68 Op. Att'y Gen. 151 | Wis. Att'y Gen. | 1979
DANIEL G. SMITH, Department of Revenue
You have asked several questions relating to the enforcement of Wisconsin's cigarette tax statutes, sec.
For the following reasons, it is my opinion that the state's jurisdiction to collect its taxes from Indian persons and Indian activities within reservations is extremely limited.
As indicated in previous opinions (see e.g., 65 Op. Att'y Gen. 276 (1976); 64 Op. Att'y Gen. 184 (1975)), there are certain basic legal principles which govern the resolution of jurisdictional questions concerning Indians and Indian lands. First, a federally recognized Indian tribe is a legitimate governmental entity possessing attributes of sovereignty over both its members and its territory, and as such has the power to regulate its internal and social relations. Second, the federal government has authority to qualify this power. Third, state law can have no role to play within a reservation's boundaries except with the *152 consent of the tribe itself or in conformity with treaties and acts of Congress or where the courts have determined that state law shall apply.
Recent Supreme Court decisions make clear that a state's authority to impose taxes on Indian tribes, tribal members, or tribal property within reservation boundaries depends on clear congressional authorization. See, e.g., Bryan v. Itasca Cty.,Minnesota,
The Supreme Court outlined the general framework by which state jurisdiction in taxation cases is to be analyzed, in McClanahan. The Court, as a starting point, noted that "the trend has been away from the idea of inherent Indian sovereignty as a bar to state jurisdiction and toward reliance on federal pre-emption." Tribal sovereign status, however, was strongly reaffirmed by the Court in two recent cases, Santa Clara Pueblo v. Martinez,
Also, in Mescalero Apache Tribe v. Jones, the Court concluded that Indian tribes do not enjoy absolute tax immunity outside reservation boundaries. The Court upheld the imposition of a state tax on the gross receipts of a ski resort operated by the Mescaleros on land located outside the boundaries of their reservation, although the Court struck down the state's use tax imposed on the personalty installed in the construction of the ski lifts. *153
Although McClanahan outlined the general framework by which state jurisdiction in taxation matters is to be analyzed, the Court specifically did not consider federal jurisdictional legislation such as Pub.L. No. 280,
Bryan concerned one question reserved in McClanahan; namely, whether the grant of civil jurisdiction to the states conferred by section four of Pub.L. No. 280 (
The Court held that the congressional grant of jurisdiction to the states through Pub.L. No. 280 was not authorization to the states to subordinate reservation Indians "to the full panoply of civil regulatory powers, including taxation, of state and local governments" because Congress did not clearly express such an intent. Id. at 388. In writing the opinion for a unanimous Court Justice Brennan stated:
[C]ongress knew well how to express its intent directly when that intent was to subject reservation Indians to the full sweep of state laws . . . . [I]f Congress in enacting Pub.L. No. 280 had intended to confer upon the States general civil regulatory powers . . . over reservation Indians, it would have expressly said so.
Id. at 389-90. Accordingly, the Court held invalid the state's personal property tax as applied to the mobile home of an enrolled Chippewa Indian where such mobile home was located on land held in trust for tribal members. Compare 65 Op. Att'y Gen. 276 (1976).
When read together, McClanahan and Bryan make clear that in view of federal pre-emption there is now a presumption against state taxing authority over Indians and Indian property located within an Indian reservation and that Pub.L. No. 280 does not alter or otherwise affect that presumption.
In Moe v. Confederated Salish and Kootenai Tribes, Etc.,
The Court noted also that the Montana cigarette tax was a direct tax on the retail consumer pre-collected by the seller for the purpose of convenience and facility only. Id.
With these general guidelines in mind, each of your several questions will now be considered.
1. You ask whether your Department can refuse to issue a permit under sec.
The underlying issue in all of your questions is whether the state cigarette tax laws are applicable to Indian tribes and Indian persons on Indian reservations. Accordingly, your questions will be answered in the context of state taxing authority. This analysis, therefore, does not necessarily govern other jurisdictional questions.
Wisconsin's cigarette tax laws, sec.
Section
Pursuant to sec.
Section
An occupational tax is imposed on the sale, offering or exposing for sale, possession with intent to sell or removal for consumption or sale of cigarettes or other disposition for any purpose whatsoever. All cigarettes received in this state for sale or distribution within this state, except cigarettes actually sold as provided in sub. (3), shall be subject to such tax.
Subsection (3) lists various exceptions to the occupational tax.
Your first question requires consideration of both the permit requirement of sec.
The sec.
The United States Supreme Court in the leading cases discussed heretofore made clear that a general exemption from state taxes extends to Indian tribes and Indian persons within reservation boundaries. As indicated, the Court in Moe v. Confederated Salishand *156 Kootenai Tribes, Etc.,
The sec.
2. You next ask if the answer to question one is yes, or if the Indian person does not apply for a permit and proceeds to distribute cigarettes, is he or she subject to the cigarette taxes imposed at sec.
The answer to this question as it concerns sec.
Section
A use tax is imposed and levied upon the use of cigarettes in this state by any person for any purpose if the occupational tax imposed by s.
139.31 has not been paid on such cigarettes. Such tax is levied and shall be collected at the same rates as provided for in s.139.31 .
It is clear that this use tax is intended to complement the occupational tax discussed above.
Use taxes together with sales taxes constitute a general taxing plan under which everything is taxable at the retail level unless specifically exempted. See Dept. of Revenue v. Milwaukee RefiningCorp.,
3. You then ask if the answer to question one is no, is the Indian distributor subject to the cigarette taxes imposed at sec.
The answer to this question is no for the reasons stated in question one above.
4. You next ask if the Indian distributor of cigarettes is subject to the cigarette tax law, what means are available to this Department to enforce payment of the tax under sec.
Since it is my opinion that an Indian distributor doing business on a reservation is not subject to the cigarette tax law it is not necessary to consider this question.
5. You next ask whether a retailer selling cigarettes on a reservation is required to obtain a retailer's license under sec.
Section
No person shall in any manner, or upon any pretense, or by any device, directly or indirectly sell, expose for sale, possess with intent to sell, exchange, barter, dispose of or give away any cigarettes to any person not holding a license as herein provided or a permit under s.
139.30 to139.41 without first obtaining a license from the clerk of the city, village or town wherein such privilege is sought to be exercised.
This section allows local government to impose an additional burden upon retail sellers of cigarettes in the form of a license fee. This "fee" requirement is separate from and in addition to the permit *158
requirement under secs.
6. You next ask: When an Indian retailer of cigarettes, having a place of business on an Indian reservation in Wisconsin, purchases unstamped cigarettes from a resident or non-resident distributor, who is either an Indian or non-Indian, with or without a permit, and the retailer sells the unstamped cigarettes on the reservation to Indian and non-Indian consumers, is the Indian retailer subject to the tax imposed at either secs.
Retailers of cigarettes generally are subject to the occupational tax imposed by sec.
The use tax imposed by sec.
In Moe v. Confederated Salish and Kootenai Tribes, Etc.,
The State's requirement that the Indian tribal seller collect a tax validity imposed on non-Indians is a minimal burden designed to avoid the likelihood that in its absence non-Indians purchasing from the tribal seller will avoid payment of a concededly lawful tax. Since this burden is not, strictly speaking, a tax at all, it is not governed by the language of Mescalero, quoted supra, at 1642, dealing with the "special area of state taxation." We see nothing in this burden which frustrates tribal self-government, [citation omitted] or runs afoul of any congressional enactment dealing with the affairs of reservation Indians, [citation omitted] . . . . We therefore agree with the District Court that to the extent that the "smoke shops" sell to those upon whom the State has validly imposed a sales or excise tax with respect to the article sold, the State may require the Indian proprietor simply to add the tax to the sales price and thereby aid the State's collection and enforcement thereof.
Moe v. Confederated Salish and Kootenai Tribes, Etc. at 483.
Wisconsin's cigarette use tax does not seem to come within this exception to proscribed state taxation. As already noted, the Wisconsin Statutes do not require the retailer to precollect the cigarette use tax. It is, therefore, my opinion that under the existing state statutes an Indian retailer of cigarettes has no obligation to collect the cigarette use tax on sales to non-Indians.
7. You next ask if my response to questions one through six would be the same if the place of business of the Indian distributor or retailer was on the Menominee Reservation rather than on one of the other Wisconsin Indian reservations. You note that Wisconsin has general civil and criminal jurisdiction over the latter (pursuant to Pub.L. No. 280) and not the former.
As noted in the opening comments to this opinion, Bryan
forecloses the possibility of reaching a different conclusion regarding taxation in view of Pub.L. No. 280 because the Court held that Pub.L. No. 280's grant of civil jurisdiction only confers jurisdiction over civil causes of action involving Indians. See also Washington v. Confederated Bands and Tribes,
8. In your next question you ask whether my response to questions one through six would be the same if the distributor or retailer was an Indian tribe rather than an individual Indian.
As already suggested, it is my opinion that under the existing tax statutes both the tribe and tribal members enjoy the tax immunity considered herein. It should be kept in mind, however, that an Indian tribe does enjoy general immunity from suit because of its sovereign status. See United States v. Wheeler,
9. You next ask whether my response to questions one through six would be the same if the distributor or retailer was a corporation or a partnership with some Indian person investment and, if so, what proportion of Indian person investment would be required. You cite Eastern Navajo Industries, Inc. v. Bureau ofRevenue of the State of New Mexico,
In Eastern Navajo Industries, Inc. the court concluded that incorporation under New Mexico law did not cause the Indian owners of the corporation to lose their tax exempt status. Navajos held a fifty-one percent majority of the corporation's stock, which under various federal programs qualified the corporation for consideration by the federal government as an Indian business. It is not practicable in the absence of a specific fact situation to exhaustively search all federal statutes that may similarly affect the incorporation of tribal businesses established to engage in the sale of cigarettes. The same result reached by the New Mexico court in Eastern NavajoIndustries, Inc. may very well follow, with respect to Indian businesses incorporated under Wisconsin law, but I believe it best to defer specific comment until an actual fact situation is presented.
10. You next ask if my response to questions one through six would be the same if the Indian distributor or retailer held a federal Indian trader's permit and obtained rights from the tribe to distribute *161 for retail sale cigarettes on the reservation to Indians and to non-Indians.
Possession of a federal Indian trader's permit may affect the ability of a business to operate within an Indian reservation and reflects federal pre-emption in this area; see Warren TradingPost v. Arizona Tax Com.,
As already indicated the state does have jurisdiction to require Indian retailers doing business on a reservation to precollect taxes on sales to non-Indians assuming that state law requires such precollection. Id. It is unclear what effect a tribe's exercise of jurisdiction with respect to taxation generally would have on the state's jurisdiction over sales to non-Indians. One three-judge district court recently concluded that tribal ordinances taxing on-reservation sales of cigarettes to non-Indians pre-empted state jurisdiction and the state law thus constituted an unreasonable interference with tribal self-government.Confederated Tribes of Colville v. State of Wash.,
In Fort Mojave Tribe v. San Bernardino County,
It is my understanding that none of the Wisconsin tribes have enacted laws covering cigarette taxation; therefore, it is not now possible to reach a definitive resolution of issues presented by such *162 action. In all events, the court's decision in the appeal ofConfederated Tribes of Colville v. State of Wash., will probably provide an answer to the question of whether tribal law can pre-empt state taxing jurisdiction over non-members.
11. Your last question asks if my response to questions one through six distinguishes between Indians and non-Indians in the application or enforcement of the cigarette tax law, and, if so, what definition I would apply to the word "Indian."
As already suggested, the tax exemption does not extend to non-Indian consumers, retailers, or other sellers of cigarettes.
To answer your question concerning who is an Indian, it is my opinion that "Indian" for purpose of taxation can be defined as an individual of Indian descent who is recognized in the local community as an Indian or is a member of a recognized federal Indian tribe. Membership in the tribe as evidenced by either a name on the tribal roll or confirmation of such fact by the tribe would probably be considered authoritative evidence that the state does not have jurisdiction over that person for taxation purposes. It follows that persons not of Indian descent and not tribe members cannot claim the exemption.
Finally, in communication with this office subsequent to your formal opinion request, you asked whether sales made by distributors doing business outside reservations to Indian distributors or retailers doing business on a reservation would be exempted from the sec.
*163(1) The tax imposed by s.
139.31 shall be paid by purchase of stamps from the secretary. To evidence the payment, stamps of the proper denomination shall be affixed to each package or other container in which cigarettes are packed, prior to the first sale within this state. First sale does not include a sale by a manufacturer to a distributor or by a distributor to a permittee who has obtained department approval as provided for in sub. (8)(a) 2. The tax shall be paid only once on each package or container.
Section
(a) This subsection shall not apply to the following:
. . . .
2. Any permittee under s.
139.34 having department approval or person authorized to acquire, possess or sell unstamped cigarettes under s.139.31 (3) provided that said permittee or person maintains a separate inventory thereof and records pertaining thereto in such manner and form as the department prescribes by rule.
It is my opinion that these statutory provisions would allow the Department through appropriate rules and regulations to approve the sale of unstamped cigarettes to Indian distributors by non-Indian distributors without holding the non-Indian distributor responsible for the tax.
BCL:JDN