Pourier v. South Dakota Dept. of Revenue, 22221.
Decision Date | 26 February 2003 |
Docket Number | No. 22221.,22221. |
Parties | Loren POURIER, d/b/a Muddy Creek Oil and Gas, Inc., and Muddy Creek Oil and Gas, Inc., Plaintiffs and Appellants, v. SOUTH DAKOTA DEPARTMENT OF REVENUE, Defendant and Appellee. |
Court | South Dakota Supreme Court |
Vanya S. Hogen of Faegre & Benson, LLP, Minneapolis, MN, Frank Lawrence of Holland & Knight, LLP, Los Angeles, CA, for plaintiffs and appellants.
Lawrence E. Long, Attorney General, David D. Wiest, Assistant Attorney General, Pierre, SD, for defendant and appellee.
Mario Gonzalez, Pine Ridge, SD, Tracy A. Labin, Washington, DC, for Amicus Curiae, Oglala Sioux Tribe.
Appellant's Rehearing Denied April 1, 2003.
Appellee's Rehearing Granted April 2, 2003, Solely on Issue One.
[¶ 1.] Loren Pourier is an enrolled member of the Oglala Sioux Tribe and a resident of the Pine Ridge Indian Reservation in South Dakota. Muddy Creek Oil and Gas, Inc., (Muddy Creek) is a South Dakota corporation whose sole shareholder and president is Pourier. The corporation's principal place of business is Pine Ridge. Muddy Creek purchased gas in Nebraska and trucked it to Pine Ridge for resale to consumers including reservation residents. The South Dakota Department of Revenue (Department) imposed a state motor fuel tax on Muddy Creek and refused Muddy Creek's refund request without a hearing. Muddy Creek appealed to the circuit court. After oral arguments, the circuit court entered an order remanding the case back to the Department for a full consideration of Muddy Creek's claims. The Department accepted the proposed decision against Muddy Creek from the Hearing Examiner and Pourier appealed that decision to the circuit court. The court affirmed the Department's ruling and Pourier appeals. We reverse and remand.
[¶ 2.] Muddy Creek is licensed by South Dakota as a fuel importer, exporter, marketer and distributor. It is also licensed by the Oglala Sioux Tribe to do business on the reservation, but does not hold a Federal Indian Trader license.
[¶ 3.] Muddy Creek purchases fuel at a terminal rack in Nebraska and trucks the fuel onto the reservation with its own tanker trucks. The corporation sells the fuel at its retail gas station on the reservation. It is apparently undisputed that approximately 90% of the purchasers are Indians who reside on the reservation.
[¶ 4.] South Dakota taxes motor fuel at in-state terminal racks and on importation. SDCL 10-47B-5 and 10-47B-6. Since Muddy Creek bought its motor fuel at an out-of-state terminal rack, it was taxed as an importer and was liable for the tax at the point of importation, regardless of use of the fuel once it entered the state.1 Muddy Creek has paid the tax under protest since 1995. Pourier testified that he did not pass the tax through to his customers, but evidence at the administrative hearing led the circuit court to the finding that the tax was passed on to the consumers. Specifically, sales to the federal government are exempted from the state motor fuel tax. According to Muddy Creek's own accounts and returns, the government paid 22 cents less per gallon than the pump price. If Muddy Creek were not passing the tax on to the consumer, no such reduction from the pump price for the federal government would have been necessary.
[¶ 5.] Muddy Creek claims it is entitled to a refund of approximately $940,000.00 for taxes paid since July 1995. The claim is based on the assertion that the State is taxing an Indian on an Indian reservation without explicit congressional authorization. The circuit court held that the Hayden-Cartwright Act of 1936 provided the necessary authorization for the imposition of the motor fuel tax. Muddy Creek appeals raising the following issues:
STANDARD OF REVIEW
Sopko v. C & R Transfer Co., Inc., 1998 SD 8, ¶ 6, 575 N.W.2d 225, 228 (internal citations omitted). Questions requiring application of a legal standard are reviewed de novo. Voeltz v. John Morrell & Co., 1997 SD 69, ¶ 9, 564 N.W.2d 315, 316.
[¶ 7.] 1. WHETHER THE HAYDEN-CARTWRIGHT ACT EXPRESSLY PERMITS STATE TAXATION OF MOTOR FUEL SALES TO TRIBAL MEMBERS BY A NATIVE AMERICAN CORPORATION OPERATING ON AN INDIAN RESERVATION.
85 L.Ed.2d at 753) (citation omitted). These presumptions and rules of construction form the necessary background to our consideration of any attempt by the State to assert taxation jurisdiction over Indians in Indian Country.
[¶ 9.] The statute upon which the Department of Revenue bases its claim of right to tax Muddy Creek is 4 U.S.C. § 104, otherwise known as the Hayden-Cartwright Act of 1936 (Act). Subsection (a) of the Act provides in part:
All taxes levied by any State ... 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 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.
[¶ 10.] The Department contends that by use of the phrases "filling stations," "other reservations" and "licensed traders," Congress manifested the requisite intent to allow the State to tax Indian proprietors on the Indian reservation. We disagree. The language of the statute does not make Congress' intention to allow such taxation "unmistakably clear."2
273 N.W.2d 737, 739 (1978) (internal citations omitted).
[¶ 12.] In A.G.E., the Court faced the question whether a non-Indian contractor working on a reservation was subject to state taxation. The narrow holding was that the activities of a non-Indian on Indian land working pursuant to a federal contract were taxable. Id. That holding was based on a finding that the contractor did not fall within the federal instrumentality doctrine and that federal law did not preempt the tax. The Court was very clear that its analysis was based on the fact that the...
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