Chickasaw Nat'l v. U.S.A.
| Decision Date | 05 April 2000 |
| Docket Number | No. 99-7042,99-7042 |
| Citation | 208 F.3d 871 |
| Parties | (10th Cir. 2000) THE CHICKASAW NATION, Plaintiff-Appellant, v. UNITED STATES OF AMERICA, Defendant-Appellee |
| Court | U.S. Court of Appeals — Tenth Circuit |
APPEAL FROM UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF OKLAHOMA (D.C. No. 97-CV-511-P)
[Copyrighted Material Omitted] Graydon Dean Luthey, Jr., of Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., Tulsa, Oklahoma, (Bob W. Rabon, of Rabon, Rabon & Wolf, Hugo, Oklahoma, with him on the briefs), for the appellant.
Charles F. Marshall, Tax Division, Department of Justice, Washington, D.C., (Ann B. Durney and Michelle B. O'Connor on the brief), for the appellee.
Before BRISCOE, ANDERSON, and LUCERO, Circuit Judges.
The Chickasaw Nation (Nation) appeals from the district court's entry of judgment in favor of defendant United States on the Nation's claim for a refund of federal wagering and occupational excise taxes. The Nation alleges that these taxes were unlawfully assessed against its pull-tab gaming activities pursuant to 26 U.S.C. 4401 and 4411. We exercise jurisdiction pursuant to 28 U.S.C. 1291 and affirm.
The Nation is a Native American Indian Tribe with its principal place of business in Ada, Oklahoma. Doing business under the names Chickasaw National Central Business Services and Chickasaw Enterprises, the Nation operates a number of for-profit business activities within the State of Oklahoma including gaming centers, tobacco shops, convenience stores, gas stations, a motel, a restaurant, an accounting firm, a radio station, an internet service provider, and a computer store. All of the businesses are open to and utilized by members of the Nation and the general public.
As part of its business activities, the Nation sells "pull-tabs" at a variety of locations, including its gaming centers and convenience stores. A pull-tab is a two inch by four inch card or ticket containing five windows covered with tabs. Various symbols are found under the tabs. The face of the pull-tab discloses the combination of symbols that results in a winning ticket. To play a pull-tab, a player simply pulls back each tab and checks the symbols found under the tabs to ascertain whether he holds a winning ticket. Depending upon the point of sale, players can purchase pull-tabs from a clerk or directly from a dispensing machine. Each pull-tab typically costs between 25 cents and one dollar, and typically allows a player to win between 25 cents and $2500. If a player purchases a winning pull-tab, he can redeem the award by presenting the pull-tab to a cashier at one of the points of sale. Although players frequently present winning tickets for payment on the date of purchase, it is not uncommon for them to claim their awards later.
The Nation purchases pull-tabs in series of 24,000 tickets. Each ticket in a series contains the same serial number. The ticket manufacturer prints each ticket in a series with a winning or losing combination of symbols. A fixed number of tickets in each series have a winning combination of symbols, and those tickets are distributed randomly throughout the series. It always takes the Nation more than one business day to sell an entire series of pull-tabs. Each ticket also indicates how many winners there will be in each series (e.g., four $500 winners, four $75 winners, etc.). Once all of the tickets in a series are sold to players, the series is officially closed and winning tickets are no longer honored.
The dispute between the Nation and the United States involves whether the Nation must pay wagering excise taxes and federal occupational taxes. During the time period relevant to this lawsuit, the Nation generally withheld income taxes from pull-tab players' winnings in accordance with 26 U.S.C. 3402(q). The Nation also filed with the Internal Revenue Service (IRS) information returns concerning player winnings . The Nation did not, however, pay federal wagering excise taxes or federal occupational taxes in connection with its pull-tab sales. After conducting an audit, the IRS determined that the Nation was subject to federal wagering excise taxes under 26 U.S.C. 4401(a)(1) for the period from August 1991 through August 1994, and federal occupational taxes under 26 U.S.C. 4411 for the period from January 1993 through September 1994. On July 1, 1996, the Nation paid a total of $1,368.93 for federal wagering excise and occupational taxes determined by the IRS to be owing for July 1993. The Nation simultaneously filed with the IRS a claim for a refund of this amount.
The Nation subsequently waived its right to a statutory notice of disallowance of its refund claim and, on September 5, 1997, filed this action for refund. The United States counterclaimed for (1) the unpaid portion ($41,570.12) of the wagering excise taxes and interest assessed against the Nation for the period from August 1991 through August 1994, and (2) the unpaid portion ($1,782.48) of the occupational taxes and interest assessed against the Nation for the period from January 1993 through September 1994. The parties eventually filed cross-motions for summary judgment, and agreed that if the district court resolved the case on summary judgment, neither would "raise on appeal that a controverted material fact exist[ed] which preclude[d] summary judgment." App. at 260 (pretrial order). On December 30, 1998, the district court entered judgment in favor of the United States.
We review de novo the district court's grant of summary judgment, applying the same standard as the district court under Federal Rules of Civil Procedure 56(c). See Simms v. Oklahoma ex rel. Dep't of Mental Health & Substance Abuse Servs., 165 F.3d 1321, 1326 (10th Cir.), cert. denied, 120 S. Ct. 53 (1999). Summary judgment is appropriate where no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). When reviewing a grant of summary judgment, we view the evidence and draw reasonable inferences therefrom in the light most favorable to the nonmoving party. Simms, 165 F.3d at 1326. Questions of law relevant to the summary judgment are reviewed de novo. C-470 Joint Venture v. Trizec Colorado, Inc., 176 F.3d 1289, 1291 (10th Cir. 1999).
The Nation attacks four aspects of the district court's decision. Specifically, the Nation contends that (1) pull-tabs do not involve a taxable wager, as defined in 26 U.S.C. 4421, (2) it is not a "person" subject to federal wagering excise taxes, (3) the Indian Gaming Regulatory Act (IGRA) demonstrates Congress' intent not to subject Indian gaming activities to federal wagering excise taxes, and (4) the self-government guarantee of the 1855 treaty between the United States and the Nation precludes imposition of the taxes in question. We consider these arguments in order.
Do pull-tabs constitute a taxable wager under 26 U.S.C. 4421?
The initial question is whether the purchase of one of the Nation's pull-tab cards constitutes a "wager" for purposes of the IRC. Section 4401 of the IRC provides in pertinent part:
(a) Wagers.
(1) State authorized wagers.There shall be imposed on any wager authorized under the law of the State in which accepted an excise tax equal to 0.25 percent of the amount of such wager.
* * *
(b) Amount of wager.In determining the amount of any wager for the purposes of this subchapter, all charges incident to the placing of such wager shall be included; except that if the taxpayer establishes, in accordance with regulations prescribed by the Secretary, that an amount equal to the tax imposed by this subchapter has been collected as a separate charge from the person placing such wager, the amount so collected shall be excluded.
(c) Persons liable for tax.Each person who is engaged in the business of accepting wagers shall be liable for and shall pay the tax under this subchapter on all wagers placed with him. Each person who conducts any wagering pool or lottery shall be liable for and shall pay the tax under this subchapter on all wagers placed in such pool or lottery. Any person required to register under section 4412 who receives wagers for or on behalf of another person without having registered under section 4412 the name and place of residence of such other person shall be liable for and shall pay the tax under this subchapter on all such wagers received by him.
26 U.S.C. 4401. The term "wager" is defined under the IRC as including "any wager placed in a lottery conducted for profit."1 26 U.S.C. 4421(1)(C). In turn, the term "lottery" is defined under the IRC to include "the numbers game, policy and similar types of wagering," but does not include "(A) any game of a type in which usually (i) the wagers are placed, (ii) the winners are determined, and (iii) the distribution of prizes or other property is made, in the presence of all persons placing wagers in such game . . . ." 26 U.S.C. 4421(2).
In asserting that the purchase of a pull-tab card does not constitute a "wager," the crux of the Nation's argument is that its pull-tab games fall outside the IRC's definition of "lottery." The Nation contends that "the game involves one bet by one player only," "[e]ach bet is a new game with a new pull-tab card," "[t]he player is the only person playing the game when it is determined whether he wins or loses," and "[t]he prize, if he wins one, is distributed in his presence immediately." Pl.'s Opening Br., at 28. Thus, the Nation argues, the pull-tab games fall within the statutory exclusion from the definition of "lottery" set forth in 26 U.S.C. 4421(2)(A).
As the Nation's arguments make obvious, the critical question is whether the Nation's pull-tab games can legitimately be characterized as a "lottery" under 4421(2)(A) of the IRC. The starting point for answering this question is the plain language of 4421(2)(A). See Ramah Navajo Chapter v. Lujan, 112 F.3d 1455, 1460 (...
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