New Mexico Taxation and Revenue Dept. v. Laguna Industries, Inc.

• Decision Date: 08 June 1993
• Docket Number: No. 20855,20855
• Citation: 855 P.2d 127,1993 NMSC 25,115 N.M. 553
• Parties: NEW MEXICO TAXATION AND REVENUE DEPARTMENT, Defendant-Petitioner, v. LAGUNA INDUSTRIES, INC., and Raytheon Service Company, Plaintiffs-Respondents.
• Court: New Mexico Supreme Court

Page 127

855 P.2d 127

115 N.M. 553

NEW MEXICO TAXATION AND REVENUE DEPARTMENT, Defendant-Petitioner, v. LAGUNA INDUSTRIES, INC., and Raytheon Service Company Plaintiffs-Respondents.

No. 20855.

Supreme Court of New Mexico.

June 8, 1993.

Tom Udall, Atty. Gen., Frank D. Katz, Sp. Asst. Atty. Gen., Santa Fe, for petitioner.

Nordhaus, Haltom, Taylor, Taradash & Frye, Wayne Bladh, Santa Fe, for respondents.

OPINION

FRANCHINI, Justice.

By opinion dated October 5, 1992, the Court of Appeals affirmed the trial court's summary judgment in favor of Laguna Industries, Inc. (Laguna) and against the New Mexico Taxation and Revenue Department (Department). See Laguna Indus., Inc. v. New Mexico Taxation & Revenue Dep't, 114 N.M. 644, 845 P.2d 167 (Ct.App.1992). On November 19, 1992, we granted certiorari to determine whether the Indian trader statutes¹ preempt the imposition of gross receipts tax² on receipts for non-Indian services rendered to an Indian tribal entity on the reservation.

After a careful review of the majority and dissenting opinions, briefs, and all other pertinent material, we affirm the Court of Appeals. The majority determined that "trade" as used in the Indian trader statutes includes trade in services and therefore, the preemption analysis of Warren Trading Post Co. v. Arizona Tax Comm'n, 380 U.S. 685, 85 S.Ct. 1242, 14 L.Ed.2d 165 (1965), and Central Machinery Co. v. Arizona State Tax Comm'n, 448 U.S. 160, 100 S.Ct. 2592, 65 L.Ed.2d 684 (1980), applied to the transaction at issue. See Laguna Industries, 114 N.M. at 654, 845 P.2d at 177. We adopt the majority opinion and comment only to emphasize what we consider an important consideration in the majority's analysis: that the purpose of the Indian trader statutes supports the interpretation that "trade" includes trade in services.

The facts are set forth in detail by the Court of Appeals. See Laguna Industries, 114 N.M. at 646-47, 845 P.2d at 168-69. We briefly summarize. Raytheon Service Company (Raytheon) contracted with Laguna, a wholly owned corporation of the Pueblo of Laguna, to perform technical, training, and management assistance to enable Laguna to obtain federal contracts from the Department of Defense (DOD). The underlying case is a claim for refund of state gross receipts tax paid by Raytheon on income received for training and other services it performed at Laguna Pueblo for Laguna. See NMSA 1978, Sec. 7-1-26 (Repl.Pamp.1990). Raytheon passed the cost of the gross receipts tax on to Laguna and assigned its right to any tax refund to Laguna.

The Department throughout the litigation has conceded that transactions which come within the scope of the Indian trader statutes are not taxable by the State based on Warren Trading Post and Central Machinery. The question presented to the Court of Appeals was whether "trade" as used in the statutes includes trade in services. The Department contends that it applies only to trade in goods. In a well reasoned, carefully thought out opinion, the majority rejected the Department's narrow interpretation of "trade" on several interrelated grounds: (1) The Indian trader statutes must be construed broadly and liberally in favor of the Indians; (2) Excluding service transactions from the statutes would not be consistent with the purposes of statutes to protect Indians from fraud and imposition; (3) Service transactions were a significant part of the American economy when the first Indian trader statutes were enacted; (4) The term "trade" in other similar contexts has not been interpreted as limited to goods; (5) The seminal Indian law decision of Worcester v. Georgia, 31 U.S. (6 Pet.) 515, 556-57, 8 L.Ed. 483 (1832) interpreted the Indian Trade and Intercourse Acts as regulating all intercourse with the Indians in their territory; (6) The 1834 version included express references to regulation of "boatmen" and "interpreters" who dealt in services; and (7) Department of Interior regulations have expressly interpreted the Indian trader statutes and related acts to include trade in services. See Laguna Industries, 114 N.M. at 649-50, 845 P.2d at 172-75.

To the majority opinion we would only emphasize the following on the purpose of the Indian trader statutes. The Indian trader statutes were passed for the benefit of the dependent Indian tribes and must be liberally construed with doubtful expressions being resolved in favor of the Indians. Ashcroft v. United States Dept. of the Interior, 679 F.2d 196, 198 (9th Cir.1982). Until they are repealed or amended, "we must give them 'a sweep as broad as [their] language,' and interpret them in light of the intent of the Congress that enacted them." Central Machinery, 448 U.S. at 166, 100 S.Ct. at 2596 (citations omitted). Thus, we look to the object sought to be accomplished by the legislatures. See Lopez v. Employment Sec. Div., 111 N.M. 104, 105, 802 P.2d 9, 10 (1990).

One noted scholar has described the trader statutes as shaping, through a series of laws, our government's Indian policy. Francis P. Prucha, American Indian Policy in the Formative Years: The Indian Trade and Intercourse Acts, 1790-1834, 2 (Bison Book ed. 1970) (1962). A major aspect of that policy was controlling the problem resulting from the presence of Indians in the "path of aggressive and land-hungry whites." Id. at 3.

The goal of American statesmen was the orderly advance of the frontier. To maintain the desired order and tranquility it was necessary to place restrictions on the contacts between the whites and the Indians. The intercourse acts were thus restrictive and prohibitory in nature--aimed largely at restraining the actions of the whites and providing justice to the Indians as the means of preventing hostility.

Id.

The United States addressed the question of trade with the surrounding Indian nations in the very first Congress. See Act of July 22, 1790, ch. 33, 1 Stat. 137 (1856). That statute required a federal license before any person could be "permitted to carry on any trade or intercourse with the Indian tribes." Section 1. From the very beginning, Congress asserted the power to control through licensing all trade and other contacts with the Indians.

The 1790 act had a two-year "sunset" provision, and Congress adopted similar acts again in 1793, 1796, 1799 and 1802.³ These acts became more detailed as years passed, until Congress adopted the final enactment in the series of Acts "to regulate trade and intercourse with the Indian tribes." Indian Trade and Intercourse Act of June 30, 1834, ch. 161, 4 Stat. 729 (1850). The 1834 Act demonstrates an attempt by Congress to control every aspect of contact between the United States and the Indian nations. Its detailed and comprehensive provisions manifested the intent of the Federal Government to assert "through statutes and treaties a sweeping and dominant control over persons who wished to trade with Indians and Indian tribes." Warren Trading Post, 380 U.S. at 687, 85 S.Ct. at 1244. The objectives of the statutes were "to prevent 'fraud and imposition' upon [the Indians]," Central Machinery, 448 U.S. at 163, 100 S.Ct. at 2595. These objectives support the majority opinion's holding that the Indian trader statutes apply to the sale of services as well as the sale of goods. The narrow interpretation of "trade" urged by the Department would tend to defeat these objectives. Thus, for example, under Section 3 of the 1834 Act (25 U.S.C. Sec. 263), if the President declares an embargo on certain goods, no trader to any other tribe "shall, so long as such prohibition may continue, trade with any Indians" of the embargoed tribe. Under the Department's interpretation, both licensed traders and unlicensed individuals would be free to sell "services" to the tribe during the embargo, presumably including gunsmith...