Fostering State-Tribal Collaboration by Wilkins Andrea;

Author:Wilkins, Andrea;
Language: eng
Format: epub
Tags: undefined
Publisher: Rowman & Littlefield Publishers
Published: 2012-08-15T00:00:00+00:00

Collection of Taxes and Problems Relating to Enforcement

Litigation can clarify the taxing authority of state and tribal government, but it cannot fully resolve problems that arise surrounding the exercise of that authority—namely problems associated with collection of taxes owed to the state and the problem of dual taxation. This is best done through intergovernmental cooperation.

Two key areas that have been the focus of litigation concerning the overlapping state and tribal taxing authority are severance taxes levied against natural resources extracted from tribal land and collection of state taxes on cigarette purchases made by non-Indians on the reservations.

Income generated from the natural resources found on tribal land is a significant source of income for tribes. The Supreme Court has ruled that both state and tribal government are entitled to levy taxes on non-Indian economic activity involving natural resource extraction.[16] This results in dual taxation. The Supreme Court has recognized the fact that dual taxation will likely result in higher costs being passed on to non-Indian lessees doing business on tribal land, noting that “[t]he burdensome consequence is entirely attributable to the fact that the leases are located in an area where two governmental entities share jurisdiction.”[17] For this reason, intergovernmental cooperation is useful in addressing problems that litigation has not solved. Agreements between the state and tribe addressing problems of dual taxation (possibly providing for a tax-sharing arrangement or state tax waiver) can alleviate the disincentive non-Indians may otherwise have for pursuing economic ventures on tribal land.

Similarly, the Supreme Court has ruled that both the state and the tribe are entitled to assess taxes on cigarette purchases made on the reservation by individuals who are not members of the tribe. (Sales to non-Indians purchasing cigarettes on the reservation from tribal “smoke shops” are common.) In addition, the state may impose “minimal burdens on Indian businesses to aid in collecting and enforcing that tax.”[18] This puts tribes in a difficult position whereby they are legally obligated to collect the state tax, despite the administrative difficulties associated with it. And since tribes also are entitled to assess taxes on these purchases, dual taxation raises the price of the product and dissuades nonmembers from doing business on the reservation. Tribes may opt to keep prices competitive by forgoing the tribal tax in order to avoid dual taxation, but then the “state tax revenue flows exclusively off-reservation.”[19] Because of this dilemma, tribes have historically been resistant to collect state taxes, and their refusal to do so has produced conflict and litigation. On more than one occasion the Supreme Court has ruled that the state is entitled to seize cigarette shipments traveling to the reservation as one possible remedy,[20] but this is a solution that generally will result in more conflict. And since tribal sovereign immunity prohibits the state from filing a lawsuit against the tribe to enforce its right to collect on these taxes,[21] both sides have an incentive to cooperate.

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