SAN FRANCISCO โ State attempts to collect a fuel tax from tribes received a
major rebuff from the 9th Circuit Court of Appeals on Aug. 19.
In a 2 to 1 decision, a three-judge circuit court panel rejected a stubborn
attempt by the Idaho state legislature to collect the motor vehicle excise
tax from gas stations on the Coeur dโAlene, Nez Perce and Shoshone-Bannock
reservations. Although the ruling does not affect federal legislation, it
affirmed the principle that explicit Congressional action was necessary to
overrule tribal sovereignty.
The ruling, in a case brought by the three tribes against the commissioners
of the Idaho State Tax Commission, actually upheld an unbroken series of
decisions by lower courts, including the Idaho Supreme Court, rejecting the
state legislatureโs attempt to tax reservation sales. In 2001 the Idaho
Supreme Court in the Goodman Oil case held that the state law placed the
burden of the tax on the tribal retailers, which it was not allowed to do
without โexpress Congressional authorization.โ
In response, the Republican-controlled legislature rewrote the law to
declare that the legal burden of the tax fell on the distributor, not the
retailer. The major issue in the appeal was whether the legislature made it
so by saying it was so. In technical terms, the question was whether the
law changed the legal โincidenceโ of the tax.
Although the courts acknowledged that โlegal incidenceโ was a separate
matter than the actual economic burden, the circuit court panel found that
the Idaho tax worked just as it had earlier, before the cosmetic changes.
The legislature couldnโt change the facts just by enacting a new
definition, especially when tribal sovereignty was at stake.
โIf the legislature could indirectly tax Indian nations merely by reciting
ipso facto that the incidence of the tax was on another party,โ said the
majority opinion, โit would wholly undermine the Supreme Courtโs precedent
that taxing Indians is impermissible absent clear congressional
authorization.โ
In another important finding for Indian law, the circuit court went on to
say that a federal law frequently cited to allow taxation of reservations
in fact did nothing of the sort. Ambiguous language in the 1934
Hayden-Cartwright Act allowed states to tax motor fuel sales on โU.S.
Military and other reservations,โ but the two-judge majority said that if
the law was to apply to Indian reservations it should have said so
explicitly.
The dissent by Judge Andrew J. Kleinfeld focused on this interpretation,
reciting the history of federal disposition Of โfree landโ to argue that
the law did include tribal territory. The contrary ruling by the majority,
he said, was a โlogical amusement.โ
The case has a counterpart in Kansas, in which a U.S. District Court
earlier this year rejected the state governmentโs attempt to tax gasoline
distribution by the Winnebago Tribe. But it appears to contradict a federal
district court decision in Rhode Island upholding the state police raid on
a smoke shop owned by the Narragansett Indian Tribe. If contradictory
rulings prevail in different circuit courts of appeal, the issue usually
winds up in the U.S. Supreme Court.
