Winnebago Tribe of Nebraska v. Kline, 94,781.

• Decision Date: 05 February 2007
• Docket Number: No. 94,781.,94,781.
• Citation: 150 P.3d 892
• Parties: WINNEBAGO TRIBE OF NEBRASKA, et al., Plaintiffs, v. Phill KLINE, Attorney General, for the State of Kansas, et al., Defendants.
• Court: Kansas Supreme Court

150 P.3d 892

WINNEBAGO TRIBE OF NEBRASKA, et al., Plaintiffs, v. Phill KLINE, Attorney General, for the State of Kansas, et al., Defendants.

No. 94,781.

Supreme Court of Kansas.

February 5, 2007.

COPYRIGHT MATERIAL OMITTED

Skip C. Durocher, of Dorsey & Whitney LLP, of Minneapolis, Minnesota, argued the cause, and Mary J. Streitz and Christopher R. Duggan, of the same firm; Thomas E. Wright, of Wright, Henson, Clark, Hutton, Mudrick & Gragson, LLP, of Topeka; Danelle Smith, of Winnebago Tribe of Nebraska, of Winnebago, Nebraska; Mark S. Gunnison, of Payne & Jones, Chartered, of Overland Park; Thomas Weathers, of Alexander, Berkey, Williams & Weathers, LLP, of Berkeley, California; and Ilse Smith, of Horton, were with him on the brief for plaintiffs.

John Michael Hale, of Kansas Department of Revenue, argued the cause, and Jay D. Befort, J. Brian Cox, and Brian R. Johnson, all of the Kansas Department of Revenue, were with him on the briefs for defendants.

The opinion of the court was delivered by ALLEGRUCCI, J.:

The plaintiffs are Indian Tribes that filed an action in the United States District Court seeking an order enjoining Kansas officials' enforcement of the motor-fuel tax law, K.S.A. 79-3401 et seq. (Act), and a determination that the Act does not authorize assessment of tax on motor fuel delivered and sold by a Nebraska tribal corporation to tribes in Kansas for on-reservation retail sale. Injunctive relief was granted by the federal district court, see Winnebago Tribe of Nebraska v. Stovall, 205 F.Supp.2d 1217 (D.Kan.2002) and Winnebago Tribe of Nebraska v. Stovall, 216 F.Supp.2d 1226 (D.Kan.2002), and affirmed by the Tenth Circuit Court of Appeals, 341 F.3d 1202 (10th Cir.2003). Federal District Judge Thomas Marten certified the following question of law to this court pursuant to K.S.A. 60-3201:

"DOES THE KANSAS MOTOR-FUEL TAX, K.S.A. 79-3401 ET SEQ., IMPOSE FUEL TAX COLLECTION OR PAYMENT RESPONSIBILITY UPON NON-RESIDENT INDIAN TRIBES WHO IMPORT FUEL FROM OUTSIDE KANSAS AND DELIVER THE FUEL TO OUTLETS IN INDIAN RESERVATIONS WITHIN THE STATE OF KANSAS?"

FACTS:

The federal district court's order certifying the question to this court was precipitated by the Indian Tribes' motion for summary judgment. In its order, the federal district court made findings of fact and set out the parties' arguments before concluding that certification was appropriate in the absence of controlling precedent on an issue that may be determinative of the case. With the references to the district court record omitted, the following statement of facts is quoted from the federal district court's order:

"Plaintiff Winnebago Tribe of Nebraska is a federally-recognized American Indian Tribe organized under the Indian Reorganization Act of 1934, 25 U.S.C. § 476, and is the beneficial owner of and exercises jurisdiction over the Winnebago Tribe of Nebraska Indian Reservation. The Winnebago reservation is located in northeast Nebraska, and is not contiguous to Kansas. Ho-Chunk, Inc., and plaintiff HCI Distribution are corporations organized under the laws of the Winnebago Tribe. HCI is wholly-owned by Ho-Chunk Inc., which in turn is wholly-owned by the Winnebago Tribe.

"The Winnebago Indian News, dated January 18, 2005, indicates that Ho-Chunk, Inc., the parent company of HCI Distribution, had 2003 non-gaming revenues of $80 million and was `featured in Inc. magazine as one of the 500 fastest growing companies in the United States.'

"According to the website maintained by the plaintiff Winnebago Tribe, Ho-Chunk, Inc., is apparently a holding company with the following `business list': HCI Distribution (tobacco and gasoline products); Heritage Express (convenience stores specializing in discount gas and cigarette sales); AllNative.com (Native American e-commerce site); Blue Earth Marketing (marketing, advertising and graphic design); AllNative Office (office products, machines, furniture); Indianz.com (Native American Indian news); AllNative Systems (communications solutions); Dynamic Homes (modular housing manufacturer); HCI Construction (solutions for individual and commercial building); Ho-Chunk Community Development (501(c)3 nonprofit corporation); REZ Cars (used car dealership). The 2001 Annual Report for Ho-Chunk Inc. states that `Ho-Chunk, Inc. was established so that tribal business operations would be free from political influence and outside the bureaucratic process of the government.'

"On May 8, 2001, HCI mailed to the Kansas Department of Revenue both an Application for Motor Vehicle Fuel and Special Fuel Importer/Exporter License and an Application for Motor Vehicle Fuel and Special Fuel Distributor's License. Along with these applications, HCI mailed a Motor Vehicle Fuel and Special Fuel Importer/Exporter Bond in the amount of $5,000.00 and a Motor Vehicle Fuel and Special Fuel Distributor's Bond in the amount of $1,000.00.

"On May 11, 2001, the Department returned the Application for Motor Vehicle Fuel and Special Fuel Distributor's License and the Motor Vehicle Fuel and Special Fuel Distributor's Bond to HCI by mail.

"According to HCI employee Crystal Appleton, when she received the returned application and bond, she called the Department to ask why the documents were returned. The Department representative told her that the Department did not require that HCI obtain a distributor's license, and that the only license that HCI needed was an importer/exporter license. According to the defendant, HCI would not qualify for a distributor's license because they indicated they did not have a place of business in the State of Kansas.

"The Department issued to HCI a Motor Fuel Importer/Exporter License with an effective date of May 4, 2001, instead of a distributor's license.

"Plaintiff Sac and Fox Nation of Missouri is a federally-recognized American Indian Tribe.

"The Sac and Fox Nation wholly owns and operates two retail gas stations—the Trad'n Post in Reserve, Kansas, and the Sac & Fox Truck Stop in Powhattan, Kansas. Both of these tribally-owned businesses are located on land held in trust by the United States for the benefit of the Sac and Fox Nation.

"Plaintiff the Iowa Tribe of Kansas and Nebraska is a federally-recognized American Indian Tribe. The Iowa Tribe wholly owns and operates a gas station in Kansas on land held in trust for the Iowa Tribe by the United States of America.

"Plaintiff the Kickapoo Tribe of Indians of the Kickapoo Reservation is a federally-recognized American Indian Tribe. The facts are disputed as to the location of the Tribe's gas stations. According to plaintiffs, the Kickapoo Tribe owns and operates two gas stations in Kansas located on lands within the exterior boundaries of the reservation pursuant to Treaties executed in 1854. According to defendants, the only gas station of the Kickapoo mentioned in the complaint is a `Truck Plaza' which sits outside the boundaries of the Kickapoo Tribe's reservation.

"HCI began selling fuel to the Kansas Tribes in August 2001. The Winnebago Tribe has transported the fuel sold to the Kansas Tribes by tanker trucks from Nebraska to the Kansas Tribes' tribal gas stations.

"At no time did the Winnebago Tribe ever purchase or receive the subject fuel in Kansas from any person, and the fuel was not stored and did not come to rest in Kansas before its delivery by the Winnebago Tribe to the Kansas Tribes' facilities. The Winnebago Tribe did not and does not own or lease storage facilities, transfer facilities, mixing facilities, offices or any other facilities within Kansas.

"On September 10, 2001, shortly after the Winnebago Tribe started selling motor fuel to the Kansas Tribes, defendant Lochow of the Kansas Department of Revenue sent a letter to the Winnebago Tribe. Lochow stated that HCI, as a licensed importer under the Act, was required to report and remit Kansas fuel taxes on deliveries of fuel to any retailer in Kansas regardless of location.

"John Blackhawk, Chairman of the Winnebago Tribe, responded to Lochow's letter on Septamber 18, 2001, writing that the Winnebago Tribe disputed that Kansas had the right under federal law to tax the sales to the Kansas Tribes.

"On October 17, 2001, Charles Reomer of the Kansas Department of Revenue responded to Blackhawk's letter by once again demanding payment of the fuel tax, and stating that `[u]nder Kansas law, tax is due upon importation of motor fuel by the distributor of first import.'

"On April 8, 2002, defendant Scott, designee of the Director of Taxation, Kansas Department of Revenue, submitted an Affidavit and Application for Arrest Warrant that led to the seizures of property and other actions that necessitated this lawsuit. The affidavit and application stated that `the distributor, importer or manufacturer on or before the 25th day of each month, shall render to the director at the director's office in Topeka, Kansas a report "certified to be true and correct showing the number of gallons of motor fuel imported." See K.S.A. 79-3410.' In fact, Section 79-3410 of the Act states that the report must show `the number of gallons of motor-vehicle fuels or special fuels received by such distributor, manufacturer, importer, exporter or retailer during the preceding calendar month'.

"On the following day, April 9, 2002, the defendants seized the following property of HCI: two trucks, two tanker trailers, fuel and fuel oil, two black permit books and shipping papers. The parties dispute whether the seizures occurred with prior notice. On the same date, the Department of Revenue entered orders for jeopardy assessment and issued tax warrants against HCI and the individual plaintiffs. The plaintiffs also allege that the defendants also initiated criminal proceedings against plaintiffs HCI, Chairman Blackhawk and Lance Morgan, but the evidence fails to support the contention, and defendants deny it. The record shows only that criminal proceedings were commenced by the State of Kansas.

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