938 F.3d 928
8th Cir.2019Background
- Flandreau Santee Sioux Tribe owns and operates Royal River Casino & Hotel (Casino) and First American Mart (Store) on the Flandreau Reservation in South Dakota; most patrons are nonmembers.
- South Dakota imposes a use tax on goods/services purchased in the State; the legal incidence of the use tax falls on nonmember purchasers.
- Tribe failed to remit use tax on nonmember sales at the Casino and Store; South Dakota’s Department of Revenue denied renewal of the Tribe’s alcoholic beverage licenses under S.D.C.L. § 35-2-24.
- District court: held IGRA expressly preempted imposition of the use tax on nonmember purchases of amenities throughout the Casino but not at the Store; held State could not condition liquor-license renewals on remittance of the use tax.
- Eighth Circuit: affirmed preemption for nonmember purchases of Casino amenities under Bracker-style balancing; held State may validly impose the use tax at the Store; reversed district court as to the prohibition on conditioning liquor-license renewal—State may condition renewal on remittance of validly imposed use taxes.
Issues
| Issue | Plaintiff's Argument (Tribe) | Defendant's Argument (State) | Held |
|---|---|---|---|
| Whether IGRA preempts South Dakota's use tax on nonmember purchases of Casino "amenities" (hotel, food, RV park, gift shop, entertainment) | IGRA (and the compact framework) preempts state taxation of activity "directly related to" Class III gaming; amenities are integral to gaming and thus preempted | IGRA does not preempt non-gaming activity; Class III protection covers only actual gaming ("each roll of the dice"); State can tax nonmember purchases under Bracker balancing | Court: IGRA does not expressly preempt, but under Bracker balancing federal and tribal interests in Class III gaming outweigh State interests; taxing nonmember Casino amenities is preempted (affirming district court) |
| Whether State may impose its use tax on nonmember purchases at the Store (non-gaming retail) | Tribe did not appeal district court’s ruling that tax may be imposed at the Store | State: tax valid and enforceable; incidence on nonmembers | Court: use tax may be imposed on nonmember purchases at the Store (district court ruling stands; Tribe did not appeal) |
| Whether State may condition renewal of Tribe's alcoholic beverage licenses on remittance of validly imposed use taxes (18 U.S.C. § 1161 / Rehner) | Conditioning renewal on remittance is not "reasonably necessary" under federal law and improperly leverages liquor licensing to collect unrelated taxes | §1161 and Rehner permit State regulation of reservation liquor; conditioning renewal is a reasonably necessary means to collect valid taxes (Potawatomi alternatives exist but are not exclusive) | Court: State may condition license renewal on remittance of validly imposed use taxes; district court’s prohibition reversed |
Key Cases Cited
- Oklahoma Tax Comm’n v. Chickasaw Nation, 515 U.S. 450 (1995) (states cannot tax reservation Indians absent federal authorization)
- White Mountain Apache Tribe v. Bracker, 448 U.S. 136 (1980) (Bracker balancing test for state taxes on nonmember activity on reservations)
- Ramah Navajo School Bd., Inc. v. Bureau of Revenue of N.M., 458 U.S. 832 (1982) (preemption where federal regulatory scheme is comprehensive and state tax burdens fall on tribe)
- Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163 (1989) (declined broad preemption absent special factors; flexible balancing)
- California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987) (tribal autonomy over gaming; prompted IGRA)
- Michigan v. Bay Mills Indian Cmty., 572 U.S. 782 (2014) (defining Class III gaming activity as what occurs in a casino)
- Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S. 134 (1980) (upheld state excise tax on vendors supplying cigarettes for on-reservation sales to nonmembers)
- Okla. Tax Comm’n v. Potawatomi Indian Tribe, 498 U.S. 505 (1991) (tribal sovereign immunity limits direct suits, but tribes may be required to assist in collection of valid state taxes; proposed alternative remedies)
- Dep’t of Taxation & Fin. of N.Y. v. Milhelm Attea & Bros., Inc., 512 U.S. 61 (1994) (upheld state quotas/controls on off-reservation wholesalers as reasonably necessary to prevent fraud and protect tax base)