(1980) (quoting Japan Line, Ltd. v. County of Los

Angeles, 441 U.S. 434, 445 (1979)). Numerous other

governmental entities levy a general revenue tax similar

to that imposed by the Jicarilla Tribe when they provide

comparable services. Under these circumstances, there is

nothing exceptional in requiring petitioners to contribute

through taxes to the general cost of tribal government.

Merrion, 455 U.S. at 137-38.

None of the cases cited by the Court were concerned with

whether the taxing jurisdiction had exclusive or unrestricted

regulatory power within its jurisdiction, or with whether the

taxing jurisdiction retained any ownership interest in the

property on which the taxable transaction occurred. Rather,

these cases are representative of a body of jurisprudence

establishing the “general principles of taxation” to which the

Court referred in upholding a broad tribal right to tax. /d. at

140. These principles support the right of a tribal

governmental body to tax activity or property within its

12

jurisdictional boundaries to fund the costs of its governmental

programs.”

The Court in Merrion chose to apply the now routine nexus

analysis contained in Mobil Oil Corp. v. Commissioner of

Texas, 445 U.S. 425 (1980), and Wisconsin v. J.C. Penney

Co., 311 U.S. 435 (1940), in establishing the Tribe’s right to

tax: the taxpayer had nexus because it conducted business

activity on the reservation. Merrion, 455 U.S. at 137.

Similarly, the Court cited the observation in Exxon Corp. v.

Wisconsin Dept. of Revenue, 477 U.S. 207, 228 (1980),

another state nexus case, that the establishment of nexus

entitles a jurisdiction to tax in order to raise the revenue to

provide the “advantages of a civilized society” to the benefit

of all who maintain situs or transact business within the

jurisdiction.

The Court found the tribal tax in Merrion to be consistent

with general principles of taxation. It therefore found

“nothing exceptional” in requiring non-members to pay taxes

to the Tribe, which, along with the federal, state, and local

governments, contributes to the establishment of a civilized

society on the reservation. Merrion, 455 U.S. at 138.

> Arguments that general principles of taxation do not necessarily apply

to tribal governments because the party being taxed has no ability to

participate in tribal government must be given no weight. First, as

discussed above, this Court has already found applicable a broad tribal

right to tax activity or property within tribal boundaries regardless of

taxpayer representation in tribal government. Second, many tribal

governments allow non-members to appear at hearings and other

governmental proceedings to provide testimony or input. The Navajo Tax

Commission, for example, held public hearings before recommending

adoption of a hotel occupancy tax. J.A. 16-17. Finally, government

entities regularly impose taxes on persons or entities who are not

represented before them. By their nature, for example, hotel occupancy

taxes like that at issue in this case are borne mainly by persons who do not

reside within the jurisdiction levying the tax.

® See also the Court’s reference to “settled principles of taxation.”

Merrion, 455 U.S. at 151.

13

C. Under Merrion, A Tribe’s Power To Tax Non-

Member Activity Is Not Dependent On Trust

Status Of The Land On Which The Activity

Occurs And Is Not Limited To Transactions

With The Tribe Or Its Members

Merrion correctly makes no distinction between trust land

and land owned in fee by non-members. To the contrary, the

Court quoted and emphasized the language from Buster v.

Wright stating that a government’s powers are diminished

neither “‘by the ownership nor occupancy of the land within

its territorial jurisdiction by citizens or foreigners.’” Merrion,

455 U.S. at 143 (quoting Buster, 135 F. at 952). Petitioner

nonetheless argues that Merrion is not applicable because it

involved trust land.

Trust status is relevant to governmental power only where

the power derives, in whole or in part, from the power to

exclude. Trust status is therefore relevant when a tribe

attempts to exercise a regulatory power, but it is irrelevant

when a tribe exercises the power to tax. Tribal power of

taxation emanates from another source—a tribe’s inherent

power to govern and to raise the revenues necessary to cover

the costs of government. It would indeed be a rare

circumstance in which a non-tribal taxing jurisdiction had

legal title to property subject to its taxing power, and of

course no such requirement exists under general principles of

taxation.

The taxpayers’ leasehold interests in Merrion precluded the

Tribe from excluding the lessees from the property. The

ensuing argument—i.e., that the power to tax is derived from

the power to exclude and therefore cannot be exercised—was

made and expressly rejected by the majority in Merrion.

Merrion, 455 U.S. at 137.

Petitioner further attempts to distinguish Merrion by noting

that the taxpayers’ leases in Merrion were with the tribe.

Petitioner cites Washington v. Confederated Tribes of the

14

Colville Indian Reservation, 447 U.S. 134 (1980), to support

its argument that a tribe has the power to tax only those

transactions that significantly involve a tribe or its members.

Pet. Brf. at 12, 23-25. Although Colville states that a tribe's

interest in raising revenues “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,” 447 U.S. at 156-57, it does not

limit taxation to only those activities. In fact, Colville ruled

that both the tribe and the state could tax the same transaction

because both entities had a “legitimate governmental interest

in raising revenues,” even though in any given situation one

entity’s interest may be stronger than the other’s. /d. at 157.

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

163 (1989) (recognizing the power of tribal, state, and federal

government to simultaneously tax the same transaction).

A tribe thus has authority to tax non-members to raise

revenue under Merrion regardless of whether the non-

member is transacting business with the tribe or its members,

and regardless of the type of land on which the non-member

is situated.

Il. THE MONTANA TEST DOES NOT APPLY TO

NON-REGULATORY TRIBAL TAXATION

A. The Montana Test, Which Applies When

Determining If A Tribe Can Regulate The

Conduct Of Non-Members, Does Not Apply

To Determining The Validity Of A Tribal Tax

Designed To Raise Revenue

Montana vy. United States addressed the validity of

legislation enacted by the Crow Tribe that sought to prevent

non-members from hunting or fishing on lands within the

Tribe’s reservation that were owned in fee simple by non-

members. 450 U.S. 544 (1981). The State of Montana

disputed the Tribe’s legislation, asserting that the State had

15

sole authority to regulate hunting and fishing by non-

members on such lands. The Court analyzed the various

treaties leading to the establishment of the current Crow

reservation in context with its interpretation of Congressional

intent as reflected in subsequent legislation, particularly the

allotment acts that lead to non-Indian land ownership on the

reservation. Jd. at 557-61. The Court interpreted the

allotment acts as divesting the Tribe of sovereign power over

non-members beyond that necessary to protect and control

self-government and internal relations, because they indicated

congressional intent not to subject non-Indians to tribal

regulation. /d. at 560 n.9, 561. While acknowledging that

Congress repudiated the allotment policy with the Indian

Reorganization Act of 1934, the Court inferred no symmetric

revesting of tribal authority over non-Indians because they

retained the right to continue to reside and own property on

the reservation. Jd. at 560 n.9, 560-61. Because Congress

had not restored the tribes’ authority to exclude non-Indian

settlers from the fee lands, the tribes did not regain the lesser

derivative power to regulate non-members’ conduct on their

properties. /d. The Court further concluded that, due to

tribes’ status as dependent sovereigns, in general, “the

inherent sovereign powers of an Indian tribe do not extend to

the activities of the nonmembers of the tribe.” Jd. at 565.

The Court acknowledged, however, that “Indian tribes

retain sovereign power to exercise some forms of civil

jurisdiction over non-Indians, even on non-Indian fee lands.”

Id. In particular, the Court noted that a tribe “may regulate,

through taxation, licensing or other means, the activities of

nonmembers who enter consensual relationships with the

tribe or its members, through commercial dealing, contracts,

leases, or other arrangements,” id., and a tribe may “exercise

civil authority over the conduct of non-Indians on fee lands

within its reservation when that conduct threatens or has

some direct effect on the political integrity, the economic

security, or the health or welfare of the tribe,” id. at 566.

a i A 5s,

16

The Court has applied Montana and its exceptions on

several occasions, but none of the cases in which it did so

involved taxation. South Dakota v. Bourland involved tribal

regulation of hunting and fishing by non-Indians within the

reservation. 508 U.S. 679 (1993). The majority opinion

reiterated the principle that a tribe’s regulatory authority is

derivative in large part of its power to exclude non-Indians

from the reservation. /d. at 688-89. Brendale v. Confederated

Tribes and Bands of the Yakima Indian Nation held that the

Yakama Nation did not have power to zone non-member fee

land in the area of the reservation open to the general public,

but upheld the Nation’s authority to zone non-Indian owned

fee land in that part of the reservation closed to the general

public. 492 U.S. 408, 424 (1989).

More recently, in Strate v. A-] Contractors, the Court

reemphasized that a tribe’s presumptive authority to govern

the conduct of a non-member emanates in large part from its

practical legal capacity to exclude the non-member. 520 U.S.

438 (1997). Strate concerned a tort claim arising out of a

traffic accident that involved non-Indians on a state highway

within a federally granted right-of-way across the Fort

Berthold Reservation. In holding that the Tribal Court lacked

jurisdiction over the dispute, the Court characterized the

right-of-way as equivalent to fee land for jurisdictional

purposes under Montana because the Tribes could not

exclude non-members. /d. at 456. Postulating that a tribe’s

adjudicatory jurisdiction does not exceed its legislative

jurisdiction with respect to non-members, the Court found it

necessary to ascertain the scope of the Tribes’ legislative

authority. Id. at 453. The Court held that the Tribes had lost

the inherent right to enact legislation governing usage of the

highway when it lost the prerogative to exclude non-members

from the right-of-way. Jd. at 456. The Court concluded that

because neither of the Montana exceptions was met, the

Tribes necessarily lacked judicial jurisdiction over the claim.

Id. at 456-59.

17

Montana and its progeny apply the general rule that a tribe

has regulatory authority over non-Indians only where the tribe

retains the power to exclude non-Indians-from the land,

unless one of the two Montana exceptions applies. The

Court’s reference to taxation in its articulation of the

“consensual relationship” exception has been misunderstood,

leading to the erroneous belief that taxation of non-Indians on

fee land is generally subject to the Montana test. Montana

and its progeny, however, are not tax cases—they are cases

that address regulatory authority:’ Montana and Bourland

involved hunting and fishing rights; Brendale involved

zoning; and Strate involved adjudicatory authority. These

cases concemed tribal efforts to control or regulate activities

or conduct and involved real or potential conflict between

tribal and non-tribal jurisdictions.

Merrion—and not Montana—provides the analytic

framework for determining the validity of non-regulatory

tribal taxation of non-members, whether on trust land, fee

land, or fee-equivalent land. This conclusion is inescapable

when Colville, Montana, and Merrion—all decided within a

20-month period—are read together. Colville held that taxing

schemes that merely intend to raise revenue are not regulatory

in nature and therefore do not normally give rise to concerns

regarding state or tribal regulatory jurisdiction. 447 U.S. 134.

Montana prescribed the conditions under which tribes have

authority to regulate non-members and parenthetically noted

that taxation can have regulatory intent. 450 U.S. at 565-66.

Merrion, the last of the three, pointed out that governments,

including tribes, generally possess a broad authority to

impose taxes intended to raise revenue to fund services that

contribute to a civilized society throughout the jurisdiction.

"The Montana Court itself stated, “[T]hough the parties in this case

have raised broad questions about the power of the Tribe to regulate

hunting and fishing by non-Indians on the reservation, the regulatory issue

before us in this case is a narrow one.” Montana, 450 U.S. at 557.

18

455 U.S. at 140. The Court put its final imprint on this

analysis in Cotton Petroleum Corp. v. New Mexico by

allowing multiple taxation (state, tribal, and federal) of the

same activity. 490 U.S. 163 (1989). The three governments

had varying degrees of civil authority throughout the

reservation and all provided services contributing to a

civilized society. Id.

Taxation can be regulatory in nature, see infra at 18-23, but

in its more common form a tax is simply a means of raising

revenue to pay for the cost of government. The Court has

long recognized the distinction between regulatory taxation

and revenue—raising taxation. Indeed, it made just such a

distinction in a case involving tribal taxation only ten months

prior to its decision in Montana. See, e.g., Washington vy.

Confederated Tribes of the Colville Indian Reservation, 447

U.S. 134 (1980). Moreover, the problems of compliance that

may arise when a regulated party must comply with

regulations imposed by multiple jurisdictions do not present

themselves in the context of multiple taxation. See id. at 154-

59. Montana and its exceptions would thus apply to a tribe’s

power to tax non-members on fee lands (or on fee-equivalent

lands under Strate) only if the tax is designed to “regulate . . .

the activities of nonmembers . . . .” 450 U.S. at 565. The

validity of a tribal tax designed to raise revenue is

accordingly subject to a different standard analysis—that set

forth in Merrion.

B. The Court Has Repeatedly Distinguished

Between Taxation That Is Regulatory In

Nature And Taxation That Has Only A

Revenue-Raising Purpose, And _ Has

Specifically Made This Distinction In The

Context Of Tribal Taxation

In Washington v. Confederated Tribes of the Colville

Indian Reservation, which was handed down only ten months

prior to Montana, the Court upheld the Tribes’ transaction tax

on tobacco sales the legal incidence of which fell primarily on

19

non-Indians. 447 U.S. 134 (1980). The transactions occurred

~ in retail outlets located on trust land. The Court held that the

power to tax non-Indians was not inconsistent with the

Tribes’ dependent status and had not been preempted by

Congressional legislation or state taxes on the same tax base.

Id. at 156.

The Court also upheld the State of Washington’s

concurrent tax on non-member purchases even though the

transactions occurred on trust land, holding that both

governments possessed a legitimate interest in raising

revenue to fund services. /d. at 157. The Court rejected the

Tribes’ assertions that Washington’s tax “regulated” the sale

of cigarettes, and that because the activity in question was

conducted on trust land where the Tribes possessed

presumptive civil regulatory authority, the State’s tax was

impermissible:

A second asserted ground for the invalidity of the state

taxes is that they somehow conflict with the Tribes’

Cigarette ordinances and thereby are subject to pre-

emption or contravene the principle of tribal self-

government. This argument need not detain us. There is

no direct conflict between the state and tribal schemes,

since each government is free to impose its taxes without

ousting the other. Although taxes can be used for

distributive or regulatory purposes, as well for raising

revenue, we see no nonrevenue purposes to the tribal

taxes at issue in these cases . . . . Other provisions of the

tribal ordinances do comprehensively regulate the

marketing of cigarettes by the tribal enterprises; but the

State does not interfere with the Tribes’ power to

regulate tribal enterprises when it simply imposes its tax

on sales to nonmembers. Hence, we perceive no conflict

between state and tribal law warranting invalidation of

the State’s taxes.

Id. at 158-59 (emphasis added).

20

More recently, in Jefferson County v. Acker, the Court )

reaffirmed the distinction between revenue raising taxes and

taxes used to accomplish regulatory goals. 527 U.S. 423

(1999). Jefferson County had imposed a broad occupational

tax that extended to federal judges. The taxpayer judges

contended that the tax represented an impermissible attempt

by the county to regulate the federal judiciary, a power

reserved solely for the federal government. The Court

disagreed: “In practice, Jefferson County’s license tax serves

a revenue-raising, not a regulatory, purpose. Jefferson County

neither issues licenses to taxpayers, nor in any way regulates

them in their performance of their duties based on their status

as license taxpayers.” /d. at 440.

Because the tax did not regulate, and served only to raise

revenues, it was upheld. See also Michelin Tire Corp. v.

Wages, 423 U.S. 276, 286 (1976) (county ad valorem tax

imposed upon imported goods held to “have no impact

whatsoever on the Federal Government’s exclusive regulation

of foreign commerce”); Chickasaw Nation v. Oklahoma ex

rel. Oklahoma Tax Comm'n, 1995 U.S. App. LEXIS 24517 at

*9-*10 (10th Cir. 1995) (finding that the state’s tax on beer

sold in Indian country was within its power to regulate sales

of alcoholic beverages within Indian country: “Where the

taxation is an integral part of the overall regulatory structure

in a traditionally heavily regulated area, as opposed to a

simple revenue measure, the tax may properly be considered

to be regulatory and to fall within the regulatory authority.”

Citing Colville, 447 U.S. 134 at 158), on remand from 515

U.S. 450 (1995).°

® Similarly, the Court has struck down taxes imposed by the United

States Congress where the tax was designed not to raise revenue but to

regulate in an area in which the Constitution has left regulation to the

States. See United States v. Kahriger, 345 U.S. 22, 31 (1953) (“Penalty

provisions in tax statutes added for breach of a regulation concerning

activities in themselves subject only to state regulation have caused this

21

The courts have also made a distinction between regulatory

taxes and revenue-raising taxes for purposes of the Tax

Injunction Act, 28 U.S.C. § 1341, which prohibits federal

courts from enjoining the assessment, levy or collection of

any state tax where a plain, speedy and efficient remedy is

available in state court to the party contesting the tax. “These

cases make a general distinction between broader-based taxes

that sustain the essential flow of revenue to state (or local)

government and fees that are connected to some regulatory

scheme. Taxes fall within the scope of the Tax Injunction

Act, but regulatory fees do not.” Collins Holding Corp. v.

Jasper County, 123 F.3d 797, 800 (4th Cir. 1997). See also

Marcus v. Kansas Dept. of Revenue, 170 F.3d 1305, 1312

(10th Cir. 1999) (finding that a state assessment for disabled

parking placards constitutes a regulatory fee because it is tied

to the administrative costs of a specific regulatory scheme);

Hager v. City of W- Peoria, 84 F.3d 865, 871 (7th Cir. 1996)

(municipal ordinances requiring permits for trucks exceeding

certain weight limit were regulations rather than taxes, even

Court to declare the enactments invalid.”) (footnote omitted), overruled

on other grounds, Marchetti v. United States, 390 U.S. 39, 58 (1968). See

also United States v. Butler, 297 U.S. 1, 59, 67-69 (1936) (holding beyond

the taxing power an act taxing the processing of agricultural commodities

and providing for payments to farmers from the taxes collected); Hill v.

Wallace, 259 U.S. 20, 37 (1922) (striking down an act imposing a tax on

the,employment of child labor as a regulation beyond Congress’s power).

Although these cases are of less relevance today under the expansive

modern interpretation of the commerce clause, see, e.g., United States v.

Darby, 312 U.S. 100 (1941) (upholding congressional regulation of child

labor under the commerce clause), they indicate that, in proper

circumstances, the Court will inquire as to whether a regulatory tax is

within the power of Congress. See South Carolina v. Baker, 485 U.S.

505, 527 n.16 (1988) (“Because we hold that Congress could have

prohibited States from issuing any unregistered bonds by direct

regulation, we necessarily reject South Carolina’s argument that [26

U.S.C.] § 310(b)(1) is an impermissible regulatory tax because it imposes

a tax on activities not subject to federal regulatory power.”).

22

though the revenues from the assessments went into the

general fund, because they “were passed to control certain

activities, not to raise revenues”).

The difference between a non-regulatory, revenue-raising

tax and a tax employed as a part of a regulatory scheme is

critical. Regulatory taxation differs from the usual revenue-

raising tax in two key respects. First, unlike a regulatory tax,

which is designed to regulate conduct, e.g., Hill v. Wallace,

259 U.S. 20, 37 (1922) (tax designed to regulate child labor);

Hager v. City of W. Peoria, 84 F.3d 865, 871 (7th Cir. 1996)

(tax designed to regulate use of roads by large trucks), non-

regulatory taxation does not attempt to proscribe behavior.

Generally, taxes are enacted to raise revenue to fund

government services. Although a regulatory tax may raise

revenues for general governmental programs, it is not

imposed for that purpose, but for its regulatory purpose. In

fact, a completely effective regulatory tax may raise no

revenue as it eliminates the conduct taxed. A revenue-raising

tax, in contrast, is generally enacted with the hope that it will

have a minimal effect on the activity taxed. The Navajo Hotel

Occupancy Tax at issue for example, is not intended to deter

guests from staying at hotels on the Navajo Reservation,

because that would frustrate its purpose of raising revenue.

Second, taxing power may be, and commonly is,

simultaneously exercised by overlapping jurisdictions, each

providing complementary services to the direct or indirect

benefit of all those with nexus to the jurisdiction. This

simultaneous existence and exercise of taxing power by

overlapping jurisdictions is the rule rather than the exception

in the tax area, and does not present conflicting jurisdictional

claims such as those that the Court was called on to resolve in

regulatory contexts such as Montana and its progeny. The

Court specifically addressed this issue in Cotton Petroleum

Corp. v. New Mexico, 490 U.S. 163 (1989). After Merrion

upheld the Jicarilla Apache’s right to impose severance taxes

23

on non-members, an affected non-member taxpayer, Cotton

Petroleum Company, challenged the State of New Mexico’s

severance tax on that same activity, arguing that the levy was

invalid because the tax far exceeded the value of the State’s

on-reservation services and that it represented impermissible

double taxation. The Tribe, in its amicus brief, contended

that the State’s tax illegally thwarted its own ability to raise

taxes and diminished the value of its oil and gas leases. As it

had in Colville, 447 U.S. at 156-57, the Court upheld the

simultaneous exercise of state and tribal taxing jurisdiction:

“There are, therefore, three different governmental entities

(federal, state, and tribal], each of which has taxing

jurisdiction over the non-Indian wells . . . . Unless and until

Congress provides otherwise, each of the other two

sovereigns has taxing jurisdiction over all Cotton’s leases.”

Cotton Petroleum Corp., 490 U.S. at 188-89.

Common examples of multiple taxation by overlapping

jurisdictions are familiar to most of us. “Concurrent federal

and state taxation of income, of course, is a well-established

norm.” Mobil Oil Corp. v. Commissioner of Taxes, 445 U.S.

425, 448 (1980). Moreover, in the realm of property taxation, |

numerous jurisdictions levy on the same property.

Commonly a city, county, school district, hospital district,

etc., each with its own separate governmental responsibilities

to fund, will levy separate taxes on the same property. In sum,

the power to tax need not be, and indeed rarely is, an

exclusive one.

24

III. UNDER MERRION, THE NAVAJO HOTEL

OCCUPANCY TAX IS A _ VALID NON-

REGULATORY TAX LEVIED FOR THE

PURPOSE OF RAISING REVENUES TO PAY

FOR -THE COST OF _ LEGITIMATE

GOVERNMENT SERVICES

The District Court of New Mexico upheld the Navajo

Hotel Occupancy Tax by applying Montana’s consensual

relationship test to tribal powers of taxation and by also

applying the “benefits of civilized society” standards from

Merrion. Pet. App. 63a. In deciding that Montana was

applicable, the District Court noted that both Montana and

Strate specifically mention that “a tribe may regulate, through

taxation . . . . The Supreme Court’s inclusion of taxation

power within its discussion of the consensual , relationships

test indicates that the test applies to [the taxation] form of

tribal jurisdiction as well as to tribal regulatory and judicial

authority over non-members.” Jd. At the same time, the

District Court recognized that Merrion is not limited to cases

involving Indian trust lands and that “fairness indicates that [a

tribe] be allowed to impose taxes to help pay for

[governmental] services.” Id.

In a majority decision, the Tenth Circuit also upheld the

Navajo Hotel Occupancy Tax, ruling that (1) the Montana

test was controlling, Pet. App. 9a, (2) the fee status of the

land did not in and of itself preclude tribal taxation, id. at 25a,

(3) a “balancing test” derived from Merrion was an

appropriate elaboration of the Montana consensual

relationship exception in the area of taxation, and id. at 13a-

14a, (4) the tax fell within the consensual relationship

exception. /d. at 28a-30a. Unlike the District Court, the

Tenth Circuit never explained why it thought that Montana

should apply as part of its analysis.

Despite looking to Montana, the Tenth Circuit nonetheless

emphasized that the tax was in substance and purpose similar

to state and local occupancy taxes consistently upheld by the

25

courts: “We conclude that the same principles apply as in

those other cases in which hotel occupancy taxes have been

subject to judicial review.” Jd. at 30a. The court further

recognized that taxation by its nature is less burdensome than

the exercise of other forms of tribal authority over non-

members and that the burden of the Navajo tax was

“minimal” and did not materially restrict non-members’

activities. Jd. at 30a-3la. In its balancing test, the Tenth

Circuit held that the burden of the tax was not

disproportionate to the services provided and therefore the

Navajo Hotel Occupancy Tax was valid. Jd. at 31a-32a.

Amici agree with the lower courts that if Montana is the

applicable rule, then the tax should be upheld under the

“consensual relationship” exception. The Montana test

simply does not apply, however, because the Navajo Hotel

Occupancy Tax is not a regulatory tax. The courts below

failed to distinguish between regulatory taxation and revenue-

raising taxation. Cognizant that Montana’s consensual

relationship exception referred to “taxation,” the Tenth

Circuit, like the District Court, concluded that it should

somehow incorporate the Montana test in its analysis.

Because the court also recognized that Merrion applies

beyond trust property, it attempted to reconcile Montana and

Merrion by extracting a “balancing test” from Merrion and

grafting it onto Montana’s “consensual relationship”

exception. As a practical matter, the court’s balancing test

between taxes and services on a case by case, taxpayer by

taxpayer basis would impose a burden on tribes that no other

governmental body is required to carry in order to validate its

tax system and would be difficult for the courts to apply.

Moreover, had the Tenth Circuit distinguished between

regulatory and revenue-raising taxation, it would not have

needed to apply such a balancing test nor fit the tax within the

Montana exception. Instead, the tax would simply have been

evaluated under “general principles of taxation” as prescribed

by Merrion.

26

This Court has recognized the need to distinguish between

regulatory taxation and revenue raising taxation. In Colville,

handed down less than a year prior to Montana, and more

recently in the Jefferson County case, the Court has made the

distinction between regulation and taxation for revenue

purposes in both a tribal and a non-tribal context. Colville,

447 U.S. 134 (1980); Jefferson County v. Acker, 527 U.S. 423

(1999). See also Cotton Petroleum Corp. v. New Mexico, 490

U.S. 163 (1989). Clarification of the distinction here, along

with the corresponding reaffirmation of the “general

principles of taxation” prescribed by Merrion, will bring

clarity and certainty to an area in great need of both.’

* The United States Court of Appeals for the Ninth Circuit has held on

two occasions that Merrion and not Montana governs the validity of tribal

taxes on fee lands within reservation boundaries. Snow v. Quinault Indian

Nation, 709 F.2d 1319 (9th Cir. 1983), cert. denied, 467 U.S. 1214

(1984); Burlington Northern R.R. Co. v. Red Wolf, 196 F.3d 1059 (9th

Cir. 1999), rehearing denied, opinion amended, 2000 U.S. App. LEXIS

92, cert. denied, 120 S. Ct. 1964 (2000). In Red Wolf, the Ninth Circuit

reaffirmed its earlier holding in Burlington Northern R.R. Co. v. Blackfeet

Tribe, 924 F.2d 899 (9th Cir. 1991), that the tribe could tax a railroad

right-of-way, even as it held that the tribe could not adjudicate a tort claim

arising within the same right-of-way, which the court considered to be the

equivalent of fee lands for jurisdictional purposes under Strate. The Red

Wolf panel, which included retired Justice White (who participated in the

Merrion and Montana decisions), reconciled its decisions as follows:

[T]he Tribe’s power to tax the right-of-way does not create civil

jurisdiction over non-members arising out of accidents occurring on

the right-of-way. The power to tax is not equivalent to the right to

exercise civil jurisdiction over tribal land. Indeed, Merrion rejected

the theory that a tribe’s taxation power was coextensive with its

right to exclude non-members from tribal lands. Thus, because a

tribe’s taxation power is broader than its civil adjudicatory

authority over non-members, the Tribe’s authority to tax the right-

of-way is not dispositive. .

Red Wolf, 196 F.3d at 1063-64 (opinion joined in by retired Justice White)

(omitting footnote) (emphasis added). [Footnote continues on next page.]

27

The Navajo Hotel Occupancy Tax (H.O.T.) at issue is a

revenue raising tax—it is not a regulatory tax designed to

curb or eliminate hotel stays or other business of the

petitioner. The H.O.T. imposes an 8% tax on all hotel rooms

located within the reservation, whether on fee land or trust

land. J.A. 15-17; Pet. App. 67a. As the Tenth Circuit noted,

this tax is like similar hotel taxes imposed by the states of

Arizona and New Mexico. Pet. App. 28a-29a. Such tax is for

revenue raising purposes to cover the cost of governmental

services provided or available to the public, including

Petitioner and its hotel guests.'°

Most recently, however, in Big Horn County Electric Cooperative v.

Adams, the Ninth Circuit held that the Crow Tribe exceeded its regulatory

authority when it assessed a 3% tax on the value of the taxpayer’s rights-

of-way over the reservation through which the taxpayer ran_ its

transmission lines. 219 F.3d 944 (9th Cir. 2000). The Ninth Circuit held

(erroneously) that the taxpayer’s rights-of-way were equivalent to fee land

and that Montana applied. See id. at 953 (overruling Burlington Northern

R.R. Co. v Blackfeet Tribe, 924 F.2d 899 (9th Cir. 1991)). In so ruling, the

panel relied on the decision in Red Wolf, 196 F.3d 1059, but ignored the

distinction that the Red Wolf panel made between regulatory or

adjudicatory powers on one hand and taxation on the other.

'° For example, the federal and state highways over which Petitioner’s

guests travel to reach the hotel property are jointly patrolled by the

Arizona state and Navajo tribal police. Pet. App. 57a. The tribal police

force is the primary provider of police protection. Id. A Navajo police

department substation is located in Cameron, and a 911 emergency call

from Atkinson would be forwarded to the Navajo police. /d. The Navajo

fire department and the Bureau of Indian Affairs fire department, both

located 25 miles away in Tuba City, provide the primary response to calls

from the Cameron area. /d. at 57a-58a; J.A. 86-89, 91. The Navajo

Nation’s Emergency Medical Service Department provides emergency

medical care to the Cameron area. Pet. App. 58a. See also Pet. App. 27a-

28a n.13. Additionally, the Navajo Nation provides health services to

both members and non-members through the Navajo Nation Division of

Health, including health inspections of all food vendors located on the

reservation. Pet. App. 87a. The Navajo Nation’s Tourism Department

provides facilities for the health and safeiy of visiting tourists. /d. The

28

The Navajo H.O.T. has no regulatory purpose whatsoever.

The Tribe does not tell Petitioner whom it may let its rooms

to, what it may charge for those rooms, or in any other way

direct Petitioner’s conduct of its business.'' Nor does it

regulate in any way the hotel guests who are subject to the

tax. Because the Navajo tax has a revenue-raising purpose

meant to defray the costs of government services, it must not

be analyzed under the Montana framework, which addresses

tribes’ regulatory power over non-members on fee lands.

Rather, the proper analysis of the Navajo H.O.T. takes place

under the standards set forth in Merrion and general

principles of taxation referred to in Merrion.

There is nothing extraordinary about requiring a business

or, as here, its customer, to contribute through taxes to the

general cost of government if its economic activities or

contacts with the taxing jurisdiction establish a nexus.

Navajo Nation also funds economic and community development, social

services, educational programs, and a host of other activities. Id.; J.A.

107-110.

"' Petitioner, on page 22 of its brief, suggests that the enforcement

mechanisms of the Navajo tax (i.e., record-keeping requirements, lien

creation procedures, etc.) constitute regulation even if the tax itself does

not. The Court has consistently rejected the argument that a lawful tax

should be struck down because it imposes minimal regulatory burdens.

As explained in Oklahoma Tax Commission v. Citizen Band Potawatomi

Indian Tribe of Oklahoma, the Court held in Moe v. Confederated Salish

and Kootenai Tribes of the Flathead Reservation, 425 U.S. 463, 483

(1976), “Indian retailers on an Indian reservation may be required to

collect all state taxes applicable to sales to non-Indians. We determined

that requiring the tribal seller to collect these taxes was a minimal burden

justified by the State’s interest in assuring the payment of these

concededly lawful taxes.” 498 U.S. 505, 512 (1991). Four years later, in

Colville, the Court reiterated that “the state may impose at least minimal

burdens on Indian businesses to aid in collecting and enforcing the tax [on

sales to non-Indians],” and that those burdens cannot be used to invalidate

an otherwise valid tax. 447 U.S. at 151.. See also, Department of

Taxation & Fin. v. Milhelm Attea & Bros., Inc., 512 U.S. 61, 75 (1994).

29

Merrion, 455 U.S. at 138. Atkinson owns property on the

reservation, employs 120 people and conducts an active

business. Its guests are visitors to the reservation, and enjoy

the benefits of tribal government and tribal services. Under

“general principles of taxation” there is simply no question

that there is a nexus sufficient to support the taxation.

Furthermore, the services made available by the Tribe

provide equally compelling support for taxation. See id. at

138 n.5 (“We agree with [Circuit Court] Judge McKay’s

observation that ‘[i]t simply does not make sense to expect

the tribes to carry out municipal functions approved and

mandated by Congress without being able to exercise at least

minimal taxing powers, whether they take the form of real

estate taxes, leasehold taxes or severance taxes’”) (quoting

Merrion v. Jicarilla Apache Tribe, 617 F.2d 537, 550 (10th

Cir. 1980) (McKay, J. concurring)). See also Merrion, 455

U.S. at 137. The revenues raised by the Navajo Nation are

used to support the public good. Petitioner’s business and

guests benefit from a safe and healthy environment made

possible by the government services provided by the Navajo

Tribe.

To suggest that there must be a more direct benefit for the

disputed tax to be valid flies in the face of a long line of case

precedent. As the Court noted in Cotton Petroleum Corp. v.

New Mexico: “[T]here is no constitutional requirement that

the benefits received from a taxing authority by an ordinary

commercial taxpayer—or by those living in the community

where the taxpayer is located—must equal the amount of its

tax obligations.” 490 U.S. 163, 189-190 (1989).

Under the principles set forth in Merrion, general

principles of taxation are applicable to a tribal revenue-raising

tax just as they would be to a tax imposed by any other

governmental entity. Under such principles, the petitioner’s

attempt to avoid the Navajo H.O.T. must fail and the tax must

be upheld. Like the lessee in Merrion, Petitioner and its hotel

30

guests that are subject to the Navajo H.O.T. “benefit from the

provision of police protection and other governmental

services, as well as from the ‘advantages of a civilized

society’ that are assured by the existence of tribal

government.” Merrion, 455 U.S. at 137-38 (quoting Exxon

Corp. v. Wisconsin Dept. of Revenue, 447 U.S. 207, 228

(1980)).

CONCLUSION

For the above reasons, the judgment of the court of appeals

should be affirmed.

Respectfully submitted,

JEFFREY D. LERNER MICHAEL L. ROY

3000 Iron Stone Court Counsel of Record

Arlington, Texas 76006 HOBBS, STRAUS, DEAN

(817) 723-7349 & WALKER. LLP

2120 L. Street, N.W., Suite 700

WASHINGTON, D.C. 20037

(202) 822-8282

J. D. WILLIAMS GEOFFREY D. STROMMER

MANAGING ATTORNEY STARLA K. ROELS

Office of Legal Counsel HOBBS, STRAUS, DEAN

Confederated Tribes of the & WALKER, LLP

Umatilla Indian Reservation 851 S.W. 6th Ave., Suite 1650

P.O. Box 638 Portland, Oregon 97204

Pendleton, Oregon 97801 (503) 242-1745

Counsel for Amici Curiae

Dated: February 14, 2001