Oklahoma Tax Commission v. Citizen Band Potawatomi Indian Tribe of Oklahoma

Decision Date26 February 1991
Docket NumberNo. 89-1322,89-1322
Citation498 U.S. 505,112 L.Ed.2d 1112,111 S.Ct. 905
PartiesOKLAHOMA TAX COMMISSION, Petitioner, v. CITIZEN BAND POTAWATOMI INDIAN TRIBE OF OKLAHOMA
CourtU.S. Supreme Court
Syllabus

Although, for many years, respondent Indian Tribe has sold cigarettes at a convenience store that it owns and operates in Oklahoma on land held in trust for it by the Federal Government, it has never collected Oklahoma's cigarette tax on these sales. In 1987, petitioner, the Oklahoma Tax Commission (Oklahoma or Commission), served the Tribe with an assessment letter, demanding that it pay taxes on cigarette sales occurring between 1982 and 1986. The Tribe filed suit in the District Court to enjoin the assessment, and Oklahoma counterclaimed to enforce the assessment and to enjoin the Tribe from making future sales without collecting and remitting state taxes. The court refused to dismiss the counterclaims on the Tribe's motion, which was based on the assertion that the Tribe had not waived its sovereign immunity from suit. The court held on the merits that the Commission lacked authority to tax on-reservation sales to tribal members or to tax the Tribe directly, and therefore that the Tribe was immune from Oklahoma's suit to collect past unpaid taxes directly, but that the Tribe could be required to collect taxes prospectively for on-reservation sales to nonmembers. The Court of Appeals reversed, holding, inter alia, that the lower court erred in entertaining Oklahoma's counterclaims because the Tribe enjoys absolute sovereign immunity from suit and had not waived that immunity by filing its action for injunctive relief, and that Oklahoma lacked authority to tax any on-reservation sales, whether to tribesmen or nonmembers.

Held: Under the doctrine of tribal sovereign immunity, a State that has not asserted jurisdiction over Indian lands under Public Law 280 may not tax sales of goods to tribesmen occurring on land held in trust for a federally recognized Indian tribe, but is free to collect taxes on such sales to nonmembers of the tribe. Pp. 509-514.

(a) The Tribe did not waive its inherent sovereign immunity from suit merely by seeking an injunction against the Commission's proposed tax assessment. United States v. United States Fidelity & Guaranty Co., 309 U.S. 506, 511-512, 513, 60 S.Ct. 653, 655-656, 657, 84 L.Ed. 894. In light of this Court's reaffirmation, in a number of cases, of its longstanding doctrine of tribal sovereign immunity, and Congress' consistent reiteration of its approval of the doctrine in order to promote Indian self-government, self-sufficiency, and eco- nomic development, the Court is not disposed to modify or abandon the doctrine at this time. Nor is there merit to Oklahoma's contention that immunity should not apply because the Tribe's cigarette sales do not occur on a formally designated "reservation." Trust land qualifies as a reservation for tribal immunity purposes where, as here, it has been " 'validly set apart for the use of the Indians as such, under the superintendence of the Government.' " United States v. John, 437 U.S. 634, 648-649, 98 S.Ct. 2541, 2549, 57 L.Ed.2d 489. Mescalero Apache Tribe v. Jones, 411 U.S. 145, 148-149, 93 S.Ct. 1267, 1270-1271, 36 L.Ed.2d 114, which approved nondiscriminatory state taxation of activities on non-reservation, nontrust Government land leased by Indians, is not to the contrary. Pp. 509-511.

(b) Nevertheless, the Tribe's sovereign immunity does not deprive Oklahoma of the authority to tax cigarette sales to nonmembers of the Tribe at the Tribe's store, and the Tribe has an obligation to assist in the collection of validly imposed state taxes on such sales. Moe v. Confederated Salish and Kootenai Tribes, 425 U.S. 463, 482, 483, 96 S.Ct. 1634, 1645-1646, 48 L.Ed.2d 96; Washington v. Confederated Tribes of Colville Reservation, 447 U.S. 134, 100 S.Ct. 2069, 65 L.Ed.2d 10. This case is not distinguishable from Moe and Colville on the ground that Oklahoma disclaimed jurisdiction over Indian lands upon entering the Union and did not reassert jurisdiction over civil causes of action in such lands as permitted by Public Law 280. Neither of those cases depended on the assertion of such jurisdiction by the State in question, and it is simply incorrect to conclude that the Public Law was the essential (yet unspoken) basis for the Court's decision in Colville. Although the Tribe's sovereign immunity bars Oklahoma from pursuing its most efficient remedy—a lawsuit—to enforce its rights, adequate alternatives may exist, since individual Indians employed in "smoke-shops" may not share tribal immunity, and since States are free to collect their sales taxes from cigarette wholesalers or to enter into mutually satisfactory agreements with tribes for the collection of taxes. If these alternatives prove to be unsatisfactory, States may seek appropriate legislation from Congress. Pp. 511-514.

888 F.2d 1303 (CA10 1989), affirmed in part and reversed in part.

REHNQUIST, C.J., delivered the opinion for a unanimous Court. STEVENS, J., filed a concurring opinion, post, p. ---.

David Allen Miley, Oklahoma City, Okl., for petitioner.

Edwin S. Kneedler, Washington, D.C., for the U.S. as amicus curiae by special leave of Court.

Michael Minnis, Oklahoma City, Okl., for respondent.

Chief Justice REHNQUIST delivered the opinion of the Court.

The issue presented in this case is whether a State that has not asserted jurisdiction over Indian lands under Public Law 280 may validly tax sales of goods to tribesmen and nonmembers occurring on land held in trust for a federally recognized Indian tribe. We conclude that under the doctrine of tribal sovereign immunity, the State may not tax such sales to Indians, but remains free to collect taxes on sales to nonmembers of the tribe.

Respondent, the Citizen Band Potawatomi Indian Tribe of Oklahoma (Potawatomis or Tribe), owns and operates a convenience store in Oklahoma on land held in trust for it by the Federal Government. For many years, the Potawatomis have sold cigarettes at the convenience store without collecting Oklahoma's state cigarette tax on these sales. In 1987, petitioner, the Oklahoma Tax Commission (Oklahoma or Commission), served the Potawatomis with an assessment letter, demanding that they pay $2.7 million for taxes on cigarette sales occurring between 1982 and 1986. The Potawatomis filed suit to enjoin the assessment in the United States District Court for the Western District of Oklahoma.

Oklahoma counterclaimed, asking the District Court to enforce its $2.7 million claim against the Tribe and to enjoin the Potawatomis from selling cigarettes in the future without col- lecting and remitting state taxes on those sales. The Potawatomis moved to dismiss the counterclaim on the ground that the Tribe had not waived its sovereign immunity and therefore could not be sued by the State. The District Court denied the Potawatomis' motion to dismiss and proceeded to trial. On the merits, the District Court concluded that the Commission lacked the authority to tax the on-reservation cigarette sales to tribal members or to tax the Tribe directly. It held, therefore, that the Tribe was immune from Oklahoma's suit to collect past unpaid taxes directly from the Tribe. Nonetheless, the District Court held that Oklahoma could require the Tribe to collect taxes prospectively for on-reservation sales to nonmembers of the tribe. Accordingly, the court ordered the Tribe to collect taxes on sales to nontribal members, and to comply with all statutory recordkeeping requirements.

The Tribe appealed the District Court's denial of its motion to dismiss and the court's order requiring it to collect and remit taxes on sales to nonmembers. The United States Court of Appeals for the Tenth Circuit reversed. 888 F.2d 1303 (1989). That court held that the District Court erred in entertaining Oklahoma's counterclaims because the Potawatomis enjoy absolute sovereign immunity from suit, and had not waived that immunity by filing an action for injunctive relief. The Court of Appeals further held that Oklahoma lacked the authority to impose a tax on any sales that occur on the reservation, regardless of whether they are to tribesmen or nonmembers. It concluded that "because the convenience store is located on land over which the Potawatomis retain sovereign powers, Oklahoma has no authority to tax the store's transactions unless Oklahoma has received an independent jurisdictional grant of authority from Congress." Id., at 1306. Finding no independent jurisdictional grant of authority to tax the Potawatomis, the Court of Appeals ordered the District Court to grant the Potawatomis' request for an injunction.

We granted certiorari to resolve an apparent conflict with this Court's precedents and to clarify the law of sovereign immunity with respect to the collection of sales taxes on Indian lands. 498 U.S. 806, 111 S.Ct. 37, 112 L.Ed.2d 14 (1990). We now affirm in part and reverse in part.

I

Indian tribes are "domestic dependent nations" that exercise inherent sovereign authority over their members and territories. Cherokee Nation v. Georgia, 5 Pet. 1, 17, 8 L.Ed. 25 (1831). Suits against Indian tribes are thus barred by sovereign immunity absent a clear waiver by the tribe or congressional abrogation. Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58, 98 S.Ct. 1670, 1677, 56 L.Ed.2d 106 (1978). Petitioner acknowledges that Indian tribes generally enjoy sovereign immunity, but argues that the Potawatomis waived their sovereign immunity by seeking an injunction against the Commission's proposed tax assessment. It argues that, to the extent that the Commission's counterclaims were "compulsory" under Federal Rule of Civil Procedure 13(a), the District Court did not need any independent jurisdictional basis to hear those claims.

We rejected an identical contention over a half-century ago in United States v. United States Fidelity & Guaranty...

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