325 F. Supp. 3d 995
D.S.D.2018Background
- Flandreau Santee Sioux Tribe owns and operates Royal River Casino on its reservation in Moody County, SD and undertook a $24 million renovation/expansion of the casino.
- Under SDCL § 10-46A-1, contractors must pay a 2% contractor's excise tax; the SD Dept. of Revenue denied the Tribe's exemption request and the general contractor paid the tax under protest.
- The Tribe sued state officials seeking a declaratory judgment that South Dakota cannot impose the excise tax on non-Indian contractors performing work on the Tribe’s on-reservation casino project, and sought refunds of taxes paid under protest.
- The Tribe argued the tax is pre-empted by the Indian Gaming Regulatory Act (IGRA) and infringes tribal self-governance; the State argued the tax falls on non-Indian contractors and funds state services that benefit the Tribe and contractors.
- The district court granted the Tribe summary judgment on the first three claims (declaratory relief) holding IGRA pre-empts the tax and that state interests do not outweigh tribal/federal interests; the Tribe’s claim for a refund was dismissed for lack of jurisdiction (Eleventh Amendment).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the contractor's excise tax is per se invalid because it falls on tribal interests | Tribe: Tax effectively burdens the Tribe (passed through) so categorical bar applies | State: Legal incidence falls on non-Indian contractor under SD law so no per se bar | Court: Legal incidence is on contractor; tax is not per se invalid |
| Whether IGRA pre-empts the State's imposition of the excise tax on non-Indian contractors performing on-reservation casino construction | Tribe: IGRA comprehensively regulates gaming and catchall compact subjects; renovation is integral to gaming so tax is pre-empted | State: IGRA does not occupy field for such taxes; the State provides services funded by tax; distinguishes Bracker/Ramah | Court: IGRA pre-empts the tax (comprehensive regulation and catchall provision apply) |
| Whether imposition of the tax unlawfully infringes tribal self-government under Bracker balancing | Tribe: Tax interferes with tribal self-sufficiency and operation of gaming; no nexus between tax and state services provided to project | State: Tax funds services that benefit Tribe and contractors; general state interest in taxation | Court: State interest insufficient; tax infringes tribal self-government—Bracker balancing favors Tribe |
| Whether the court can order a refund of taxes paid under protest against state defendants | Tribe: Seeks refund as entity that bore tax burden | State: Sovereign immunity/Eleventh Amendment bars monetary relief absent US intervention | Court: Refund claim dismissed without prejudice for lack of jurisdiction |
Key Cases Cited
- Okla. Tax Comm'n v. Chickasaw Nation, 515 U.S. 450 (U.S. 1995) (legal incidence controls categorical validity of Indian-country taxes)
- White Mountain Apache Tribe v. Bracker, 448 U.S. 136 (U.S. 1980) (particularized balancing of state, federal, and tribal interests for non-Indian on-reservation activity)
- Ramah Navajo Sch. Bd., Inc. v. Bureau of Revenue of N.M., 458 U.S. 832 (U.S. 1982) (pre-emption where federal regulation of tribal functions is comprehensive)
- California v. Cabazon Band of Mission Indians, 480 U.S. 202 (U.S. 1987) (limits state regulation of tribal gaming; prompted IGRA)
- Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163 (U.S. 1989) (distinguishes state taxes where Congress showed minimal interest and state provides substantial services)
- Gaming Corp. of America v. Dorsey & Whitney, 88 F.3d 536 (8th Cir. 1996) (IGRA pre-emption and compact-driven state role analysis)
- In re Indian Gaming Related Cases (Coyote Valley II), 331 F.3d 1094 (9th Cir. 2003) (test for whether an activity falls within IGRA's catchall provision)
- Barona Band of Mission Indians v. Yee, 528 F.3d 1184 (9th Cir. 2008) (sales tax on casino renovation supplies not pre-empted where tribe engaged in tax manipulation)
- City of Duluth v. Fond du Lac Band of Lake Superior Chippewa, 785 F.3d 1207 (8th Cir. 2015) (IGRA's policy to make tribe the primary beneficiary of gaming income)
- Marty Indian School Bd., Inc. v. State of S.D., 824 F.2d 684 (8th Cir. 1987) (applying Bracker to educational services and state tax pre-emption)
- Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S. 134 (U.S. 1980) (state tax upheld where tribe marketed tax exemption to off-reservation customers)