CENTRAL MACHINERY CO. v. ARIZONA STATE TAX COMMISSION
No. 78-1604
Supreme Court of the United States
Argued January 14, 1980—Decided June 27, 1980
448 U.S. 160
Rodney B. Lewis argued the cause for appellant. With him on the briefs were Richard B. Collins, Jeanne S. Whiteing, and Z. Simpson Cox.
Ian A. Macpherson, Assistant Attorney General of Arizona, argued the cause for appellee. With him on the brief was Robert K. Corbin, Attorney General.
MR. JUSTICE MARSHALL delivered the opinion of the Court.
This case presents the question whether a State may tax the sale of farm machinery to an Indian tribe when the sale took place on an Indian reservation and was made by a corporation that did not reside on the reservation and was not licensed to trade with Indians.
I
Appellant is a corporation chartered by and doing business in Arizona. In 1973 it sold 11 farm tractors to Gila River Farms, an enterprise of the Gila River Indian Tribe. The Tribe is federally recognized and is governed by a constitution adopted pursuant to the Indian Reorganization Act,
Appellant‘s salesman solicited the sale of these tractors on the reservation, the contract was made there, and payment for and delivery of the tractors also took place there. Appellant does not have a permanent place of business on the reservation, and it is not licensed under
The State of Arizona imposes a “transaction privilege tax” on the privilege of doing business in the State.
The tax amounts to a percentage оf the gross receipts of the taxable entity. The tax is assessed against the seller of goods, not against the purchaser. In this case, appellant added the amount of this tax—$2,916.62—as a separate item to the price of the tractors, thereby increasing by that amount the total purchase price paid by Gila River Farms. Appellant paid this tax to the State under protest and instituted state administrative proceedings to claim a refund.2 The administrative claim was denied, and appellant thеn filed this action in state court, contending that federal regulation of Indian trading pre-empted application of the state tax to the transaction in question. The Superior Court for Maricopa County held that the State had no jurisdiction to tax the transaction, and accordingly it ordered a refund. The Supreme Court of Ari-
We noted probable jurisdiction, 444 U. S. 822 (1979), and now reverse.
II
In 1790, Congress passed a statute regulating the licensing of Indian traders. Act of July 22, 1790, ch. 33, 1 Stat. 137. Ever since that time, the Federal Government has comprehensively regulated trade with Indians to рrevent “fraud and imposition” upon them. H. R. Rep. No. 474, 23d Cong., 1st Sess., 11 (1834) (Committee Report with respect to Indian Trade and Intercourse Act of 1834, ch. 161, 4 Stat. 729). In the current regulatory scheme, the Commissioner of Indian Affairs has “the sole power and authority to appoint traders to the Indian tribes and to make ... rules and regulations ... specifying the kind and quantity of goods and the prices at which such goods shall be sold to the Indians.”
In Warren Trading Post Co. v. Arizona Tax Comm‘n, 380 U. S. 685 (1965), the Court unanimously held that these “apparently all-inclusive regulations and the statutes authorizing them,” id., at 690, prohibited the State of Arizona from imposing precisely the same tax as is at issue in the present case on the operаtor of a federally licensed retail trading post located on a reservation. We determined that these regulations and statutes are “in themselves sufficient to show that Congress has taken the business of Indian trading on reservations so
There are only two distinctions between Warren Trading Post, supra, and the present case: appellant is not a licensed Indian trader, and it does not have a permanent place of business on the reservation.3 The Supreme Court of Arizona concluded that these distinctions indicated that federal law did not bar imposing the transaction privilege tax on appellant. We disagree.
The contract of sale involved in the present case was executed on the Gila River Reservation, and delivery and payment wеre effected there. Under the Indian trader statutes,
Nor is it relevant that appellant did not maintain a permanent place of business on the reservation. The Indian trader statutes and their implementing regulations apply no less to a nonresident person who sells goods to Indians on a reservation than they do to a resident trader. See
Since the transaction in the present case is governed by the Indian trader statutes, federal law pre-empts the asserted state tax. As we held in Warren Trading Post, supra, at
The decision of the Supreme Court of Arizona is
Reversed.
MR. JUSTICE STEWART, with whom MR. JUSTICE POWELL, MR. JUSTICE REHNQUIST, and MR. JUSTICE STEVENS join, dissenting.
The question before us is whether the appellant is immune from a state tax imposed on the proceeds of the sale by it of farm machinery to an Indian tribe. The Court concludes that an affirmative answer is required by the rationale of Warren Trading Post Co. v. Arizona Tax Comm‘n, 380 U. S. 685, a case that is similar in some respects to this one. While I agree that Warren Trading Post states the relevant legal principles, I cannot agree that those principles lead to the result reached by the Court in this case. Accordingly, I dissent.
In Warren Trading Post, the Court held that the State of Arizona may not impose the same tax involved here on the operator of a federally licensed retail trading business located on an Indian reservation. The Court determined that
As the Court recognizes, the circumstances of this case differ from those presented by Warren Trading Post. Specifically, the appellant here is not a licensed Indian trader and does not have a permanent place of business on the reservation. See ante, at 164. The Court considers these differеnces immaterial, however, apparently because, as it reads the relevant statutes, the appellant could have been subjected to regulation somewhat like that in Warren Trading Post, though in fact it was not. Thus the Court relies on
Even assuming that the Court correctly reads the statutory language to reach anybody who sells goods “on any Indian reservation,” I cannot understand why the Court ascribes to that fact the significance that it does. The question, after all, is not whether the apрellant may be required to have a license, but rather, as the Arizona Supreme Court correctly believed, whether the state tax “runs afoul of any congressional enactments” dealing with the affairs of reservation Indians, State v. Central Machinery Co., 121 Ariz. 183, 184, 589 P. 2d 426, 427 (1978). This Court has consistently recognized that “‘[e]nactments of the federal government passed to protect and guard its Indian wards only affect the operation, within the [reservation,] of such state laws as conflict with the federal enactments,‘” Moe v. Salish & Kootenai Tribes, 425 U. S. 463, 483, quoting United States v. McGowan, 302 U. S. 535, 539.1 With regard to the determinative issue
But the rationale of the decision in Warren Trading Post, supra, was not so simple as this. The grounds of that decision were twofold. First, as the Court today reiterates, a tax on the gross income of a licensed trader residing on the reservation could “disturb and disarrange the statutory plan Congress set up in order to protect Indians against рrices deemed unfair or unreasonable,” id., at 691. Second, the Court saw in that case no governmental justification to support the State‘s “put[ting] financial burdens on [the trader] or the Indians with whom it deals in addition to those Congress or the tribes have prescribed,” ibid. Because Congress for nearly a century had “left the Indians ... free to run the reservation and its affairs without state control,” Arizona had been “automatically relieved ... of all burdens for carrying on those same responsibilities,” id., at 690. That being so, the Court did not “believe that Congress intended to leave to the State the privilege of levying this tax,” id., at 691.
Neither of these considerations is present here. First, although the appellant was obliged to obtain federal approval of the sale transaction in this case, see
Second, the Court inexplicably ignores the State‘s wholly legitimate purpose in taxing the аppellant, a corporation that does business within the State at large and presumably derives substantial benefits from the services provided by the State at taxpayer‘s expense.3 Aside from entering the reser-
It is impоrtant to recognize the limits inherent in the principles of federal pre-emption on which the Warren Trading Post decision rests. Those limits make necessary in every case such as this a careful inquiry into pertinent federal, tribal, and state interests, without which a rational accommodation of those interests is not possible. Had such an inquiry been made in this case, I am convinced the Court could not have concluded that Arizona‘s exercise of the sovereign power to tax its non-Indian citizens had been pre-empted by federal law.
MR. JUSTICE POWELL, dissenting in No. 78-1604 (ante, p. 160) and concurring in No. 78-1177 (ante, p. 136).
I write separately because I would distinguish Central Machinery Co. v. Arizona State Tax Comm‘n, ante, p. 160, from White Mountain Apache Tribe v. Bracker, ante, p. 136.
I
Central Machinery
Warren Trading Post held that Arizona could not levy its transaction privilege tax against a company regularly еngaged in retail trading with the Indians upon a reservation. The company operated under a federal license, and it was subject to the federal regulatory scheme authorized by
The Court today is too much persuaded by the superficial similarity between Warren Trading Post and Central Machinery. The Court mistakenly concludes thаt a company having no license to trade with the Indians and no place of business within a reservation is engaged in “the business of Indian trading on reservations....” 380 U. S., at 690. Although “[a]ny person” desiring to sell goods to Indians inside a reservation must secure federal approval, see
Our most recent cases undermine the notion that
Finally, unlike taxes imposed upon an Indian trader engaged in a continuous course of dealing within the reservation, the tax assessed against Central Machinery does not “to a substantial extent frustrate the evident congressional purpose of ensuring that no burden shall be imposed upon Indian traders for trading with Indians ... except as authorized by Acts of Congress or by valid regulations promulgated under those Acts.” Warren Trading Post, supra, at 691. In this case, the Bureau of Indian Affairs approved all aspects of the only sale Central Machinery made to the Gila River Indian Tribe. The contract price approved by the Bureau included costs attributable to the very tax that Central Machinery now seeks to recover. Ante, at 161-162. Thus, the State‘s tax did not interfere with “the statutory plan Congress set up in order to protect Indians against prices deemed unfair or unreasonable. ...” Warren Trading Post, supra, at 691. Since a seller not licensed to trade with the Indians must secure specific fedеral approval for each isolated transaction, there is no danger that ordinary state business taxes upon the seller will impair the Bureau‘s ability to prevent fraudulent or excessive pricing. To hold the seller immune from state taxes otherwise due upon a single transaction with the Indians gives the non-Indian seller a windfall or the Indian buyer an unwarranted advantage over all others who deal with the seller.
II
White Mountain Apache Tribe
White Mountain Apache Tribe presents a different situation. Petitioner Pinetop Logging Co. operates solely and continuоusly upon an Indian reservation under its contract
Since the Federal Government, the Tribe, and its contractors are solely responsible for the roads that Pinetop uses, I “cannot believе that Congress intended to leave to the State the privilege of levying” road use taxes upon Pinetop‘s operations. See Warren Trading Post, 380 U. S., at 691. The State has no interest in raising revenues from the use of Indian roads that cost it nothing and over which it exercises no control. See Washington v. Confederated Tribes, supra, at 162-164.3 The addition of these taxes to the road construction and repair expenses that Pinetop already bears also would interfere with the federal scheme for maintaining roads essential to successful Indian timbering. See 380 U. S., at
Notes
“A. There is levied and there shall be collected ... privilege taxes measured by the amount or volume of business transacted by рersons on
At the time of the transaction,
“A. The tax imposed by subsection A of § 42-1309 shall be levied and collected at an amount equal to two per cent of the gross proceeds of sales or gross income from the business upon every person engaging or continuing within this state in the business of selling any tangible personal property whatever at retail....”
At the time of the transaction,
“A. There is levied and shall be collected by the department of revenue a tax:
“1. On the privilege of doing business in this state, measured by the amount or volume of business transacted by persons on account of their business activities, and in the amounts to be determined by the application, against values, gross proceeds of sales, or gross income, as the case may be, in accordance with the provisions and schedulеs as set forth in [§ 42-1301 et seq.], at rates equal to fifty per cent of the rates imposed in such article.” 1973 Ariz. Sess. Laws, ch. 123, § 117. As MR. JUSTICE POWELL observes in his dissenting opinion, post, at 172, the Court in Moe v. Salish & Kootenai Tribes rejected the contention that The regulation dealing with itinerant peddlers was promulgated after the decision in Warren Trading Post. See 30 Fed. Reg. 8267 (1965). Thus, the regulations before the Court in Warren Trading Post required all licensed Indian traders to conduct their businesses under the management of a habitual resident upon the reservation.
2 At oral argument, cоunsel for Central Machinery conceded that the State could have taxed the transaction in question if it had been completed at the firm‘s usual place of business. Tr. of Oral Arg. 7. Thus, Central Machinery‘s argument reduces to the proposition that the locus of the transaction is dispositive. Quite apart from the opportunities for tax evasion that it creates, this position is unsound. Persons who make an unauthorized sale to Indians upon a reservation can be prosecuted.
2 The Court‘s construction of the trader statutes, in fact, sweeps far more broadly than their language, no portion of which indicates a congressional intention to immunize anybody from state taxation.