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Supreme Court upholds state tax on reservation fuel
Wednesday, December 7, 2005

The U.S. Supreme Court under new Chief Justice John G. Roberts issued its first Indian law decision on Tuesday, ruling that the state of Kansas can impose a tax on fuel sold on tribal lands.

By a 7-2 vote, the justices upheld the legality of the state's fuel tax. The majority opinion by Justice Clarence Thomas said the tax doesn't infringe on tribal sovereignty because it falls on non-Indian distributors who do business off the reservation.

"Kansas law makes clear that it is the distributor, rather than the retailer, that is liable to pay the motor fuel tax," Thomas wrote.

The decision is a blow to the Prairie Band Potawatomi Nation, whose leaders opened the "Nation Station" in order to further tribal self-sufficiency. The tribe had argued that state law was written in order to "indirectly" tax the tribe and destroy the reservation economy.

"The nation's tribal government imposes it own fuel taxes, which are entirely used to build and maintain roads and bridges on and near its reservation," Chairman Zach Pahmahmie said in a statement. "The imposition of the state tax makes collection of our tribal fuel taxes impossible."

Pahmahmie's view gained support in a dissent filed by Justice Ruth Bader Ginsburg. She said the imposition of the state tax will harm the tribe's efforts to develop its economy, promote self-sufficiency and ensure a strong government.

"Kansas' collection of its tax on fuel destined for the Nation Station will effectively nullify the Nation's tax, which funds critical reservation road-building programs, endeavors not aided by state funds," Ginsburg wrote in the dissent, which was joined by Justice Anthony Kennedy. "I resist that unbalanced judgment."

Tribal advocates had expected the negative outcome after oral arguments in the case were heard on October 3, the first day of the new Roberts court. Most of the questions the justices posed were based on the nature of the tax and not whether it infringes on tribal sovereignty.

"Everyone who went to the argument walked out of the room just shaking their heads in that the argument was not a positive one at all for tribes," John Dossett, the general counsel for the National Congress of American Indians, said recently. "The questions were very tough."

Tex Hall, the chairman of the Mandan, Hidatsa and Arikara Nation of North Dakota and former president of NCAI, said the decision proved that the Supreme Court doesn't understand tribal sovereignty. He predicted the case will have "dire" impacts on tribes throughout the nation. Tribes in Washington are already in a battle with the state over a gas tax.

"If sovereignty means anything, it means that no tribe should have to go hat in hand to the non-Indians of the state they live in and ask for the right to exercise their inherent sovereign powers," Hall said yesterday. "Seven of the Justices sitting on the Court don't get this."

Despite the negative outcome, the justices bypassed one of the main issues that was presented in the case. Attorneys for Kansas had asked the court to reconsider precedents that attempt to balance tribal, state and federal interests.

The justices declined to rewrite existing case law. But the majority opinion did set new ground by directing the lower courts not to engage in balance of interest tests in cases where state and federal interests clash off the reservation.

"Limiting the interest-balancing test exclusively to on-reservation transactions between a nontribal entity and a tribe or tribal member is consistent with our unique Indian tax immunity jurisprudence," Thomas wrote, emphasizing "on-reservation."

Ginsburg, in her dissent, criticized the majority for avoiding the balancing issue. In her view, tribal and federal interests clearly outweigh the imposition of the state tax.

"Balancing tests have been criticized as rudderless, affording insufficient guidance to decisionmakers," Ginsburg wrote. "Pointed as the criticism may be, one must ask, as in life's choices generally, what is the alternative."

The case is the only Indian law case that has been heard by the new Roberts court. But a petition involving the state of Kansas' refusal to recognize car tags issued by the Prairie Band Potawatomi Nation is still pending.

Along with the decision handed down yesterday, the court relisted the petition in the car tag case. The petition will be considered on Friday, with an announcement on whether the court will take the case to come next week.

Wagnon v. Prairie Band Potawatomi Nation:
Syllabus | Opinion [Thomas] | Dissent [Ginsburg]

Supreme Court Documents:
Day Call | Docket Sheet | Questions Presented

Court Briefs:
Richard v. Prairie Band Potawatomi Nation (NCAI-NARF Supreme Court Project)

Lower Court Decision:
Prairie Band Potawatomi Nation v. Richards (10th Circuit August 2004)

Relevant Links:
Prairie Band Potawatomi Nation - http://www.pbpindiantribe.com
NARF-NCAI Tribal Supreme Court Project - http://doc.narf.org/sc/index.html
Multistate Tax Commission - http://www.mtc.gov