OKLAHOMA TAX COMMISSION v. CHICKASAW NATION
No. 94-771
Supreme Court of the United States
Argued April 24, 1995-Decided June 14, 1995
515 U.S. 450
GINSBURG, J.
Dennis W. Arrow argued the cause for respondent. With him on the briefs was Bob Rabon.
Paul A. Engelmayer argued the cause for the United States as amicus curiae urging affirmance. With him on the brief were Solicitor General Days, Assistant Attorney General Schiffer, and Deputy Solicitor General Kneedler.*
JUSTICE GINSBURG delivered the opinion of the Court.
This case concerns the taxing authority of the State of Oklahoma over the Chickasaw Nation (Tribe) and its members.1 We take up two questions: (1) May Oklahoma impose*
We hold that Oklahoma may not apply its motor fuels tax, as currently designed, to fuel sold by the Tribe in Indian country. In so holding, we adhere to settled law: when Congress does not instruct otherwise, a State‘s excise tax is unenforceable if its legal incidence falls on a Tribe or its members for sales made within Indian country. We further hold, however, that Oklahoma may tax the income (including wages from tribal employment) of all persons, Indian and non-Indian alike, residing in the State outside Indian country. The Treaty between the United States and the Tribe, which guarantees the Tribe and its members that “no Territory or State shall ever have a right to pass laws for the government of” the Chickasaw Nation, does not displace the rule, accepted interstate and internationally, that a sovereign may tax the entire income of its residents.
I
The Chickasaw Nation, a federally recognized Indian Tribe, commenced this civil action in the United States District Court for the Eastern District of Oklahoma, to stop the State of Oklahoma from enforcing several state taxes against the Tribe and its members.3 Pertinent here, the District
Concerning the motor fuels tax, the Tenth Circuit disapproved the District Court‘s “balancing of the respective tribal and state interests” approach. Id., at 972. The legal incidence of the tax, the Court of Appeals ruled, is the key concept. That incidence, the Tenth Circuit determined, falls directly on fuel retailers-here, on the Tribe, due to its operation of two convenience stores that sell fuel to tribal members and other persons. Oklahoma‘s imposition of its fuels tax on the Tribe as retailer, the Court of Appeals concluded, “conflicts with . . . the traditional scope of Indian sovereign authority.” Ibid. Because the State asserted no congressional authorization for its exaction, the Tenth Circuit declared the fuels tax preempted.
Oklahoma‘s income tax, in the Court of Appeals’ view, could not be applied to any tribal member employed by the Tribe;4 residence, the Tenth Circuit said, was “simply not relevant to [its] determination.” Id., at 979. The Court of Appeals relied on the provision of the Treaty of Dancing
We granted the State‘s petition for certiorari, 513 U. S. 1071 (1995), and now (1) affirm the Court of Appeals’ judgment as to the motor fuels tax, and (2) reverse that judgment as to the income tax applied to earnings of tribal members who work for the Tribe but reside in the State outside Indian country.
II
The Tribe contends, and the Tenth Circuit held, that Oklahoma‘s fuels tax5 is levied on retailers, not on distributors or consumers. The respect due to the Chickasaw Nation‘s sovereignty, the Tribe maintains, means Oklahoma-absent congressional permission-may not collect its tax for fuel supplied to, and sold by, the Tribe at its convenience stores. In support of the tax immunity it asserts, the Tribe recalls our reaffirmations to this effect: “The Constitution vests the Federal Government with exclusive authority over relations with Indian tribes . . . , and in recognition of the sovereignty retained by Indian tribes even after formation of the United States, Indian tribes and individuals generally are exempt from state taxation within their own territory.” Montana v. Blackfeet Tribe, 471 U. S. 759, 764 (1985); see
In response, Oklahoma urges that Indian tribes and their members are not inevitably, but only “‘generally,‘” immune from state taxation. Brief for Petitioner 19 (quoting Blackfeet Tribe, 471 U. S., at 764). At least as to some aspects of state taxation, Oklahoma asserts, an approach “balancing the state and tribal interests” is in order. Brief for Petitioner 17. Even if the legal incidence of the fuels tax falls on the Tribe (as retailer), Oklahoma concludes, tax immunity should be disallowed here because “the state interest supporting the levy is compelling, . . . the tribal interest is insubstantial, and . . . the state tax would have no effect on ‘tribal governance and self-determination.‘” Id., at 22 (emphasis in original).
In the alternative, Oklahoma argues that the Court of Appeals “erred in holding that the legal incidence of the fuel tax falls on the retailer.” Id., at 10. Moreover, the State newly contends, even if the fuels tax otherwise would be impermissible, Congress, in the 1936 Hayden-Cartwright Act,
We set out first our reason for refusing to entertain at this late date Oklahoma‘s argument that the Hayden-Cartwright Act expressly permits state levies on motor fuels sold on Indian reservations. We then explain why we agree with the Tenth Circuit on the Tribe‘s exemption from Oklahoma‘s fuels tax.
A
On brief, the State points out-for the first time in this litigation-that the Hayden-Cartwright Act,
B
Assuming, then, that Congress has not expressly authorized the imposition of Oklahoma‘s fuels tax on fuel sold by the Tribe, we must decide if the State‘s exaction is nonetheless permitted. Oklahoma asks us to make the determination by weighing the relevant state and tribal interests, and urges that the balance tilts in its favor. Oklahoma emphasizes that the fuel sold is used “almost exclusively on state roads,” imposing “very substantial costs on the State-but no burden at all on the Tribe.” Brief for Petitioner 9. The State
We have balanced federal, state, and tribal interests in diverse contexts, notably, in assessing state regulation that does not involve taxation, see, e. g., California v. Cabazon Band of Mission Indians, 480 U. S. 202, 216-217 (1987) (balancing interests affected by State‘s attempt to regulate on-reservation high-stakes bingo operation), and state attempts to compel Indians to collect and remit taxes actually imposed on non-Indians, see, e. g., Moe v. Confederated Salish and Kootenai Tribes of Flathead Reservation, 425 U. S. 463, 483 (1976) (balancing interests affected by State‘s attempt to require tribal sellers to collect cigarette tax on non-Indians; precedent about state taxation of Indians is not controlling because “this [collection] burden is not, strictly speaking, a tax at all“).
But when a State attempts to levy a tax directly on an Indian tribe or its members inside Indian country, rather than on non-Indians, we have employed, instead of a balancing inquiry, “a more categorical approach: ‘[A]bsent cession of jurisdiction or other federal statutes permitting it,’ we have held, a State is without power to tax reservation lands and reservation Indians.” County of Yakima v. Confederated Tribes and Bands of Yakima Nation, 502 U. S. 251, 258 (1992) (citation omitted). Taking this categorical approach, we have held unenforceable a number of state taxes whose legal incidence rested on a tribe or on tribal members inside Indian country. See, e. g., Bryan v. Itasca County, 426 U. S. 373 (1976) (tax on Indian-owned personal property situated in Indian country); McClanahan, 411 U. S., at 165-166 (tax on income earned on reservation by tribal members residing on reservation).
The initial and frequently dispositive question in Indian tax cases, therefore, is who bears the legal incidence of a tax.
Judicial focus on legal incidence in lieu of a more venturesome approach accords due deference to the lead role of Congress in evaluating state taxation as it bears on Indian tribes and tribal members. See Yakima, 502 U. S., at 267. The State complains, however, that the legal incidence of a tax “‘has no relationship to economic realities.‘” Brief for Petitioner 30 (quoting Complete Auto Transit, Inc. v. Brady, 430 U. S. 274, 279 (1977)). But our focus on a tax‘s legal incidence accommodates the reality that tax administration
By contrast, a “legal incidence” test, as 11 States with large Indian populations have informed us, “provide[s] a reasonably bright-line standard which, from a tax administration perspective, responds to the need for substantial certainty as to the permissible scope of state taxation authority.” Brief for South Dakota et al. as Amici Curiae 2.9 And if a State is unable to enforce a tax because the legal incidence of the impost is on Indians or Indian tribes, the State generally is free to amend its law to shift the tax‘s legal incidence. So, in this case, the State recognizes and the Tribe agrees that Oklahoma could accomplish what it here seeks “by declaring the tax to fall on the consumer and directing the Tribe to collect and remit the levy.” Pet. for Cert. 17; see Brief for Respondent 10-13.10
The State also argues that, even if legal incidence is key, the Tenth Circuit erred in holding that the fuels tax‘s legal incidence rests on the retailer (here, the Tribe). We consider the Court of Appeals’ ruling on this point altogether reasonable, and therefore uphold it. See, e. g., Haring v. Prosise, 462 U. S. 306, 314, n. 8 (1983) (noting “our practice to accept a reasonable construction of state law by the court of appeals“).
The Oklahoma legislation does not expressly identify who bears the tax‘s legal incidence-distributors, retailers, or consumers; nor does it contain a “pass through” provision, requiring distributors and retailers to pass on the tax‘s cost to consumers. Cf. Moe, 425 U. S., at 482 (statute at issue provided that Montana cigarette tax “‘shall be conclusively presumed to be [a] direct [tax] on the retail consumer precollected for the purpose of convenience and facility only‘“).
In the absence of such dispositive language, the question is one of “fair interpretation of the taxing statute as written and applied.” California Bd. of Equalization v. Chemehuevi Tribe, 474 U. S. 9, 11 (1985) (per curiam). Oklahoma‘s law requires fuel distributors to “remit” the amount of tax due to the Tax Commission; crucially, the statute describes this remittal by the distributor as ”on behalf of a licensed retailer.”
The fuels tax law contains no comparable indication that retailers are simply collection agents for taxes ultimately imposed on consumers. No provision sets off the retailer‘s liability when consumers fail to make payments due; neither are retailers compensated for their tax collection efforts. And the tax imposed when a distributor sells fuel to a retailer applies whether or not the fuel is ever purchased by a consumer. See, e. g.,
As the Court of Appeals fairly and reasonably concluded: “[T]he import of the language and the structure of the fuel tax statutes is that the distributor collects the tax from the retail purchaser of the fuel“; the “motor fuel taxes are legally imposed on the retailer rather than on the distributor or the consumer.” 31 F. 3d, at 971-972.
III
Regarding Oklahoma‘s income tax, the Court of Appeals declared that the State may not tax the wages of members of the Chickasaw Nation who work for the Tribe, including members who reside in Oklahoma outside Indian country.
The holding on tribal members who live in the State outside Indian country runs up against a well-established principle of interstate and international taxation-namely, that a jurisdiction, such as Oklahoma, may tax all the income
“That the receipt of income by a resident of the territory of a taxing sovereignty is a taxable event is universally recognized. Domicil itself affords a basis for such taxation. Enjoyment of the privileges of residence in the state and the attendant right to invoke the protection of its laws are inseparable from responsibility for sharing the costs of government . . . . These are rights and privileges which attach to domicil within the state. . . . Neither the privilege nor the burden is affected by the character of the source from which the income is derived.” New York ex rel. Cohn v. Graves, 300 U. S. 308, 312-313 (1937).
This “general principl[e] . . . ha[s] international acceptance.” American Law Institute, Federal Income Tax Project: International Aspects of United States Income Taxation 4, 6 (1987); see, e. g., C. Cretton, Expatriate Tax Manual 1 (2d ed. 1991) (“An individual who is resident in the UK is subject to income tax on all his sources of income, worldwide.“). It has been applied both to the States, e. g., Shaffer v. Carter, 252 U. S. 37, 57 (1920); see 2 J. Hellerstein & W. Hellerstein, State Taxation § 20.04, p. 20-13 (1992), and to the Federal Government, e. g., Cook v. Tait, 265 U. S. 47, 56 (1924); see 1 J. Isenbergh, International Taxation 45-56 (1990).12
Notably, the Tribe has not asserted here, or before the Court of Appeals, that the State‘s tax infringes on tribal self-governance. See Brief in Opposition 9-10 (“infringement” question is not presented to this Court); Brief for Respondent 42, n. 37; see also Sac and Fox, 508 U. S., at 126 (reserving question “whether the Tribe‘s right to self-governance could operate independently of its territorial jurisdiction to pre-empt the State‘s ability to tax income
Instead, the Tribe relies on the argument that Oklahoma‘s levy impairs rights granted or reserved by federal law. See Mescalero Apache Tribe v. Jones, 411 U. S. 145, 148-149 (1973) (“[E]xpress federal law to the contrary” overrides the general rule that “Indians going beyond reservation boundaries have generally been held subject to nondiscriminatory state law otherwise applicable to all citizens of the State.“). The Tribe invokes the Treaty of Dancing Rabbit Creek, Sept. 27, 1830, Art. IV, 7 Stat. 333-334, which provides in pertinent part:
“The Government and people of the United States are hereby obliged to secure to the said [Chickasaw15] Nation of Red People the jurisdiction and government of all the persons and property that may be within their limits west, so that no Territory or State shall ever have a right to pass laws for the government of the [Chickasaw] Nation of Red People and their descendants . . . but the U. S. shall forever secure said [Chickasaw] Nation from, and against, all [such] laws. . . .”
According to the Tribe, the State‘s income tax, when imposed on tribal members employed by the Tribe, is a law “for the government of the [Chickasaw] Nation of Red People and their descendants,” and it is immaterial that these “descendants” live outside Indian country.
In evaluating this argument, we are mindful that “treaties should be construed liberally in favor of the Indians.”
The Tribe and the United States16 further urge us to read the Treaty in accord with the repudiated view that an income tax imposed on government employees should be treated as a tax on the government. See Dobbins v. Commissioners of Erie Cty., 16 Pet. 435 (1842). But see Graves v. New York ex rel. O‘Keefe, 306 U. S. 466, 480 (1939) (“The theory, which once won a qualified approval, that a tax on income is legally or economically a tax on its source, is no longer tenable . . . .“). Under this view, a tax on tribal members employed by the Tribe would be seen as an impermissible tax on the Tribe itself.
We doubt the signatories meant to incorporate this now-defunct view into the Treaty. They likely gave no thought to a State‘s authority to tax the income of tribal members
Moreover, importing the Dobbins rule into the Treaty would prove too much. That dubious doctrine, by typing taxation of wages earned by tribal employees as taxation of the Tribe itself, would require an exemption for all employees of the Tribe-not just tribal members, but nonmembers as well. The Court of Appeals rejected such an extension, see 31 F. 3d, at 975 (“It is settled that the income tax is imposed on the employee, not the employer . . . . Therefore, to the extent that the income tax is imposed on non-member employees who have no established claim to tribal ancestry, ‘the tax does not infringe upon the treaty prohibition.‘“), and even the Tribe is not urging this view before us, admitting that it is “substantially more tenuous.” Brief for Respondent 47.
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For the reasons stated, we affirm the judgment of the Court of Appeals as to the motor fuels tax, reverse that judgment as to the income tax, and remand the case for proceedings consistent with this opinion.
It is so ordered.
APPENDIX ΤΟ ΟΡΙΝION OF THE COURT
Treaty of Dancing Rabbit Creek, Sept. 27, 1830, Article IV, 7 Stat. 333-334
The Government and people of the United States are hereby obliged to secure to the said [Chickasaw] Nation of Red People the jurisdiction and government of all the persons and
JUSTICE BREYER, with whom JUSTICE STEVENS, JUSTICE O‘CONNOR, and JUSTICE SOUTER join, concurring in part and dissenting in part.
I dissent from the portion of the Court‘s decision that permits Oklahoma to tax the wages that (1) the Tribe pays (2) to members of the Tribe (3) who work for the Tribe (4) within Indian country, but (5) who live outside Indian country, and, apparently, commute to work. The issue is whether such a tax falls within the scope of a promise this Nation made to the Chickasaw Nation in 1837-a promise that no “State shall ever have a right to pass laws for the government of the [Chickasaw] Nation of Red People and their descendants . . . but the U. S. shall forever secure said [Chickasaw] Nation from, and against, all laws” except those the Tribe made itself (and certain others not relevant here). Treaty of Dancing Rabbit Creek, 7 Stat. 333 (1830) (see the Appendix to the opinion of the Court); Treaty of Jan. 17, 1837, 11 Stat. 573. In my view, this language covers the tax.
For another thing, the language of this promise, read broadly and in light of its purpose, fits the tax at issue. The United States promised to secure the “[Chickasaw] Nation from, and against, all laws” for the government of the Nation, except those the Nation made itself or that Congress made. Treaty of Dancing Rabbit Creek, supra (emphasis added). The law in question does not fall within one of the explicit exceptions to this promise. Nor need the Court read the Treaty as creating an additional implied exception where, as here, the law in question likely affects significantly and directly the way in which the Tribe conducts its affairs in areas subject to tribal jurisdiction-how much, for example, it will likely have to pay workers on its land and what kinds of tribal expenditures it consequently will be able to afford. The impact of the tax upon tribal wages, tribal members, and tribal land makes it possible, indeed reasonable, to consider Oklahoma‘s tax (insofar as it applies to these tribal wages) as amounting to a law “for the government of” the Tribe. Indeed, in 1837, when the United States made its promise to the Chickasaws, the law considered a tax like the present one to be a tax on its source-i. e., the Tribe
The majority sets forth several strong arguments against the Treaty‘s application. But, ultimately, I do not find them convincing. It is true, as the majority points out, that well-established principles of tax law permit States to tax those who reside within their boundaries. It is equally true that the Chickasaws whom Oklahoma seeks to tax live in the State at large, although they work in Indian country. But, these truths simply pose the question in this case: Does the Treaty provide an exception to well-established principles of tax law, roughly the same way as do, say, treaties governing diplomats and employees of international organizations? See, e. g., Toll v. Moreno, 458 U. S. 1, 14-15 (1982) (explaining that some such individuals are exempt from federal, state, and local income taxation). The statement of basic tax principles, by themselves, cannot provide the answer.
The majority is also concerned about a “line-drawing” problem. If the Treaty invalidates the law before us, what about an Oklahoma tax, for example, on residents who work for, but are not members of, the Tribe? I acknowledge the problem of line drawing, but that problem exists irrespective of where the line is drawn here. And, because this tax (1) has a strong connection to tribal government (i. e., it falls on tribal members, who work for the Tribe, in Indian country), (2) does not regulate conduct outside Indian country, and (3) does not (as the Solicitor General points out) represent an effort to recover a proportionate share of, say, the cost of providing state services to residents, I am convinced that it
One final legal consideration strengthens the conclusion I reach. The law requires courts to construe ambiguous treaties in favor of the Indians. County of Oneida v. Oneida Indian Nation of N. Y., 470 U. S. 226, 247 (1985). The majority believes that even a “liberal construction cannot save the Tribe‘s claim,” ante, at 466, because the Treaty says that the United States is “obliged to secure to the said [Chickasaw] Nation . . . the jurisdiction and government of all the persons and property that may be within their limits west.” Treaty of Dancing Rabbit Creek, 7 Stat. 333-334 (emphasis added). This language, when viewed in its historical context, however, seems primarily designed to point out that the Treaty operates only in respect to Chickasaw lands west of the Mississippi-i. e., that the Chickasaws would receive no protection unless they moved there. Regardless, the Oklahoma tax in question does affect “persons,” namely, tribal members, and “property,” namely, their wages, which members work and which wages are paid well “within” the Nation‘s “limits,” i. e., in Indian country. Admittedly, the quoted language, by itself, does not say for certain that such effects are sufficient to bring the state law within the Treaty‘s prohibition, but neither does it clearly make residency (rather than, say, place of employment) an absolute prerequisite. In these circumstances, the law requires us to give the Tribe the benefit of the doubt.
Thus, in my view, whether we construe the Treaty‘s language liberally or literally, Oklahoma‘s tax falls within its scope. For these reasons, I believe the Treaty bars the tax. And, although I join the remainder of the Court‘s opinion, I respectfully dissent on this point.