Flandreau Santee Sioux Tribe, a federally-recognized Indian Tribe Plaintiff - Appellee
Kristi Noem, Governor of the State of South Dakota, et al.[*] Defendants - Appellants
Submitted: February 13, 2019
from United States District Court for the District of South
Dakota - Sioux Falls
LOKEN, COLLOTON, and KELLY, Circuit Judges.
Flandreau Santee Sioux Tribe is a federally recognized tribe
that owns and operates the Royal River Casino & Hotel
(the "Casino") and the First American Mart (the
"Store") on the Flandreau Indian Reservation in
Moody County, South Dakota. The majority of patrons at the
Casino and the Store are not members of the Tribe. The State
of South Dakota (the "State") imposes a use tax on
goods and services purchased within the State. See
S.D.C.L. 10-46-2. When the Tribe failed to remit the use tax
on goods and services sold to nonmembers at the Casino and at
the Store, the State's Department of Revenue denied the
Tribe renewals of alcoholic beverage licenses issued to the
Casino and the Store. The South Dakota Office of Hearing
Examiners upheld the Department's decision.
Tribe filed this action in the district court in November
2014, alleging, inter alia, (i) that imposing the
use tax on purchases by nonmembers on reservation land is
preempted by the Indian Gaming Regulatory Act
("IGRA") because all activity under the Royal River
Casino name is "gaming activity"; (ii) that the use
tax remittance requirement infringes inherent tribal
sovereignty and violates federal common law; and (iii) that
conditioning renewal of the Tribe's alcohol licenses on
use tax remittance violates 18 U.S.C. § 1161. The
parties stipulated that the State would treat the alcohol
licenses as valid pending a decision on the merits.
on cross-motions for summary judgment, the district court
held that IGRA expressly preempts imposing the use tax on
nonmember purchases throughout the Casino, but does not
preempt imposing the tax on nonmember purchases of goods and
services at the Store. However, the court concluded, the
State may not condition renewal of alcohol beverage licenses
on the Tribe's remittance of use taxes imposed on
nonmember purchases at the Store. The State appeals, arguing
(i) federal law does not preempt imposition of its use tax on
nonmember purchases at the Casino of goods and services the
parties rather vaguely define as non-gaming "amenities,
" and (ii) the State may condition renewal
of alcoholic beverage licenses on the Tribe's failure to
remit validly imposed use taxes. Reviewing the grant of
summary judgment de novo, and the facts in the light
most favorable to the State, we disagree with the first
contention but agree with the second. Accordingly, we affirm
in part, reverse in part, and remand for determination of the
appropriate remedy. See Casino Res. Corp. v. Harrah's
Entm't, Inc., 243 F.3d 435, 437 (8th Cir. 2001)
(standard of review).
The State Tax Preemption Issue.
a federal statute permitting it, "a State is without
power to tax reservation lands and reservation Indians."
Okla. Tax Comm'n v. Chickasaw Nation, 515 U.S.
450, 458 (1995) (quotation omitted). If the legal incidence
of a state tax falls on a Tribe or its members for sales made
within Indian country, like the state motor fuels excise tax
at issue in Chickasaw Nation, the tax is
categorically unenforceable, without regard to its
"economic realities." Id. at 458-60. In
this case, however, it is undisputed that the legal incidence
of South Dakota's use tax falls on nonmember purchasers
of goods and services at the Casino and at the
Store. Thus, the per se rule against
state taxation of reservation Indians does not apply.
State seeks to impose a nondiscriminatory tax on the actions
of nonmembers on tribal land, its authority is not
categorically limited. Instead, the Supreme Court applies a
flexible analysis to determine whether state taxation of
nonmembers on Indian land is proper, often called the
"Bracker balancing test," a reference to
the Court's decision in White Mountain Apache Tribe
v. Bracker, 448 U.S. 136 (1980). Each case
"requires a particularized examination of the relevant
state, federal, and tribal interests." Ramah Navajo
School Bd., Inc. v. Bureau of Revenue of N.M., 458 U.S.
832, 838 (1982). In most cases, because Indian tribes are
dependent sovereigns, the issue turns on whether federal
legislation has preempted state taxation of nonmember
activity on Indian land, which is "primarily an exercise
in examining congressional intent." Cotton Petroleum
Corp. v. New Mexico, 490 U.S. 163, 176 (1989). However,
because of the long-recognized importance of tribal
sovereignty, "questions of pre-emption in this area are
not resolved by reference to standards of pre-emption that
have developed in other areas of the law, and are not
controlled by 'mechanical or absolute conceptions of
state or tribal sovereignty.'" Cotton, 490
U.S. at 176, quoting Bracker, 448 U.S. at 145.
Instead, Indian tax immunity jurisprudence relies heavily on
the "significant geographical component of tribal
sovereignty," which "provides a backdrop against
which the applicable treaties and federal statutes must be
read." Wagnon v. Prairie Band Potawatomi
Nation, 546 U.S. 95, 112 (2005) (cleaned up). Federal
preemption is not limited to cases in which Congress has
expressly preempted the state tax. Cotton, 490 U.S.
at 176-77. Generally, "a State seeking to impose a tax
on a transaction between a tribe and nonmembers must point to
more than its general interest in raising revenues."
New Mexico v. Mescalero Apache Tribe, 462 U.S. 324,
these principles, the Supreme Court has upheld some state
taxes on nonmembers engaging in commercial activities on
Indian lands, and held that other taxes were preempted. In
Bracker, for example, the Court held that a
State's use fuel tax on a nonmember's logging
activity on tribal land was preempted by federal statutes and
programs comprehensively encouraging and regulating logging
on federal lands held in trust for Indians. In
Ramah, the Court held that a State's gross
receipts tax on a nonmember's activity in building a
reservation school was preempted by the comprehensive federal
regulation and financing of Indian education -- the tax was
based on a general desire to increase state revenues and
provided no specific offsetting benefit to Indian education.
By contrast, in Cotton, the Court upheld a
State's severance tax on oil and gas produced by
nonmember lessees from wells on reservation land because
state regulation provided substantial services to the tribe
and the lessees, no economic burden fell on the tribe,
federal regulation was extensive but not exclusive, and there
was no evidence the tax affected the tribe's ability to
attract lessees. And in Washington v. Confederated Tribes
of Colville Indian Reservation, 447 U.S. 134 (1980), the
Court upheld both the tribe's sovereign power to
tax cigarette sales to nonmembers on the reservation, and a
state excise tax on vendors who provided cigarettes for
on-reservation sales to nonmembers. The value of Indian sales
to nonmembers was not generated by tribal activities, the
Court explained, only by the exemption of such sales from
state tax; neither principles of federal Indian law nor any
federal statute preempted the State from taxing this
"artificial competitive advantage over all other
businesses in a State." Id. at 155.
case, the federal legislation most relevant to the use tax at
issue is the Indian Gaming Regulatory Act, 25 U.S.C.
§§ 2701 et seq. In California v.
Cabazon Band of Mission Indians, 480 U.S. 202 (1987),
the Supreme Court held that a California law limiting bingo
could not be applied to high stakes tribal bingo and card
games played predominantly by nonmembers at reservation
facilities. The facilities were financed and the
gaming approved by the Secretary of the Interior to promote
tribal economic development. The Court concluded that the
federal and tribal interests in promoting Indian gaming
outweighed the State's interest in preventing organized
crime. 480 U.S. at 207-22. In response, States sought federal
legislation permitting state regulation of tribal gaming.
Congress passed IGRA the next year "to provide a
statutory basis for the operation of gaming by Indian tribes
as a means of promoting tribal economic development,
self-sufficiency, and strong tribal governments," and to
establish an "independent Federal regulatory authority
for gaming on Indian lands, [and] Federal standards for
gaming on Indian lands." 25 U.S.C. § 2702(1), (3).
IGRA sought to balance the competing federal, state, and
tribal interests by giving each sovereign a role in the
divides gaming into three classes of increasing regulatory
significance. Class I games -- social games and traditional
forms of Indian gaming -- are left to the exclusive
jurisdiction of the Indian tribes. See 25 U.S.C.
§§ 2703(6), 2710 (a)(1). Tribes may engage in Class
II games -- most forms of bingo and card games -- if they are
authorized by and played in conformity with state law,
subject to federal licensing and extensive regulation by the
National Indian Gaming Commission. See 25 U.S.C.
§§ 2703(7), 2710 (b)-(c). All other forms of gaming
are Class III games, which include casino table games and
slot machines, the forms primarily involved in this case.
See § 2703(8). A tribe may conduct Class III
gaming on Indian lands only pursuant to, and in compliance
with, a federally approved compact that the tribe has
negotiated with the surrounding State. See §
2710(d)(1)(C); Michigan v. Bay Mills Indian Cmty.,
572 U.S. 782, 785 (2014).
receiving a request to negotiate a tribal-state compact
governing Class III gaming activity "shall negotiate
with the Indian tribe in good faith to enter into such a
compact." 25 U.S.C. § 2710(d)(3)(A). A tribal-state
compact negotiated under subparagraph (A) "may
include" provisions relating to six specific subjects,
including two relating to State and tribal fees and taxation:
(iii) the assessment by the State of such [gaming] activities
in such amounts as are necessary to defray the costs of
regulating such activity;
(iv) taxation by the Indian tribe of such activity in amounts
comparable to amounts assessed by the State for ...