325 F.Supp.3d 995
D.S.D.2018Background
- Flandreau Santee Sioux Tribe (federally recognized) owns Royal River Casino on its reservation and undertook a $24 million renovation using non-Indian contractor Henry Carlson Company.
- South Dakota requires contractors to pay a 2% contractor’s excise tax (SDCL §10-46A-1); the state denied the Tribe’s exemption request, and Henry Carlson paid the tax under protest.
- Tribe sued state officials seeking a declaration that the State cannot impose the contractor’s excise tax on the on-reservation casino renovation and sought refunds of taxes paid under protest.
- The Tribe’s casino revenue is a substantial part of tribal income and IGRA requires tribal responsibility for construction/maintenance and creates a federal regulatory scheme for Class III gaming governed in part by tribal-state compacts.
- The State argued the tax is valid because its legal incidence is on the non-Indian contractor and the general fund supports services used by the Tribe/contractor; it also asserted sovereign immunity against refund relief.
- The district court granted summary judgment to the Tribe declaring the excise tax inapplicable under IGRA and Bracker analysis, but dismissed the Tribe’s refund claim for lack of jurisdiction (Eleventh Amendment).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Per se invalidity of tax | Tribe: tax burdens Tribe because contractor passes cost to Tribe; IGRA pre-empts state tax | State: legal incidence is on non-Indian contractor under SD law, so tax not per se invalid | Held: Not per se invalid because legal incidence rests on non-Indian contractor (Okla. Tax Comm’n v. Chickasaw Nation rule) |
| Preemption by IGRA / comprehensive federal scheme | Tribe: IGRA is comprehensive re gaming; tax interferes with tribal ability to benefit from gaming and is pre-empted | State: IGRA does not occupy field for contractor excise taxes; state provides services funded by tax | Held: IGRA pre-empts the excise tax — federal scheme and IGRA’s goals of tribal self-sufficiency outweigh State interest (Bracker/Ramah framework) |
| Catchall compact provision (2710(d)(3)(C)(vii)) — whether renovation is "directly related" to gaming | Tribe: Renovation exists only because of gaming and is necessary to operate casino; tax falls within catchall and compact did not address it | State: Compact/IGRA do not bar state taxation of non-Indian transactions; general fund services justify tax | Held: Renovation falls within IGRA’s catchall (would not exist but for gaming and is necessary), so State cannot impose tax absent compact provision |
| Refundability / jurisdiction for monetary relief | Tribe: seeks refund of taxes paid under protest | State: Eleventh Amendment bars monetary relief against State; only the U.S. can sue for money on Tribe’s behalf | Held: Court lacks jurisdiction to grant refund; Tribe’s fourth claim dismissed without prejudice for lack of jurisdiction (so declaratory but not monetary relief) |
Key Cases Cited
- Okla. Tax Comm’n v. Chickasaw Nation, 515 U.S. 450 (State tax per se invalid only when legal incidence falls on tribe)
- White Mountain Apache Tribe v. Bracker, 448 U.S. 136 (1979) (particularized inquiry balancing federal, tribal, and state interests for on-reservation non‑Indian activity)
- Ramah Navajo Sch. Bd., Inc. v. Bureau of Revenue of N.M., 458 U.S. 832 (1982) (comprehensive federal regulation of Indian education preempts state tax)
- California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987) (federal/tribal interests preempt state regulation of gaming absent federal authorization)
- Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163 (1989) (analyzed when state taxes on on-reservation activity are permissible based on history and state involvement)
- Barona Band of Mission Indians v. Yee, 528 F.3d 1184 (9th Cir. 2008) (sales tax on third-party purchases for casino renovation not preempted where tribe engaged in tax manipulation)
- Gaming Corp. of America v. Dorsey & Whitney, 88 F.3d 536 (8th Cir. 1996) (IGRA preemption leaves states authority only through negotiated compacts)
- Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S. 134 (1980) (state tax permissible where tribe marketed tax exemption to off-reservation customers)
- Marty Indian School Bd., Inc. v. State of South Dakota, 824 F.2d 684 (8th Cir. 1987) (applying Bracker to education-related on-reservation taxation)