Oklahoma Tax Comm'n v. Citizen Band of Potawatomi Tribe of Okla.
112 L. Ed. 2d 1112, 498 U.S. 505, 1991 U.S. LEXIS 1298 (1991)
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Rule of Law:
Indian tribes are immune from direct state lawsuits to collect unpaid taxes, but they are generally required to collect and remit state sales taxes on goods sold to non-tribal members on lands validly set apart for Indian use, which includes trust land, even if the state has not assumed jurisdiction under Public Law 280.
Facts:
- The Citizen Band Potawatomi Indian Tribe of Oklahoma (Potawatomis) owned and operated a convenience store in Oklahoma.
- The convenience store was located on land held in trust for the Potawatomis by the Federal Government.
- For many years, the Potawatomis sold cigarettes at their convenience store without collecting Oklahoma's state cigarette tax.
- In 1987, the Oklahoma Tax Commission (Oklahoma) served the Potawatomis with an assessment letter demanding payment of $2.7 million for taxes on cigarette sales that occurred between 1982 and 1986.
Procedural Posture:
- The Citizen Band Potawatomi Indian Tribe (Potawatomis) filed suit in the United States District Court for the Western District of Oklahoma to enjoin the Oklahoma Tax Commission's (Oklahoma) $2.7 million tax assessment.
- Oklahoma counterclaimed in District Court, seeking to enforce its assessment and enjoin the Potawatomis from selling cigarettes in the future without collecting and remitting state taxes.
- The Potawatomis moved to dismiss Oklahoma's counterclaim, asserting sovereign immunity, which the District Court denied.
- The District Court concluded that Oklahoma lacked authority to tax on-reservation sales to tribal members or tax the Tribe directly, finding the Tribe immune from suit for past unpaid taxes.
- The District Court held that Oklahoma could prospectively require the Tribe to collect taxes for on-reservation sales to nonmembers and ordered the Tribe to comply with collection and recordkeeping.
- The Potawatomis appealed the District Court’s denial of its motion to dismiss and the order requiring prospective tax collection to the United States Court of Appeals for the Tenth Circuit.
- The Tenth Circuit reversed, holding that the District Court erred in entertaining Oklahoma’s counterclaims due to tribal sovereign immunity, and that Oklahoma lacked authority to tax any sales on the reservation (to tribesmen or nonmembers) without an independent congressional jurisdictional grant, ordering the District Court to grant the Potawatomis’ injunction request.
- The U.S. Supreme Court granted certiorari to resolve an apparent conflict with precedents and clarify the law of sovereign immunity regarding sales tax collection on Indian lands.
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Issue:
Does an Indian tribe waive its sovereign immunity from a state's counterclaim for unpaid taxes by seeking an injunction against the state's tax assessment, and may a state require an Indian tribe to collect sales taxes on goods sold to non-tribal members on tribal trust land when the state has not asserted jurisdiction under Public Law 280?
Opinions:
Majority - Chief Justice Rehnquist
No, an Indian tribe does not waive its sovereign immunity from a state's counterclaim for unpaid taxes by seeking an injunction, but Yes, a state may require an Indian tribe to collect sales taxes on goods sold to non-tribal members on tribal trust land, even if the state has not asserted jurisdiction under Public Law 280. The Court affirmed that Indian tribes are "domestic dependent nations" with inherent sovereign authority, and thus enjoy sovereign immunity from suit unless clearly waived by the tribe or abrogated by Congress, citing Cherokee Nation v. Georgia and Santa Clara Pueblo v. Martinez. It rejected Oklahoma's argument that the Potawatomis waived their immunity by filing suit for injunctive relief, reaffirming United States v. United States Fidelity & Guaranty Co., which held that a tribe does not waive immunity from cross-suits merely by initiating an action. The Court also declined to narrow or abandon the doctrine of tribal sovereign immunity, noting Congress's consistent approval. Furthermore, the Court rejected Oklahoma's contention that the tribal convenience store was not on a "reservation," clarifying that the test for whether land constitutes "Indian country" is whether it has been "validly set apart for the use of the Indians as such, under the superintendence of the Government," a standard met by trust land, as established in United States v. John. However, the Court held that tribal sovereign immunity does not excuse a tribe from the obligation to assist in the collection of validly imposed state sales taxes from non-tribal members. Citing Moe v. Confederated Salish and Kootenai Tribes and Washington v. Confederated Tribes of Colville Reservation, the Court reiterated that requiring tribal sellers to collect state taxes on sales to non-Indians is a minimal burden justified by the state’s interest in ensuring payment of lawful taxes. The Court explicitly stated that this obligation does not depend on a state's assertion of jurisdiction under Public Law 280, as previous precedents did not rely on it, and Public Law 280 does not confer broad regulatory or taxing authority over Indians. While direct suit against the tribe is barred, the Court suggested alternative remedies for states, such as pursuing individual tribal agents/officers, collecting from cigarette wholesalers, entering into agreements with tribes, or seeking congressional legislation.
Concurring - Justice Stevens
Yes, a state may require an Indian tribe to collect sales taxes on goods sold to non-tribal members on tribal trust land. Justice Stevens concurred with the Court’s holding that the State may require the Tribe to collect taxes on sales to non-Indians. He expressed his view that the doctrine of sovereign immunity is an "anachronistic fiction" and that all governments should generally be accountable for their illegal conduct. While acknowledging the established rule of tribal sovereign immunity, he questioned its application to commercial activity outside tribal territory or to claims for prospective equitable relief. He noted that the Court, by addressing the question of the Tribe's prospective liability for tax collection after dismissing the counterclaim on immunity grounds, implicitly acknowledged limits to tribal sovereign immunity. He emphasized that the Court’s decision, in effect, recognized that a tribe’s sovereign immunity from actions seeking money damages does not necessarily extend to actions seeking equitable relief.
Analysis:
This case significantly reinforces the doctrine of tribal sovereign immunity from direct state lawsuits, protecting tribal assets from state enforcement actions, but also clarifies the limits of this immunity regarding tax collection from non-members. It provides an important clarification that tribal trust lands are considered 'Indian country' for sovereign immunity purposes, equal to formally designated reservations. The ruling balances tribal sovereignty with state interests by affirming states' authority to require tribes to collect sales taxes from non-members, without requiring Public Law 280 jurisdiction, thus providing a crucial mechanism for states to recover legitimate tax revenue. The decision encourages states to utilize indirect enforcement methods or negotiate agreements with tribes, highlighting the need for cooperative solutions in the absence of direct judicial remedies against tribes.
