Oklahoma Tax Comm'n v. Chickasaw Nation

• Decision Date: 14 June 1995
• Docket Number: 94771
• Parties: OKLAHOMA TAX COMMISSION, Petitioner, v. CHICKASAW NATION
• Court: U.S. Supreme Court

515 U.S. 450

115 S.Ct. 2214

132 L.Ed.2d 400

OKLAHOMA TAX COMMISSION, Petitioner,

v CHICKASAW NATION.

No. 94-771.

Supreme Court of the United States

Argued April 24, 1995.

Decided June 14, 1995.

Syllabus ^*

Respondent Chickasaw Nation (Tribe) filed this action to stop Oklahoma from enforcing several state taxes against the Tribe and its members. Pertinent here, the District Court held for the State on the motor fuels tax question, and largely for the Tribe on the income tax issue. The Court of Appeals ruled for the Tribe and its members on both issues, determining: (1) that, without congressional authorization, the State could not impose a motor fuels tax on fuel sold by the Tribe at its retail stores on tribal trust land; and (2) that the State could not tax the wages of tribal members employed by the Tribe, even if they reside outside Indian country.

Held:

1. Oklahoma may not apply its motor fuels tax, as currently designed, to fuel sold by the Tribe in Indian country. Pp. ____.

(a) The Court declines to address the State's argument, raised for the first time in its brief on the merits, that the Hayden-Cartwright Act expressly authorizes States to tax motor fuel sales on Indian reservations. Pp. ____.

(b) When a State attempts to levy a tax directly on Indian tribes or their members inside Indian country, the proper approach is not, as the State contends, to weigh the relevant state and tribal interests. Rather, a more categorical approach should be employed: Absent clear congressional authorization, a State is without power to tax reservation lands and reservation Indians. The initial and frequently dispositive question in Indian tax cases, therefore, is who bears the legal incidence of the tax, for if it is a tribe or tribal members inside Indian country, the tax cannot be enforced absent federal legislation permitting the impost. The inquiry proper in this case is whether the fuels tax rests on the Tribe as retailer, or on the wholesaler who sells to the Tribe or the consumer who buys from the Tribe. Judicial focus on legal incidence accords due deference to Congress' lead role in evaluating state taxation as it bears on Indian tribes and tribal members. A "legal incidence" test, furthermore, provides a reasonably bright-line standard accommodating the reality that tax administration requires predictability. And a State unable to enforce its tax because the legal incidence falls on tribes or on Indians within Indian country, generally is free to amend its law to shift the tax's legal incidence. Pp. ____.

(c) The Court of Appeals' ruling that the fuels tax's legal incidence rests on the retailer is reasonable. The state legislation does not expressly identify who bears the tax's legal incidence. Nor does it contain a provision requiring that the tax be passed on to consumers. In the absence of such dispositive language, the question is one of fair interpretation of the taxing statute as written and applied. In this case, the fuels tax law's language and structure indicate that the tax is imposed on fuel retailers. Pp. ____.

2. Oklahoma may tax the income of tribal members who work for the Tribe but reside in the State outside Indian country. The Court of Appeals' holding to the contrary conflicts with the well established principle of interstate and international taxation that a jurisdiction may tax all the income of its residents, even income earned outside the taxing jurisdiction. The exception that the Tribe would carve out of the State's taxing authority gains no support from the rule that Indians and tribes are generally immune from state taxation, as this principle does not operate outside Indian country. In addition, the Treaty of Dancing Rabbit Creek, which guarantees the Tribe and its members that "no Territory or State shall ever have a right to pass laws for the [Tribe's] government," provides only for the Tribe's sovereignty within Indian country and does not confer super-sovereign authority to interfere with another jurisdiction's sovereign right to tax income, from all sources, of those who choose to live within that jurisdiction's limits. Nor can the Treaty be read to incorporate the repudiated doctrine that an income tax imposed on government employees should be treated as a tax on the government. The Treaty's signatories likely gave no thought to a State's authority to tax income of tribal members living in the State's domain, since the Treaty's purpose was to move the Tribe to unsettled land not then within a State. Moreover, if that doctrine were to apply, it would require exemption for nonmember as well as tribal member employees of the Tribe. Pp. ____.

31 F.3d 964 (CA10 1994), affirmed in part, reversed in part, and remanded.

GINSBURG, J., delivered the opinion for a unanimous Court with respect to Parts I and II, and the opinion of the Court with respect to Part III, in which REHNQUIST, C.J., and SCALIA, KENNEDY, and THOMAS, JJ., joined. BREYER, J., filed an opinion concurring in part and dissenting in part, in which STEVENS, O'CONNOR, and SOUTER, JJ., joined.

Charles Rothfeld, Washington, DC, for petitioner.

Dennis W. Arrow, Oklahoma City, OK, for respondent.

Paul A. Engelmayer, Washington, DC, for U.S., as amicus curiae by special leave of Court.

Justice GINSBURG delivered the opinion of the Court.

This case concerns the taxing authority of the State of Oklahoma over the Chickasaw Nation (Tribe) and its members.¹ We take up two questions: (1) May Oklahoma impose its motor fuels excise tax upon fuel sold by Chickasaw Nation retail stores on tribal trust land; (2) May Oklahoma impose its income tax upon members of the Chickasaw Nation who are employed by the Tribe but who reside in the State outside Indian country.²

We hold that Oklahoma may not apply its motor fuels tax, as currently designed, to fuel sold by the Tribe in Indian country. In so holding, we adhere to settled law: when Congress does not instruct otherwise, a State's excise tax is unenforceable if its legal incidence falls on a Tribe or its members for sales made within Indian country. We further hold, however, that Oklahoma may tax the income (including wages from tribal employment) of all persons, Indian and non-Indian alike, residing in the State outside Indian country. The Treaty between the United States and the Tribe, which guarantees the Tribe and its members that "no Territory or State shall ever have a right to pass laws for the government of" the Chickasaw Nation, does not displace the rule, accepted interstate and internationally, that a sovereign may tax the entire income of its residents.

I

The Chickasaw Nation, a federally recognized Indian tribe, commenced this civil action in the United States District Court for the Eastern District of Oklahoma, to stop the State of Oklahoma from enforcing several state taxes against the Tribe and its members.³ Pertinent here, the District Court, ruling on cross-motions for summary judgment, held for the State on the motor fuels tax imposition and largely for the Tribe on the income tax issue. The Court of Appeals for the Tenth Circuit ruled for the Tribe and its members on both issues: it held that the State may not apply the motor fuels tax to fuel sold by the Tribe's retail stores, and, further, that the State may not tax the wages of members of the Chickasaw Nation who work for the Tribe, even if they reside outside Indian country. 31 F.3d 964 (1994).

Concerning the motor fuels tax, the Tenth Circuit disapproved the District Court's "balancing of the respective tribal and state interests" approach. Id., at 972. The legal incidence of the tax, the Court of Appeals ruled, is the key concept. That incidence, the Tenth Circuit determined, falls directly on fuel retailers—here, on the Tribe, due to its operation of two convenience stores that sell fuel to tribal members and other persons. Oklahoma's imposition of its fuels tax on the Tribe as retailer, the Court of Appeals concluded, "conflicts with . . . the traditional scope of Indian sovereign authority." Ibid. Because the State asserted no congressional authorization for its exaction, the Tenth Circuit declared the fuels tax preempted.

Oklahoma's income tax, in the Court of Appeals' view, could not be applied to any tribal member employed by the Tribe; ⁴ residence, the Tenth Circuit said, was "simply not relevant to [its] determination." Id., at 979. The Court of Appeals relied on the provision of the Treaty of Dancing Rabbit Creek, Sept. 27, 1830, Art. IV, 7 Stat. 333, 334, that "no Territory or State shall ever have a right to pass laws for the government of the [Chickasaw] Nation of Red People and their descendants." To this treaty language, the Tenth Circuit applied "the general rule that '[d]oubtful expressions are to be resolved in favor of' the Indians." 31 F.3d, at 978 (quoting McClanahan v. Arizona State Tax Comm'n, 411 U.S. 164, 174, 93 S.Ct. 1257, 1263, 36 L.Ed.2d 129 (1973)). The Court of Appeals also noted that it had endeavored to "rea[d] the treaty as the Indians [who signed it] would have understood it." 31 F.3d, at 979.

We granted the State's petition for certiorari, 513 U.S. ----, 115 S.Ct. 714, 130 L.Ed.2d 621 (1995), and now (1) affirm the Court of Appeals' judgment as to the motor fuels tax, and (2) reverse that judgment as to the income tax applied to earnings of tribal members who work for the Tribe but reside in the State outside Indian country.

II

The Tribe contends, and the Tenth Circuit held, that Oklahoma's fuels tax ⁵ is levied on retailers, not on distributors or consumers. The respect due to the Chickasaw Nation's sovereignty, the Tribe maintains, means Oklahoma—absent congressional permission—may not collect its tax for fuel supplied to and sold by the Tribe at its convenience stores. In support of the tax immunity it asserts, the Tribe recalls our reaffirmations to this effect: "The Constitution vests the Federal Government with exclusive authority over...