Litigation Updates
Glen Stankee
September, 2015
Rental Tax
Seminole Tribe of Florida v. Florida, Case No. 14-14524 (11th Cir.,
August 26, 2015), aff’g in part, 49 F. Supp. 3d 1095 (S.D. Fla. 2014).
 The State of Florida attempted to impose tax on rentals that a non-Indian
lessee paid for space in the Tribe's on-reservation casino. The Tribe sued
for declaratory and injunctive relief.
 If the legal incidence of the Rental Tax rested with the Indian landlord, it
would be categorically barred under McClanahan v. State Tax Comm’n of
Ariz., 411 U.S. 164 (1973); Oklahoma Tax Comm’n v. Chickasaw Nation,
515 U.S. 450 (1995). However, the legal incidence of the Rental Tax rests
with the non-Indian lessee.
 The federal district court determined that the Rental Tax, as applied to
leases of Indian land, is prohibited under 25 U.S.C. §465 and is
preempted by federal law, including the surface leasing regulations, under
White Mountain Apache Tribe v. Bracker, 448 U.S. 136 (1980). The
Eleventh Circuit agreed.
34986312.PPTX
Akerman | 2
Rental Tax (Cont’d)
Seminole Tribe of Florida v. Florida, Case No. 14-14524 (11th Cir.,
August 26, 2015), aff’g in part, 49 F. Supp. 3d 1095 (S.D. Fla. 2014).
 25 U.S.C. §465 expressly prohibits state taxation of Indian land and
certain interests in Indian Land. In Mescalero Apache Tribe v. Jones, 411
U.S. 145 (1973), the Court said that §465 prohibits state taxation of the
"use" of Indian land, but not income derived from activities conducted on
Indian land.
 The district court held that a state tax on rentals is a tax on the "use" of
Indian land, rather than a tax on income from activities conducted on
Indian land. The Eleventh Circuit agreed, holding that the right to lease
land is a fundamental privilege of ownership.
34986312.PPTX
Akerman | 3
Rental Tax (Cont’d)
Seminole Tribe of Florida v. Florida, Case No. 14-14524 (11th Cir.,
August 26, 2015), aff’g in part, 49 F. Supp. 3d 1095 (S.D. Fla. 2014).
• The Eleventh Circuit distinguished the Rental Tax from a tax on
activities conducted on the land and from a tax on tangible personal
property, such as oil and gas, removed from the land.
• The state contended that, under Confederated Tribes of Chehalis
Reservation v. Thurston Cnty. Bd. of Equalization, 724 F. 3d 1153
(9th Cir. 2013) and Agua Caliente Band of Mission Indians v.
Riverside County, 442 F. 2d 1184 (9th Cir. 1971), §465 does not
apply to leasehold interests in Indian land.
34986312.PPTX
Akerman | 4
Rental Tax (Cont’d)
Seminole Tribe of Florida v. Florida, Case No. 14-14524 (11th Cir.,
August 26, 2015), aff’g in part, 49 F. Supp. 3d 1095 (S.D. Fla. 2014).
 In Agua Caliente, §465 was not mentioned. The state construed the
court’s silence as a holding that §465 does not apply to leasehold
interests?
 The Eleventh Circuit said Agua Caliente is not good law after
Mescalero. Also, it is based on the presumption that every state tax on
a non-Indian lessee is permissible in the absence of "legislation dealing
with Indians and Indian lands [that] demonstrates a congressional
purpose to forbid the imposition of it." 442 F. 2d at 1186. That has not
been the law since 1980 when Bracker was decided.
34986312.PPTX
Akerman | 5
Rental Tax (Cont’d)
Seminole Tribe of Florida v. Florida, Case No. 14-14524 (11th Cir.,
August 26, 2015), aff’g in part, 49 F. Supp. 3d 1095 (S.D. Fla. 2014).
 A new challenge to the California Possessory Interest Tax as applied to
leasehold interests in Indian land has been launched. See, Agua Caliente
Band of Cahuilla Indians v. Riverside County, California, Case No. ED CV
14-00007 JGB (C.D. Cal. 2014).
 It is not clear whether §465 applies only to Indian tribes, or whether it
attaches to, and "runs with", the Indian land so that non-Indians to whom
the Tribe transfers interests can rely on it. In Chehalis, the Ninth Circuit
held that §465 prohibited state taxation of a non-Indian lessee’s leasehold
improvements on Indian land.
34986312.PPTX
Akerman | 6
Rental Tax (Cont’d)
Seminole Tribe of Florida v. Florida, Case No. 14-14524 (11th Cir.,
August 26, 2015), aff’g in part, 49 F. Supp. 3d 1095 (S.D. Fla. 2014).
Federal Surface Leasing Regulations – Preemption
 The holding that §465 prohibits the Rental Tax was dispositive of its
validity. However, both the district court and the Eleventh Circuit went on
to say that, even in §465 did not apply, the Rental Tax is preempted.
 §162.017(c) expressly prohibits state taxation of leasehold or possessory
interests in Indian land. The state claimed that the Secretary did not have
the authority to issue regulations that preempt state law because
Congress had not expressly granted that authority to him.
 The general rule - that Congress must expressly grant the authority to
preempt state law - has no application to on-reservation activities.
34986312.PPTX
Akerman | 7
Rental Tax (Cont’d)
Seminole Tribe of Florida v. Florida, Case No. 14-14524 (11th Cir.,
August 26, 2015), aff’g in part, 49 F. Supp. 3d 1095 (S.D. Fla. 2014).
 The authority to issue regulations that preempt state law is implied
whenever the federal regulation of the activity is pervasive and
exclusive.
 The issue is whether Congress intended to permit or prohibit state
taxation in the particular circumstances. If that intent cannot be
determined from the federal statutory scheme, it is determined under
Bracker.
 The surface leasing regulations were promulgated pursuant to the
Administrative Procedures Act. Neither the district court nor the
Eleventh Circuit appeared to believe that this affected the validity of the
exemption.
34986312.PPTX
Akerman | 8
Rental Tax (Cont’d)
Seminole Tribe of Florida v. Florida, Case No. 14-14524 (11th Cir.,
August 26, 2015), aff’g in part, 49 F. Supp. 3d 1095 (S.D. Fla. 2014).
 The district court relied on the Secretary’s declaration that federal law
preempts state taxation of Indian leasing.
 The Eleventh Circuit said that it was error for the district court to defer to
the Secretary's determination that federal law preempted state tax. It said
that the district court was required to independently conduct its own
Bracker balancing test. The Eleventh Circuit then conducted its own
Bracker balancing test and determined that state taxation of Indian leasing
was preempted because the significant federal and tribal interests in
Indian leasing outweigh the state's generalized interest in collecting tax
revenues.
 The Eleventh Circuit ruled that the federal regulation of Indian leasing is
so pervasive and exclusive as to preclude any state tax burdens.
34986312.PPTX
Akerman | 9
Rental Tax (Cont’d)
Seminole Tribe of Florida v. Florida, Case No. 14-14524 (11th Cir.,
August 26, 2015), aff’g in part, 49 F. Supp. 3d 1095 (S.D. Fla. 2014).
Bracker
 The purpose of the Bracker balancing test is to determine whether
Congress intended to permit or prohibit state taxation in the particular
circumstances when that intent cannot be inferred from the federal
statutory scheme. Bracker requires a particularized analysis of the
competing federal, state and tribal interests.
 Where the state tax burdens an activity that is pervasively and
exclusively regulated by federal law (i.e., "where the state has had
nothing to do with the on-reservation activity, save tax it." Cotton
Petroleum, 490 U.S. at 186), Bracker holds that the state cannot justify
the tax based on its generalized interest in collecting tax revenues.
The tax must be “narrowly tailored” to compensate the state for
services it provides in connection with the taxed activity to the persons
that pay the tax.
34986312.PPTX
Akerman | 10
Rental Tax (Cont’d)
Seminole Tribe of Florida v. Florida, Case No. 14-14524 (11th Cir.,
August 26, 2015), aff’g in part, 49 F. Supp. 3d 1095 (S.D. Fla. 2014).
 State taxes of general application that fund off-reservation services for
state residents in general can never satisfy the “narrowly tailored” test.
 State taxes subject to the “narrowly tailored” standard are rarely valid.
 If the state tax burdens an activity, the federal regulation of which is not
pervasive and exclusive (e.g. where it is shared with the state), it can be
justified under a much more lenient standard. In those circumstances, the
tax can be justified by the state's generalized interest in collecting tax
revenues. The availability of off-reservation services that are available to
tribal members and the negligible economic impact of the tax on the Tribe
are all relevant factors.
 State taxes not subject to the “narrowly tailored” standard are rarely
invalid.
34986312.PPTX
Akerman | 11
Possessory Interest Tax
Agua Caliente Band of Cahuilla Indians v. Riverside County,
California, Case No. ED CV 14-00007 JGB (C.D. Cal. 2014).
 The issue in this case is whether federal law prohibits the application of
the California Possessory Interest Tax (“CPIT”) to lessees' possessory
interests in Indian land.
 This was the subject of Agua Caliente Band of Mission Indians v.
Riverside County, 442 F. 2d 1184 (9th Cir. 1971), and Fort Mojave Tribe v.
San Bernandino County, 543 F. 2d 1253 (9th Cir. 1976) where the CPIT
was upheld.
 The result might be different this time.
34986312.PPTX
Akerman | 12
Possessory Interest Tax
Agua Caliente Band of Cahuilla Indians sued Riverside County,
California, Case No. ED CV 14-00007 JGB (C.D. Cal. 2014).
 The Eleventh Circuit said that Agua Caliente and Fort Mojave are no
longer good law.
 They relied on U.S. v. City of Detroit, 355 U.S. 466 (1958) which was
decided at a time when the Supreme Court viewed a tax on the use of
property as distinct from a tax on the property itself. That distinction
was obliterated in Mescalero. The CPIT os probably barred by §465.
 Agua Caliente and Fort Mojave rely on the proposition that a state tax
is permissible in the absence of "legislation dealing with Indians and
Indian lands [that] demonstrates a congressional purpose to forbid the
imposition of it." 442 F. 2d at 1186. That congressional purpose has
now been demonstrated in the surface leasing regulations. In any
event, presumptions in favor of the validity of a state tax were
eliminated in Bracker.
34986312.PPTX
Akerman | 13
Utilities Tax
Seminole Tribe of Florida v. Florida, Case No. 14-14524 (11th Cir.,
August 26, 2015), rev’g in part, 49 F. Supp. 3d 1095 (S.D. Fla. 2014).
 The Utilities Tax is a tax on the utility services, including electricity. The
state imposed the Utilities Tax on electricity delivered to the Tribe on the
reservation.
 The tax must be remitted to the state by the service provider for the
privilege of engaging in the utility service business in the state. The
service provider's obligation is limited to remitting the tax he has collected
from the consumer.
 The Florida statute permits the service provider to pass-through the
Utilities Tax to the consumer by simply adding the tax to the bill. The
statute does not require the service provider to add the tax to the bill, but
no utility service provider has ever elected not to.
34986312.PPTX
Akerman | 14
Utilities Tax (Cont’d)
Seminole Tribe of Florida v. Florida, Case No. 14-14524 (11th Cir.,
August 26, 2015), rev’g in part, 49 F. Supp. 3d 1095 (S.D. Fla. 2014).
 A state tax on an on-reservation activity or transaction is categorically
barred if the legal incidence of the tax rests with the Indian tribe. See, e.g.,
McClanahan v. State Tax Comm’n of Ariz., 411 U.S. 164 (1973), and
Oklahoma Tax Comm’n v. Chickasaw Nation, 515 U.S. 450 (1995).
 The critical issue is whether the legal incidence of the Utilities Tax rests
with the Tribe as the consumer or the service provider.
 Florida law does not designate which party bears the legal incidence of
the Utilities Tax.
34986312.PPTX
Akerman | 15
Utilities Tax (Cont’d)
Seminole Tribe of Florida v. Florida, Case No. 14-14524 (11th Cir.,
August 26, 2015), rev’g in part, 49 F. Supp. 3d 1095 (S.D. Fla. 2014).
 Where the pass through of the tax to the consumer is mandatory, the
legal incidence of the tax is shifted to the consumer as a matter of law.
See, U.S. v. State Tax Comm'n of Miss., 421 U.S. 599, 607 (1975).
 The district court held that the pass-through of the Utilities Tax as
applied is mandatory because every payment that the service provider
receives from a customer is deemed to include a proportionate share of
the tax, regardless of whether the tax was included in the bill. The
customer can not avoid paying the tax.
34986312.PPTX
Akerman | 16
Utilities Tax (Cont’d)
Seminole Tribe of Florida v. Florida, Case No. 14-14524 (11th Cir.,
August 26, 2015), rev’g in part, 49 F. Supp. 3d 1095 (S.D. Fla. 2014).
 The Supreme Court has held that the absence of mandatory pass
through language does not mean that the legal incidence rests with the
service provider. See, California Board of Equalization v. Chemehuevi
Indian Tribe, 474 U.S. 9 (1985).
 The correct inquiry is whether the state legislature intended that the tax
be passed through to, and collected from, the consumer. That is clearly
the case of the Utilities Tax.
34986312.PPTX
Akerman | 17
Utilities Tax (Cont’d)
Seminole Tribe of Florida v. Florida, Case No. 14-14524 (11th Cir.,
August 26, 2015), rev’g in part, 49 F. Supp. 3d 1095 (S.D. Fla. 2014).
 The Eleventh Circuit reversed after interpreting Oklahoma Tax Comm’n v.
Chickasaw Nation, 515 U.S. 450 (1995), as holding that the legal
incidence of the tax is shifted to the consumer only if the service provider
is required to collect the tax from the consumer. Since the statute does not
require the service provider to add the tax to the bill, it concluded that the
legal incidence rested with the service provider.
 Chickasaw Nation held that the state fuel tax was shifted from the fuel
distributor to the retailer who purchased the fuel from the distributor even
though the statute did not require that the distributor collect the tax from
the retailer.
 The Tribe has asked the court to reconsider its holding on that limited
issue.
34986312.PPTX
Akerman | 18
Utilities Tax (Cont’d)
Seminole Tribe of Florida v. Florida, Case No. 14-14524 (11th Cir.,
August 26, 2015), rev’g in part, 49 F. Supp. 3d 1095 (S.D. Fla. 2014).
 Even if the legal incidence of the Utilities Tax were held to rest with the
service provider, it would be preempted under Bracker to the extent that
the electricity were used in an on-reservation activity that is pervasively
and exclusively regulated by federal law.
 The Tribe engages in many activities that are pervasively and exclusively
regulated by federal law, including leasing of Indian land, providing
essential governmental services and Indian gaming.
34986312.PPTX
Akerman | 19
Fuel Tax
Seminole Tribe of Florida v. Stranburg, 750 F.3d 1238 (11th Cir. 2014),
cert. denied, U.S.S.C. No. 14-351 (2015).
 The district court had dismissed the Tribe’s complaint for a declaration that
state taxation of fuel used by the Tribe in the performance of onreservation governmental services is constitutionally prohibited and for an
injunction prohibiting the collection of that tax, on the grounds that it was
barred by the Rooker-Feldman Doctrine and the Tax Injunction Act.
 The Eleventh Circuit agreed that district court did not have jurisdiction in
an action seeking a declaration that the state fuel tax did not apply to fuel
that the Tribe purchased off-reservation but used on reservation, but not
because of Rooker-Feldman or the Tax Injunction Act. It determined the
action was barred by the Eleventh Amendment (which the district court did
not consider).
34986312.PPTX
Akerman | 20
Fuel Tax (Cont’d)
Seminole Tribe of Florida v. Stranburg, 750 F.3d 1238 (11th Cir.
2014), cert. denied, U.S.S.C. No. 14-351 (2015).
 Under Ex parte Young, 209 U.S. 123 (1908), the Eleventh Amendment
does not bar an action for prospective declaratory and injunctive relief. It
bars only suits for retrospective damages.
 Because Florida pre-collects the fuel tax, relief from the invalid tax is best
achieved through the repayment of pre-collected taxes. The state already
has a system in place for exactly that purpose.
 In a split panel decision, the Eleventh Circuit held that an injunction would
be tantamount to ordering the state to pay refunds in the future which it
said would constitute retrospective payments of money damages.
34986312.PPTX
Akerman | 21
Fuel Tax (Cont’d)
Seminole Tribe of Florida v. Stranburg, 750 F.3d 1238 (11th Cir. 2014),
cert. denied, U.S.S.C. No. 14-351 (2015).
 Under this holding a state can avoid suits challenging the constitutionality
of its tax scheme by simply pre-collecting the tax.
 The United States Supreme Court denied cert. on January 12, 2015.
 The Seminole Tribe has now brought a new suit for refund of taxes on fuel
used to perform on reservation governmental services in state court in a
different district.
34986312.PPTX
Akerman | 22
Fuel Tax (Cont’d)
Cougar Den Inc. v. Department of Licensing of Yakima County, Case
No. 14-2-03851-7, Washington Superior Court for Yakima County.
 The state court determined that the Yakima Tribe's treaty, which granted
the Tribe the "right to transport goods to market without restriction", barred
Washington from taxing fuel that a tribal fuel distributor imported from
Oregon for sale to on-reservation businesses.
34986312.PPTX
Akerman | 23
Fuel Tax (Cont’d)
Automotive United Traders Organization v. Washington, Case No.
89734-4 (Wash. August 27, 2015
 The state supreme court rejected an industry group's challenge to the
validity of various fuel tax agreements between the state and various
Indian tribes under which the state agreed to refund a portion of the fuel
taxes on fuel purchased by the Tribes.
34986312.PPTX
Akerman | 24
Property Tax
Poarch Band of Creek Indians v. Hildreth, Case # 1:15-cv-00277 (S.D.
Ala.).
 A County tax assessor in Alabama imposed property tax on property held
in trust for the Tribe, contending that the Secretary had no right to accept
the property into trust under Carcieri v. Salazar, 555 U.S. 379 (2009),
because the Tribe was not under federal authority in 1934 when the Indian
Reorganization Act was enacted. He argued that property improperly
accepted into trust is not exempt.
 Carcieri involved a timely filed petition by the state under the APA
challenging the Secretary's decision to accept the property into trust. The
Supreme Court held that the Secretary had no authority to accept property
into trust for a Tribe that was not federally recognized in 1934. The
property in Carcieri remained subject to local regulations.
34986312.PPTX
Akerman | 25
Property Tax (Cont’d)
Poarch Band of Creek Indians v. Hildreth, Case # 1:15-cv-00277 (S.D.
Ala.).
 The Tribe argued that, under Carcieri, challenges to the Secretary's
entrustment decisions must be made in a petition filed under the APA
within the 6 year statute of limitations.
 This was the holding in an earlier Alabama district court when it ruled
that the state could not halt gaming on the Tribe's land.
34986312.PPTX
Akerman | 26
Property Tax (Cont’d)
Poarch Band of Creek Indians v. Hildreth, Case # 1:15-cv-00277 (S.D.
Ala.).
 In Big Lagoon Rancheria v. California, Nos. 10-17808 and 10-17878,
en banc (9th Cir., June 4, 2015), the Ninth Circuit held that challenges
to the Secretary's entrustment decision must be made by filing petition
for review under the APA within the statute of limitations.
 The district court agreed with the Tribe and, on July 27, 2015, issued a
preliminary injunction prohibiting the assessor from levying the tax. The
assessor has taken an interlocutory appeal of that preliminary
injunction.
 In his counterclaim, the tax assessor added the Department of Interior
as a party. Initially, the court rejected his attempt to add it as a party, but
reversed the decision on August 20th.
34986312.PPTX
Akerman | 27
Property Tax (Cont’d)
Poarch Band of Creek Indians v. Hildreth, Case # 1:15-cv-00277 (S.D.
Ala.).
 Even if the Secretary was not legally permitted to accept the Tribe's
property into trust pursuant to §465, it would not necessarily mean that the
state could tax it.
 Unless the transfer from the Tribe to the United States were considered
null and void, the property would still be titled in the name of the United
States. States may not tax property owned by the United States. See,
Ala. Code 40-9-1(1).
34986312.PPTX
Akerman | 28
Property Tax (Cont’d)
Poarch Band of Creek Indians v. Hildreth, Case # 1:15-cv-00277 (S.D.
Ala.)
 §465 is not the only source of exemption. Any property in "Indian
Country", as defined in 18 U.S.C. §1151, is exempt under McClanahan
principles. See, Oklahoma v. Sac and Fox, 508 U.S. 114 (1993) and
Oklahoma v. Citizen Band of Potawatomi, Indian Tribe, 498 U.S. 505
(1991). The definition of Indian Country is arguably broader than the
definition of "Indian land" for purposes of §465. The property involved on
Poarch might satisfy the definition of "Indian Country" regardless of
whether the Secretary was authorized to accept it into trust.
34986312.PPTX
Akerman | 29
Sales/Use Tax
Flandreau Santee Sioux Tribe v. Gerlach, Case No. 4:14-cv-04171LLP (D.C. S.D., filed 11/18/14).
 The Tribe sued the state when it refused to reissue its liquor license for
failure to pay sales tax on liquor sales at its casino.
 The issue in this case is whether IGRA preempts state tax on non-gaming
goods and services, including fuel, food and beverages, that were sold to
non-Indians at its on-reservation entertainment facilities which include a
casino.
 The argument that IGRA generally preempts all state taxation at Indian
casinos was rejected by the Second Circuit in Mashantucket Pequot Tribe
v. Town of Ledyard, 722 F. 3d 457 (2013), where it upheld tangible
personal property tax on slot machines that were leased by non-Indians to
the Tribe for use in Indian gaming.
 This issue is similar to the issue in the Tulalip case, discussed next.
34986312.PPTX
Akerman | 30
Sales/Use Tax
Tulalip Tribes, et al v. Smith et al, Case No. 2:15-cv-00940 (W.D. Wash.,
June 12, 2015).
 The Tribes sued for declaratory and injunctive relief, contending that the
state is constitutionally prohibited from taxing any property, transactions or
activities of non-Indian lessees that take place in a tribally chartered
municipality located on the reservation, including sales of non-Indian
goods to non-Indian customers for use or consumption off-reservation, on
the grounds that the state provides no on-reservation services and the
state tax makes it impossible for the Tribes to impose their own taxes that
are needed to support the infrastructure and provide the governmental
services.
34986312.PPTX
Akerman | 31
Sales/Use Tax (Cont’d)
Tulalip Tribes, et al v. Smith et al, Case No. 2:15-cv-00940 (W.D. Wash.,
June 12, 2015).
 The Ninth Circuit rejected similar arguments in Gila River Indian
Community v. Waddell (“Waddell I"), 967 F. 2d 1404 (9th Cir. 1992); Gila
River Indian Community v. Waddell (“Waddell II"), 91 F. 3d 1232 (9th Cir.
1996); Salt River Pima-Maricopa Indian Community v. State of Arizona, 50
F. 3d 734 (9th Cir. 1995); and Yavapai-Prescott Indian Tribe v. Scott, 117
F. 3d 1107 (9th Cir. 1997).
 In the Waddell cases, the issue was whether the state could tax tickets
to on-reservation entertainment events conducted by a non-Indian
lessee. The Ninth Circuit said that the tax would be preempted under
Bracker only if the tax burdened an activity in which the Tribe had a
substantial interest. It said the Tribe had a substantial interest only in
those activities in which it materially participated. Accordingly, a tax on
entertainment activities would be preempted only if the Tribe materially
participated in those activities.
34986312.PPTX
Akerman | 32
Sales/Use Tax (Cont’d)
Tulalip Tribes, et al v. Smith et al, Case No. 2:15-cv-00940 (W.D. Wash.,
June 12, 2015).
 The issue in Salt River was whether the state could tax sales of non-
Indian goods by non-Indian businesses to non-Indian customers at an
on-reservation shopping mall that was operated by a non-Indian lessee.
The court held that the sales tax was not preempted because the Tribe
added no value to the goods sold. The goods were simply imported
onto the reservation and re-sold to non-Indians for use or consumption
off-reservation. The Ninth Circuit applied the same analysis to these
goods as the Supreme Court applied to cigarettes in Wash. v.
Confederated Tribes of Colville Indian Reservation, 447 U.S. 134
(1980), and Moe v. Confederated Salish & Kootenai Tribes of the
Flathead Reservation, 425 U.S. 463 (1976). The court noted that the
businesses that sold the goods were all managed and owned by nonIndians and the Tribe did not participate in any of their business
decisions or share in any of their profits.
34986312.PPTX
Akerman | 33
Sales/Use Tax (Cont’d)
Tulalip Tribes, et al v. Smith et al, Case No. 2:15-cv-00940 (W.D. Wash.,
June 12, 2015).
 In Yavapai-Prescott Indian Tribe v. Scott, 117 F. 3d 1107 (9th Cir. 1997),
the state was allowed to tax rentals of rooms at an on-reservation hotel
operated by a non-Indian lessee because the Tribe did not participate
the hotel business.
 In California v. Cabazon, 480 U.S. 202 (1987), the state was held to
have no right to regulate on-reservation gaming activities after the
Court distinguished Colville on the grounds that "the Tribes are not
merely importing a product onto the reservations for immediate resale
to non-Indians. They have built modern facilities which provide
recreational opportunities and ancillary services to their patrons, who
do not simply drive onto the reservations, make purchases and depart,
but spend extended periods of time there enjoying the services the
Tribes provide. . . [T]he Cabazon . . . Bands are generating value on
the reservations through activities in which they have a substantial
interest."
34986312.PPTX
Akerman | 34
Sales/Use Tax (Cont’d)
Tulalip Tribes, et al v. Smith et al, Case No. 2:15-cv-00940 (W.D.
Wash., June 12, 2015).
 The Supreme Court has repeatedly held that an otherwise valid state tax
is not rendered invalid simply because it makes it more difficult for the
Tribe to impose its own taxes. See, Colville (where the Tribe's taxes did
not deprive the state of the right to impose its cigarette taxes on onreservation sales to non-Indians), and Cotton Petroleum. It has also held
the there need not be any relationship between the state tax imposed and
the value of the state services provided.
 On August 4, 2015, the United States moved to intervene in the case.
That motion was granted on September 1, 2015.
34986312.PPTX
Akerman | 35
Sales/Use Tax (Cont’d)
Tulalip Tribes, et al v. Smith et al, Case No. 2:15-cv-00940 (W.D.
Wash., June 12, 2015).
 The United States contends that state taxation of on-reservation sales of
non-Indian goods by non-Indian lessees to non-Indian customers for use
or consumption off-reservation is prohibited where the state provides few
if any services in respect to the on-reservation activities and it inhibits the
Tribe’s ability to impose its own taxes. It contended that the state tax is
preempted by federal law, violates the Tribe’s sovereign rights to selfgovernment and violates the Indian Commerce Clause.
 The United States has not alleged that the state tax burdens an activity
that is pervasively and exclusively regulated by federal law. Consequently,
the “narrowly tailored” standard does not apply. Instead, it has engaged in
balancing the strengths of the federal and tribal interests against those of
the state.
34986312.PPTX
Akerman | 36
Sales/Use Tax (Cont’d)
Tulalip Tribes, et al v. Smith et al, Case No. 2:15-cv-00940 (W.D.
Wash., June 12, 2015).
 Historically, this has been a very low threshold that the state must satisfy.
See, Mashantucket Pequot Tribe v. Town of Ledyard, 722 F. 3d 457 (2013)
(where the state’s interest in applying its tax uniformly across the state
was held to be an important interest). The United States contends that the
Tribes have a strong interest in the sale of non-Indian goods by nonIndians to non-Indians for use or consumption off-reservation because of
its investment in the facilities in which the sales take place and the
governmental services it provides to lessees and their customers.
 On August 17th, the Washington Department of Revenue filed a brief in
opposition to the United States’ motion to intervene and the United States
responded on August 21st.
34986312.PPTX
Akerman | 37
Sales/Use Tax (Cont’d)
Tulalip Tribes, et al v. Smith et al, Case No. 2:15-cv-00940 (W.D. Wash.,
June 12, 2015).
 Under Waddell, Salt River, Yavapai-Prescott, goods to which the Tribe
added value (e.g., meals or mixed drinks) would arguably be exempt
from state tax.
 Under Cabazon, goods to which the Tribe does not add value, but
which are consumed on the reservation in connection with the
entertainment activities that the Tribe provides or in which it participates
(e.g., sodas, beer and wine) would arguably be exempt from state tax.
 On-reservation services the Tribe provides or in which it participates
(e.g., hotel rooms) would arguably be exempt from state tax.
34986312.PPTX
Akerman | 38
Sales/Use Tax (Cont’d)
Tulalip Tribes, et al v. Smith et al, Case No. 2:15-cv-00940 (W.D. Wash.,
June 12, 2015).
 However, the state would arguably have the right to tax any goods that
are simply imported onto the reservation and sold to non-Indians for
use or consumption off-reservation.
34986312.PPTX
Akerman | 39
Summons Enforcement
U.S. v. Billie, Case # 14-13843, (11th Cir. June 1, 2015).
 The issue in this case was whether tribal sovereign immunity precludes
enforcement of an administrative summons that is issued by the IRS for
records of the Tribe. The court held that it does not because the United
States is a superior sovereign.
34986312.PPTX
Akerman | 40
Tribal Liquor Tax
Smith v. Parker, Case 996 F. Supp. 2d 815 (D. Neb. 2014).
 The Omaha Tribe asserted authority to tax liquor sales on reservation land
that it sold to non-members with the consent of Congress. The issue was
whether that land was still considered part of the reservation and therefore
under the Tribe's taxing jurisdiction. The district court held that, under
Solem v. Bartlett, 465 U.S. 584 (1977), once land has been designated
reservation land, it remains reservation land until Congress has clearly
indicated otherwise.
 The Eight Circuit affirmed, Case # 14-1642, on December 19, 2014.
 On June 5, 2015, Nebraska filed a petition for certiorari with the U.S.
Supreme Court.
 On August 21st, the United States urged the Court to reject the petition.
34986312.PPTX
Akerman | 41
Resource Indemnity Trust and
Ground Water Assessment Tax
Westmoreland Resources, Inc. v. Montana, Case # DA 13-0547
(Montana, August 5, 2014).
 In computing the Resource Indemnity Trust and Ground Water
Assessment Tax owed by a non-Indian company for coal mined on Indian
land, the issue was whether Montana law, which allows a deduction for
any taxes paid to the federal, state or local government, permits a
deduction for the severance and gross proceeds taxes that are paid to the
Tribe. The Montana Supreme Court held that it does not.
.
34986312.PPTX
Akerman | 42
Severance Tax
Anadarko Petroleum Corporation and Kerr MeGee Oil & Gas Onshore,
L.P. v. Utah, Case No. 20130192, Sup. Ct. of Utah, January 30, 2015.
 In computing the value of its oil and gas interests for state severance tax
purposes, the issue was whether royalties paid to the Indian tribe are
deductible. The Utah Supreme Court held that they are.
34986312.PPTX
Akerman | 43