269 F. Supp. 3d 910
D.S.D.2017Background
- The Flandreau Santee Sioux Tribe operates the Royal River Casino & Hotel and the First American Mart (Store) on the Flandreau Reservation as a single business enterprise; ~60% of patrons are South Dakota residents. The Tribe also imposes a 6% tribal sales tax.
- A Tribal-State gaming compact authorizes Class III gaming but is silent about state authority to tax nonmember purchases of goods/services on the licensed premises or about alcohol regulation and tax-remittance duties.
- South Dakota imposed a state use tax on nonmember purchases and conditioned reissuance of three state alcohol licenses on the Tribe’s remittance of use taxes under S.D.C.L. § 35-2-24; the Tribe refused to remit and sued in federal court.
- The Tribe argued IGRA and federal common law preempt the state use tax on nonmember purchases (and that the tax/remittance requirement infringes tribal sovereignty and is discriminatory). The State defended the tax and the conditioning of licenses on remittance.
- The Court granted summary judgment in part and denied in part: it held IGRA preempts application of South Dakota’s use tax to purchases at casino-related amenities that are "directly related" to gaming (slots, table games, hotel, RV park, food & beverage at the casino, live entertainment, gift shop), but the tax applies to nonmember purchases at the separate Store; collection/remittance duties for Store transactions are permissible; conditioning alcohol-license renewal on remittance of non-gaming taxes is impermissible.
Issues
| Issue | Plaintiff's Argument (Tribe) | Defendant's Argument (State) | Held |
|---|---|---|---|
| Whether IGRA preempts the state's use tax on nonmember purchases at casino-related amenities | IGRA’s compactable subjects and §2710(d)(4) preempt state taxation of transactions "directly related to" gaming; the casino amenities are tailored to attract gaming patrons and thus fall within §2710(d)(3)(C)(vii) | IGRA does not reach non-gambling transactions; §2710(d)(4) prevents only taxation of game play, not related services; amenities are not "directly related" | Court: IGRA preempts state use tax on nonmember purchases at casino amenities (slots, table games, casino food/beverage, hotel, RV park, live entertainment, gift shop); Tribe SJ granted on that portion |
| Whether IGRA or federal law preempts state tax on nonmember purchases at the separate Store | Tribe: broader IGRA/federal sovereignty arguments should bar state tax and collection/remittance duties | State: Store transactions are separate retail activity not "directly related" to gaming; general state tax applies | Court: IGRA does not preempt the state use tax on nonmember purchases at the Store; Tribe SJ denied on Store claims; State SJ granted as to Store tax |
| Whether the State’s use tax (and its credit regime) is discriminatory under federal Indian law | Tribe: South Dakota denies tax credit for tribal tax while granting credit to other states, discriminating against the Tribe | State: Tribe is not similarly situated to other sovereigns; tax applies uniformly and credits require reciprocity; no unlawful discrimination | Court: Tax is not discriminatory; Tribe SJ denied on discrimination claim; State SJ granted on discrimination |
| Whether conditioning renewal of state alcohol licenses on remittance of use taxes and compelling the Tribe to collect/remit are preempted or infringe tribal sovereignty | Tribe: Conditioning license renewal on remittance of (some) taxes exceeds state authority and infringes sovereignty; collection/remittance duties not permissible beyond minimal collection burdens | State: Conditioning and collection/remittance are lawful regulatory measures tied to state liquor regulation authority | Court: Collection/remittance duties for Store nonmember sales are permissible (State SJ granted as to collection for Store). But conditioning license renewal on payment/remittance of disputed taxes (including those preempted by IGRA) is impermissible; State SJ denied as to conditioning licenses |
Key Cases Cited
- California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987) (federal law preempted state regulation of tribal gaming, motivating IGRA)
- White Mountain Apache Tribe v. Bracker, 448 U.S. 136 (1980) (Balancing test for state jurisdiction over on-reservation conduct)
- New Mexico v. Mescalero Apache Tribe, 462 U.S. 324 (1983) (federal policy favoring tribal self-government informs preemption analysis)
- Confederated Tribes of the Colville Indian Reservation v. Walton, 447 U.S. 134 (1980) (states may tax non-Indian customers on reservation; balancing state and tribal interests)
- Gaming Corp. of Am. v. Dorsey & Whitney, 88 F.3d 536 (8th Cir. 1996) (IGRA preemption scope and compact negotiation as exclusive path for state regulation of gaming)
- Casino Res. Corp. v. Harrah’s Entm’t, Inc., 243 F.3d 435 (8th Cir. 2001) (IGRA does not preempt generally-applicable, tangentially related state-law claims among non-Indian entities)
- Barona Band of Mission Indians v. Yee, 528 F.3d 1184 (9th Cir. 2008) (state tax on construction materials for casino not preempted where materials had multiple uses and reservation tax-exemption was invoked to attract activity)
- Rincon Band of Luiseno Mission Indians v. Schwarzenegger, 602 F.3d 1019 (9th Cir. 2010) (revenue-sharing compact terms are compactable only when funds are directly related to gaming and negotiated with meaningful concessions)
- Coyote Valley Band of Pomo Indians v. DOJ (Coyote Valley II), 331 F.3d 1094 (9th Cir. 2003) (broad reading of "directly related to the operation of gaming" in compact negotiations)
- Town of Ledyard v. Mashantucket Pequots Gaming Authority, 722 F.3d 457 (2d Cir. 2013) (IGRA does not preempt generally-applicable laws with de minimis effects on tribal gaming)
- Michigan v. Bay Mills Indian Community, 134 S. Ct. 2024 (2014) (class III gaming activity defined narrowly as the gambling conduct itself)
- Oklahoma Tax Comm’n v. Chickasaw Nation, 515 U.S. 450 (1995) (Bracker balancing and analysis of legal incidence of tax)