Goodman Oil Co. v. Idaho State Tax Com'n

• Decision Date: 08 June 2001
• Docket Number: No. 25994.,25994.
• Citation: 136 Idaho 53,28 P.3d 996
• Parties: GOODMAN OIL COMPANY OF LEWISTON, an Idaho corporation, and Goodman Oil Company, an Idaho corporation, Plaintiffs-Respondents, v. IDAHO STATE TAX COMMISSION, Defendant-Appellant.
• Court: Idaho Supreme Court

28 P.3d 996

136 Idaho 53

GOODMAN OIL COMPANY OF LEWISTON, an Idaho corporation, and Goodman Oil Company, an Idaho corporation, Plaintiffs-Respondents, v. IDAHO STATE TAX COMMISSION, Defendant-Appellant.

No. 25994.

Supreme Court of Idaho, Boise, February 2001 Term.

June 8, 2001.

Rehearing Denied July 27, 2001.

Alan G. Lance, Attorney General, Boise, for appellant. Carl E. Olsson argued.

Jim Jones and Associates, Boise, for respondents. John C. McCreedy argued.

SCHROEDER, Justice.

This is an appeal from a district court order denying partial summary judgment to the Idaho State Tax Commission (the Commission), based on its ruling that the Commission could not levy fuel tax or transfer fees against Goodman Oil Company of Lewiston (Goodman Oil) on fuel sold to the Coeur d'Alene Indian Tribe (the Tribe).

I. BACKGROUND AND PRIOR PROCEEDINGS

The period at issue in this case spans from January 1997 through March 1998. Goodman Oil was a licensed distributor of fuel in Idaho as defined by I.C. § 63-2401(13). Goodman Oil purchased gasoline from an Exxon Terminal in Spokane, Washington. Sun Transportation, a sister corporation of Goodman Oil, transported the gasoline through the state of Washington directly to a location at the eastern border of the state and the western border of the reservation. The gasoline was transported without traveling through any part of Idaho lying outside of the reservation. The Tribe purchased the gasoline at the border of the state of Washington and the reservation. The Tribe paid Sun Transportation to haul the gasoline to the Tribe-owned Benewah Auto Center located on the reservation. Neither the Tribe nor Benewah Auto Center was a licensed distributor of fuel in Idaho.

In 1994 the Tribe and the Commission entered into an agreement that the Tribe would remit fuel tax and transfer fees to the Commission for gasoline sales made at the Benewah Auto Center to non-Indians. The Tribe has remitted payments to the Commission since that time.

Beginning in August of 1997, the Commission issued deficiency notices to Goodman Oil for gasoline sold to the Tribe from January of 1997 through March of 1998. The Commission alleged that because Goodman Oil was the owner of the fuel in Washington and the owner as it arrived in Idaho, Goodman Oil was the first receiver of the fuel and responsible for remitting the fuel tax and transfer fee. The deficiencies alleged by the Commission totaled $40,814. Goodman Oil filed timely protest to each determination. The Commission issued a final decision on May 4, 1998, and assessed Goodman Oil for existing deficiencies in the amount of $27,453, reversed the assessment of penalties and granted Goodman Oil a credit for fuel tax paid by the Tribe on the sale of fuel to non-Indians. On June 18, 1998, Goodman Oil filed its complaint in this matter with the district court. The parties filed cross-motions for summary judgment. The district court held that the Commission could not impose the tax on Goodman Oil. The district court determined that although Goodman Oil brought the fuel into Idaho for the purposes of the Fuel Tax Act, no federal act authorized the state to tax fuel sales made on Indian reservations, and the incidence of the tax was on the consumer and therefore interfered with the Tribe's ability to exercise its sovereign functions.

II. STANDARD OF REVIEW

"When this Court reviews a district court's grant of summary judgment, it uses the same standard properly employed by the district court originally ruling on the motion." Family Trust v. Christensen, 133 Idaho 866, 870, 993 P.2d 1197, 1201 (1999). A party should be granted summary judgment "if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact that the moving party is entitled to judgment as a matter of law." I.R.C.P. 56(c).

"Constitutional issues and the construction and application of legislative acts are pure questions of law over which this Court exercises free review." Struhs v. Protection Technologies, Inc., 133 Idaho 715, 718, 992 P.2d 164, 167 (1999), citing Idaho State Ins. Fund v. Van Tine, 132 Idaho 902, 905-906, 980 P.2d 566, 569-70 (1999). "When questions of law are presented, this Court is not bound by findings of the district court, but is free to draw its own conclusions from the evidence presented." Mutual of Enumclaw v. Box, 127 Idaho 851, 852, 908 P.2d 153, 154 (1995).

III.

THE HAYDEN-CARTWRIGHT ACT DOES NOT PROVIDE CONGRESSIONAL AUTHORIZATION FOR A STATE TO IMPOSE A FUEL TAX ON THE SALE OF FUEL TO INDIANS ON INDIAN RESERVATIONS WITHIN THE STATE.

It is a long-standing rule of construction that tax statutes granting the right to tax are strictly construed against the taxing authority and in favor of the taxpayer with any ambiguities to be resolved in favor of the taxpayer. Reinecke v. Gardner, 277 U.S. 239, 244, 48 S.Ct. 472, 474, 72 L.Ed. 866, 868 (1928). Furthermore, taxation of Indians cannot be enforced absent clear Congressional authorization. Oklahoma Tax Comm'n v. Chickasaw Nation, 515 U.S. 450, 459, 115 S.Ct. 2214, 2220-2221, 132 L.Ed.2d 400, 409-410 (1995), citing Moe v. Confederated Salish and Kootenai Tribes of Flathead Reservation, 425 U.S. 463, 475-481, 96 S.Ct. 1634, 1642-1645, 48 L.Ed.2d 96, 107-111 (1976). The United States Supreme Court has consistently stated:

`[t]he canons of construction applicable in Indian law are rooted in the unique trust relationship between the United States and the Indians.' Oneida County v. Oneida Indian Nation, 470 U.S. 226, 247 [105 S.Ct. 1245, 1258, 84 L.Ed.2d 169, 187] (1985). Two such canons are directly applicable in this case: first, the States may tax Indians only when Congress has manifested clearly its consent to such taxation, e.g., Bryan v. Itasca County, supra, at [426 U.S. 373] 393 [96 S.Ct. 2101, 2113, 48 L.Ed.2d 710, 723-724 (1976)]; second, statutes are to be construed liberally in favor of the Indians, with ambiguous provisions interpreted to their benefit, e.g., McClanahan v. Arizona State Tax Comm'n, 411 U.S. 164, 174 [93 S.Ct. 1257, 1263, 36 L.Ed.2d 129, 136-137] (1973); Choate v. Trapp, 224 U.S. 665, 675 [32 S.Ct. 565, 569, 56 L.Ed.2d 941, 945-946] (1912).

Montana v. Blackfeet Tribe, 471 U.S. 759, 766, 105 S.Ct. 2399, 85 L.Ed.2d 753 (1985).

The Hayden-Cartwright Act (the Act) states in relevant part:

(a) All taxes levied by any State, Territory, or the District of Columbia upon, with respect to, or measured by, sales, purchases, storage, or use of gasoline or other motor vehicle fuels may be levied, in the same manner and to the same extent, with respect to such fuels when sold by or through post exchanges, ship stores, ship service stores, commissaries, filling stations, licensed traders, and other similar agencies, located on United States military or other reservations, when such fuels are not for the exclusive use of the United States.

To summarize, the Act says that states can levy fuel tax on military or other reservations as they can outside of those reservations, on any party other than the United States government. The question in this case is whether the Indian reservation is a "reservation" included within the Act or whether the use of the term "licensed trader" supports imposition of the tax.

A. Treatment Of The Act In Case Law As Applied To Indian Reservations

The United States Supreme Court has not addressed whether the Act applies to Indian reservations. In Chickasaw Nation, supra, the state of Oklahoma argued in briefing that the Act expressly authorized states to levy the motor fuel tax on Indian reservations. However, the Supreme Court declined to address the question because it was not raised in the lower court proceedings. The Court stated that Oklahoma's "newly discovered claim of vintage legislative authorization" was not "fairly included" in the question tendered for the Court's review. Chickasaw Nation, 515 U.S. at 457, 115 S.Ct. at 2219, 132 L.Ed.2d at 408. The United States Supreme Court in White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 100 S.Ct. 2578, 65 L.Ed.2d 665 (1980), held that the Act was "not designed to overcome the otherwise pre-emptive effect of federal regulation of tribal timber." Id. at 152 n. 16, 100 S.Ct. at 2588 n. 16, 65 L.Ed.2d at 678 n. 16. The Court went on to state "[w]e do not reach the more general question of whether the Hayden-Cartwright Act applies to Indian reservations at all." Id.

The Commission points to the South Dakota Supreme Court decision in Matter of the State Motor Fuel Tax Liability of A.G.E. Corp., 273 N.W.2d 737, 739 (S.D.1978), which held that Congress, through the Act, "granted to the states the right to exercise limited jurisdiction in taxing the use or sale of gasoline or other motor vehicle fuel" on federal areas. A.G.E. Corp., however, is not on point. A.G.E. Corp. dealt with tax levied on a non-Indian contractor doing work for the Bureau of Indian Affairs on tribal land. The Supreme Court of South Dakota, although holding that an Indian reservation was a federal area covered by the Act, found that a tax on the contractor was not an indirect tax on the "Indian tribe, an Indian or an Indian reservation", Id. at 741, inferring that if it was, it would not be allowed. Cases cited by the court in A.G.E. Corp. for historical background of the Act use the term "federal areas" and deal with a federal dam, airplane assembly plant and military reservation— none refers to the issue of whether Indian reservations are covered by the Act or if the Act authorizes taxation of tribal members. See State of Minnesota v. Keeley, 126 F.2d 863, 864 (8th Cir.1942); Sanders v. Oklahoma Tax Comm'n, 197 Okla. 285, 169 P.2d 748 (1946).¹

B. The Language Of The Act

There are two references within Section 10 of the Act which the Commission argues reveal the fact that it was Congress' intent to allow the levying of fuel tax on Indian reservations. First...