By David Prager, Tribal Attorney, Prairie Band Potawatomi Nation
Wagnon v. Prairie Band Potawatomi Nation,
126 S.Ct. 676. 546 U.S. ___ (2005).
Years ago the United States by treaties guaranteed the sovereignty of Indian Tribes as long as the grass grows. The Supreme Court's ruling against the Potawatomi in their fuel case is like saying that because the grass in question was in a field that was
paved for a parking lot and now has no grass, sovereignty is no longer guaranteed. Such disingenuous reasoning must be openly condemned if tribal sovereignty is to be protected as promised. Using similar pretzel logic, the Court held in this fuel case
that although a state cannot impair tribal sovereignty directly, it can do so indirectly. The Court has thus upheld form over substance and has ignored and eroded Commerce Clause protections for tribal rights.
The dormant Indian Commerce Clause has generally been the source of federal protection for tribal sovereignty. This "dormant" aspect means that even though Congress has not passed a particular law, certain state action may nevertheless interfere with
federal goals for Tribes and be prohibited by the federal courts. Some conservative justices have rejected the dormant clause concept. Justice Thomas, the author of our fuel case opinion, has completely rejected it for Interstate Commerce Clause cases.
Not far behind, Justice Scalia would consider only discrimination for such cases. On the other hand, the majority of justices have applied a balancing test to both the Indian and Interstate Commerce Clause. The balancing test has been a more fact-
sensitive way to accommodate and balance the state and federal interests. Unfortunately, in the fuel case the Court rejected balancing and looked only at discrimination in judging the state tax.
In 1995 the U.S. Supreme Court prohibited the imposition of Oklahoma's fuel taxes on a tribal gas retailer located in Indian country. Oklahoma Tax Com'n v. Chickasaw Nation, 515 U.S. 450 (1995). Because the incidence of the tax was on the retailer, the
tax was categorically prohibited as a state tax imposed on a tribal operation in Indian country in accord with McClanahan v. Arizona State Tax Commission, 411 U.S. 164 (1973). The Court rejected the States' argument that the balancing test should be
applied to that case. After Chickasaw, many states amended their fuel tax statutes to attempt to impose their fuel taxes either at the distributor or consumer level.
In 1998 Kansas amended its laws to shift the incidence of the state fuel tax to the distributor. The 10th Circuit subsequently held in one case that the Kansas fuel tax did not appear to burden reservation values of a Tribe. Sac & Fox Nation of Missouri v.
Pierce, 213 F.3d 566 (10th Cir. 2000), applying Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134 (1980). In Colville the state cigarette tax was permitted because the tribal operation was "marketing an exemption" from state
taxes and the state tax did not burden revenues derived from value "generated on the reservations by activities in which [Indians] have a significant interest." 447 U.S. at 156-157, 213 F.3d at 585; Indian Country, U.S.A. v. Oklahoma Tax Comm'n, 829 F.2d 967,
986 (10th Cir. 1987).
In response to Chickasaw, Kansas amended its tax laws to instead impose the state fuel taxes upstream on the non-tribal distributors off-reservation. Although the economic impact is exactly the same as a tax imposed directly on a Tribe, this change of
form in our case caused the Court to apply a discrimination standard instead of balancing the tribal, state and federal interests. In the Potawatomi fuel case the additional imposition of the state tax made it impossible for the Tribe to impose its own fuel tax
and would destroy the tribal business. The Tribe had clearly generated economic value on its reservation, which the Court had indicated in Colville should be entitled to some federal protection from undue state tax burdens. Unfortunately, the formal
imposition of the state tax liability at the distributor level rather than the reservation level caused the Court to ignore its ruling in Colville and to refrain from balancing the interests, which Justice Ginsburg in her dissent said favored the Tribe.
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