Chickasaw Nation v. State of Okl. ex rel. Oklahoma Tax Com'n, 92-7117

• Citation: 31 F.3d 964
• Decision Date: 29 July 1994
• Docket Number: No. 92-7117,92-7117
• Parties: CHICKASAW NATION, Plaintiff-Appellant, v. STATE OF OKLAHOMA ex rel. OKLAHOMA TAX COMMISSION, Robert E. Anderson, Chairman of the Tax Commission, Robert L. Wadley, Vice-Chairman of the Tax Commission, and Don Kilpatrick, Secretary of the Tax Commission, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 964

31 F.3d 964

CHICKASAW NATION, Plaintiff-Appellant, v. STATE OF OKLAHOMA ex rel. OKLAHOMA TAX COMMISSION, Robert E.

Anderson, Chairman of the Tax Commission, Robert L. Wadley,

Vice-Chairman of the Tax Commission, and Don Kilpatrick,

Secretary of the Tax Commission, Defendants-Appellees.

No. 92-7117.

United States Court of Appeals, Tenth Circuit.

July 29, 1994.

Bob Rabon of Rabon, Wolf & Rabon, Hugo, OK, for plaintiff-appellant.

David Hudson, General Counsel (with David Allen Miley, Asst. Gen. Counsel, on the brief), Oklahoma Tax Com'n, Oklahoma City, OK, for defendants-appellees.

Before ANDERSON, McKAY, and EBEL, Circuit Judges.

McKAY, Circuit Judge.

Appellant Chickasaw Nation ("Tribe" or "Chickasaw"), a federally recognized Indian tribe, challenged the State of Oklahoma's authority to impose certain taxes on sales, income, motor fuel and 3.2% beer to transactions occurring in Chickasaw Indian country. The case was submitted to the district court upon stipulated facts on cross motions for summary judgment. The Chickasaw appeal from the district court's grant of summary judgment on each of the issues in favor of the State of Oklahoma and from that court's denial of the Chickasaw's cross-motion for summary judgment.

I. FACTS

In submitting the case to the district court for rulings on the cross-motions for summary judgment, the parties stipulated, inter alia, that

B. Plaintiff [the Tribe] owns and operates retail sales outlets on lands held in trust for it by the United States on which it sells tobacco products, motor fuel, beer and other goods. It does not collect sales taxes on its sales to tribal or non-tribal members but is required to pay sales taxes on motor fuel products and beer when it purchases them from its wholesale vendors at said retail locations. Defendants [the State] impose sales taxes on retail purchases of goods made by plaintiff where defendants contend such goods are used for "proprietary" as opposed to "governmental" purposes and when defendant contends the goods are purchased for resale to non-tribal members.

C. Plaintiff has approximately 275 tribal member and non-tribal member employees who earn their wages on tribal trust lands. Defendants are collecting state income taxes on the earnings of said employees.

(Amended Pre-Trial Order at 2-3, Appellant's App. Doc. 11.)

We review the grant or denial of summary judgment de novo, applying the same legal standard used by the district court. Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir.1990). We view the record in the light most favorable to the party opposing the grant of summary judgment, here, the Tribe, to determine whether there is any genuine issue of material fact remaining for trial. Russillo v. Scarborough, 935 F.2d 1167, 1170 (10th Cir.1991); Deepwater Invs., Ltd. v. Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (10th Cir.1991).

In their Amended Joint Pretrial Order, the parties stipulated that the sole issues of "fact" remaining to be litigated were as follows:

A. The Chickasaw Nation is beneficiary to treaties with the United States which agree that no state may pass laws for it. (Defendant contends that this is a question of law and not an issue of fact.)

B. Defendants have attempted to and are imposing state tax laws on the plaintiff tribal government and its constitutents [sic] in violation of said treaties, congressional enactments and federal policy. Such conduct by the defendant is preempted by federal law and infringes on plaintiff's right to self-government and frustrates federal policy. (Defendant contends that this is a question of law and not an issue of fact.)

(Amended Pre-Trial Order at 4). With respect to the first issue, the Chickasaw point to treaty language stating that "no territory or state shall ever have a right to pass laws for the government of the [Chickasaw] or their descendants." ¹ The State responds that the treaties cited by the Chickasaw are not relevant because they were later abrogated by acts of Congress. The district court did not address the issue, finding that the taxes did not abridge the Tribe's right of self-government and thus did not violate the treaty language. We agree with the State that both the continuing viability of the treaties cited by the Chickasaw and the interpretations thereof are questions of law and not of fact. Turning to the second stipulated issue remaining for trial, we conclude that whether the taxes imposed by the State contravene the aforementioned treaties and are violative of the Chickasaws' right to self-government is also a question of law rather than an issue of fact.

Accordingly, as the parties have stipulated to all of the facts before us, there can be no genuine issue of material fact remaining for litigation, and our review is limited to the question whether the substantive law was correctly applied. Franks v. Nimmo, 796 F.2d 1230, 1235 (10th Cir.1986). We therefore review de novo the district court's treatment of both of these issues and their impact on the four taxes in dispute in this case.

II. BEER TAX

The Chickasaw operate retail stores in which they sell 3.2% beer. This beer is purchased from wholesale distributors. Oklahoma law provides for a tax upon 3.2% beer, in the amount of $11.25 per 31 gallons. 37 Okla.Stat.Ann. Sec. 163.3 (West 1990). The district court concluded that the State of Oklahoma had a strong interest in regulating 3.2% beer and that under our holding in Citizen Band Potawatomi v. Oklahoma Tax Com'n, 975 F.2d 1459 (10th Cir.1992), this regulatory authority encompassed the power to tax the sale of such beer. The district court thus assumed that the power to tax is encompassed within the power to regulate. We first address this assumption.

In Rice v. Rehner, 463 U.S. 713, 103 S.Ct. 3291, 77 L.Ed.2d 961 (1983), the Supreme Court faced the issue whether California could require a member of an Indian tribe who operated a general store on an Indian reservation, in which she sold alcoholic beverages, to obtain a state liquor license. The Court set out a two-part test to determine when state regulation of activities in Indian country is preempted. Id. at 718, 103 S.Ct. at 3295. Such preemption occurs when application of state law: 1) "would interfere with reservation self-government," or 2) "would impair a right granted or reserved by federal law." Id. (quoting Mescalero Apache Tribe v. Jones, 411 U.S. 145, 148, 93 S.Ct. 1267, 1270, 36 L.Ed.2d 114 (1973). In determining whether application of state law would interfere with Indian self-government, the court must consider the tradition of Indian sovereignty. If there is a tradition of Indian sovereignty in the area concerned, then an explicit statement from Congress providing that state law shall apply is usually required. Id. 463 U.S. at 719-20, 103 S.Ct. at 3295-96. The Rice Court concluded that "tradition simply has not recognized a sovereign immunity or inherent authority in favor of liquor regulation by Indians." Id. at 722, 103 S.Ct. at 3297.

Turning to the second prong of the test, the Court considered whether the state liquor licensing provisions were preempted by federal law. The Court held that, in enacting 18 U.S.C. Sec. 1161, ² Congress intended to delegate both to the states and to the tribes, its authority to regulate liquor transactions. Id. at 730-31, 103 S.Ct. at 3101-02. Accordingly, the Court held that section 1161 authorized state regulation rather than preempting it, and the state could properly require tribe members to obtain a state liquor license. Id. at 734, 103 S.Ct. at 3303.

In Potawatomi, this court held that the Supreme Court's reasoning in Rice was applicable to Oklahoma's licensing requirements with respect to 3.2% beer, notwithstanding the argument that such beer was not an "alcoholic beverage" within the scope of Sec. 1161 because of the bifurcated Oklahoma regulatory scheme classifying such beer as a "nonintoxicating beverage." Potawatomi, 975 F.2d at 1462-64. We held that Congress in Sec. 1161 had delegated the authority to regulate liquor, including 3.2% beer, and that Oklahoma had a "significant regulatory interest" in 3.2% beer despite its classification as a "nonintoxicating beverage." Id. at 1464.

The Tribe argues that, notwithstanding the Court's statements in Rice about the power to "regulate" liquor transactions, and notwithstanding this court's statements on that matter in Potawatomi, that power has nothing to do with the power to tax those transactions. We agree that the power to regulate does not automatically encompass the power to tax in all circumstances. However, "[t]he mere fact a statute raises revenue does not imprint upon it the characteristics of a law by which the taxing power is exercised." American Petrofina Co. of Texas v. Nance, 859 F.2d 840, 841 (10th Cir.1988) (quoting State ex rel. Tindal v. Block, 717 F.2d 874, 887 (4th Cir.1983), cert. denied, 465 U.S. 1080, 104 S.Ct. 1444, 79 L.Ed.2d 764 (1984)). Likewise, we do not find the fact that the beer taxes are deposited into the general treasury of the State of Oklahoma, Okla.Stat.Ann. tit. 37, Sec. 163.6 (1992), determinative of the issue. Where the taxation is an integral part of the overall regulatory structure in a traditionally heavily regulated area, as opposed to a simple revenue measure, the tax may properly be considered to be regulatory and to fall within the regulatory authority. See, e.g., Colville, 447 U.S. at 158, 100 S.Ct. at 2083-84 (noting that taxes may be used for regulatory purposes as well as for raising revenue). Such is the case here. Not only is the tax imposed on transactions involving a heavily regulated commodity, but the tax provisions themselves are contained within Title 37 of the Oklahoma Statutes, the portion of the Oklahoma Code establishing that regulation, rather than in the Revenue and Taxation Code contained in Title 68. The beer tax is thus clearly differentiated in the...