Washington v. Confederated Tribes, 447 U.S. 134 (1980)

MR. JUSTICE STEWART, concurring in part and dissenting in part.

I join all but Part IV-B(2) and Part V of the Court’s opinion. My disagreement with Part V is for the reasons stated in Part III of MR. JUSTICE REHNQUIST’s separate opinion. My disagreement with Part IV-B(2) stems from the belief that the State of Washington cannot impose the full combined measure of its cigarette and sales taxes on purchases by nontribal members of cigarettes from tobacco outlets on the Colville, Lummi, and Makah Reservations.

In Moe v. Salish & Kootenai Tribes, 425 U.S. 463, 481-483, the Court held that a State has the power to tax sales of cigarettes to non-Indians by Indian tobacco outlets, despite the exemptions from state taxes possessed by an Indian tribe and its members themselves. The State may exert this power, according to Moe, even if it thereby deprives the tribe or the enterprises the tribe operates of substantial revenues. Cf. Thomas v. Gay, 169 U.S. 264. The cigarette and sales tax aspects of this case would, therefore, be wholly controlled by the Moe decision but for the fact that all of the appellee Tribes levy their own cigarette excise taxes on the on-reservation distribution of cigarettes to non-Indians.

It seems clear to me that the appellee Tribes enjoy a power at least equal to that of the State to tax the on-reservation sales of cigarettes to nontribal members. Those sales are entered into and consummated in places and circumstances subject to the Tribes’ protection and control. Furthermore, the taxation of such transactions effectuates recognized federal policies by providing funds for the maintenance and operation of tribal self-government. See generally Indian Reorganization Act of 1934, 25 U.S.C. § 461 et seq; McClanahan v. Arizona State Tax Comm’n, 411 U.S. 164, 179-181; Williams v. Lee, 358 U.S. 217.

Consequently, when a State and an Indian tribe tax in a functionally identical manner the same on-reservation sales to nontribal members, it is my view that congressional policy, conjoined with the Indian Commerce Clause, requires the State to credit against its own tax the amount of the tribe’s tax. This solution fully effectuates the State’s goal of assuring that its citizens who are not tribal members do not cash in on the exemption from state taxation that the tribe and its members enjoy. On the other hand, it permits the tribe to share with the State in the tax revenues from cigarette sales, without at the same time placing the tribe’s federally encouraged enterprises at a competitive disadvantage compared to similarly situated off-reservation businesses.

Turning to the case at hand, the approach I have outlined leads me to one conclusion with respect to sales on the Colville Lummi, and Makah Reservations, and another with respect to sales on the Yakima Reservation. The Colville, Lummi, and Makah Tribes each collect from the operators of on-reservation tobacco outlets a tax of 40 to 50 cents per carton. Although in each case the tax is imposed at the time the cigarettes are distributed by the Tribe to the retail outlets, the pertinent taxing ordinance requires that the tax be passed on to the ultimate consumer. Thus, the actual event taxed, as with the State’s cigarette excise tax and general sales tax, is the sale to the nontribal purchaser. Since the Tribe’s cigarette tax operates in functionally the same way as do the State’s cigarette excise and general sales taxes, I would hold that the State must credit the tribal tax against the combination of its cigarette excise tax and general sales tax.

The tax imposed by the Yakima Tribe operates differently. The Tribe purchases cigarettes from out-of-state dealers and sells them to its licensed retailers. In connection with this transaction, the Tribe receives from its licensed retailers a tax of 22.5 cents per cigarette carton. Unlike the situation with the Colville, Lummi, and Makah taxes, however, there is no requirement that the tax then be added to the ultimate retail selling price. As a consequence, the event taxed is not the sale to the ultimate cigarette purchaser, and, for this reason, I believe that the State has no obligation to credit the Indian tax against the combination of its cigarette excise and general sales taxes.

Accordingly, I would vacate the judgment of the District Court insofar as it invalidates in toto the imposition of the State’s cigarette excise and general sales taxes upon cigarette sales on the Colville, Lummi, and Makah Reservations, and remand the case for further proceedings. I would reverse the judgment of the District Court insofar as it bars the imposition of the State’s taxes upon sales of cigarettes on the Yakima Reservation.

1. Much of that developmental history is recounted in McClanahan v. Arizona State Tax Comm’n, 411 U.S. 164, 168-172 (1973).

2. The Court in McClanahan did not resolve to what extent residual Indian sovereignty in the total absence of federal treaty obligations or legislation still would be recognized. The Court found that

[t]he question is generally of little more than theoretical importance, . . . since in almost all cases federal treaties and statutes define the boundaries of federal and state jurisdiction.

411 U.S. at 172, n. 8. I am convinced that this "residue" of sovereignty is no greater than the freedom from nondiscriminatory taxation held sufficient to protect sovereignty in other areas of constitutionally derived immunities. Seen. 9, infra. Our opinions have recognized that Indian sovereignty is dependent upon congressional preservation, see United States v. Wheeler, 435 U.S. 313, 323 (1978), and I decline to use our adjudicatory powers to assume a role properly reserved to Congress.

3. The Court emphasized that its review of Indian sovereignty was relevant only to this narrow category, i.e., the reservation-derived income of a reservation Indian, and that the Court was expressly not reviewing any situation in which the State attempted to exert its sovereignty over non-Indians undertaking activity on Indian reservations. 411 U.S. at 168.

4. I use "Indians" throughout this discussion of sovereign immunity to refer to members of a reservation tribe. See infra at 186-187.

5. The Court has explicitly held that attributes of Indian sovereignty are subject to complete defeasance by Congress. United States v. Wheeler, supra at 323.

6. In addition, the Court expressed the opinion that congressional policy was not at odds with state taxation, since Congress intended that the Indians be prepared to "enter the white world on a footing of equal competition." 411 U.S. at 157.

7. Indian reservations are not, of course, subject to the exclusive control of the tribe. The Federal Government and the States also have jurisdiction for some purposes.

8. It should be noted that the principles in Thomas v. Gay were not always those used to determine Indian immunities. A series of decisions, as noted in McClanahan, treated Indian immunities as derivative from the Federal Government’s immunity from state taxation. During the reign of the treatment of Indian reservations as federal instrumentalities for purposes of state taxation, this Court did prohibit States from taxing the net income derived by the lessees of Indian lands. Gillespie v. Oklahoma, 257 U.S. 501 (1922). See also Choctaw, O. & a R. Co. v. Harrison, 235 U.S. 292 (1914); Indian Territory Illuminating Oil Co. v. Oklahoma, 240 U.S. 522 (1916). While Thomas v. Gay was never explicitly overruled, these decisions were clearly inconsistent. Nevertheless, it was the line of analysis employed in Gillespie that was later overruled in Helvering v. Mountain Producers Corp., 303 U.S. 376 (1938). Thomas v. Gay stands as the traditional analysis of Indian sovereign immunity held to be relevant in McClanahan.

9. This conclusion derives support from not only Thomas v. Gay, but also analogous applications of sovereign tax immunities. When two sovereigns have legitimate authority to tax the same transaction, exercise of that authority by one sovereign does not oust the jurisdiction of the other. If it were otherwise, we would not be obligated to pay federal as well as state taxes on our income or gasoline purchases. Economic burdens on the competing sovereign also do not alter the concurrent nature of the taxing authority. Decisions of this Court unequivocally recognize that a state tax comparable to that in issue, imposed on its residents’ transactions in another State, or on a federal enclave, will not be barred by force of the respective immunities of that State or the Federal Government. In Henneford v. Silas Mason Co., 300 U.S. 577 (1937), this Court upheld a state tax on one of its resident’s use of goods purchased in another State without regard to the fact that the other State’s competitive ability to tax the same transaction was obviously reduced. The Court observed that such a tax was permissible even if no credit for the other state tax were allowed. Id. at 581. See also National Geographic Society v. California Board of Equalization, 430 U.S. 551 (1977). Even the sovereign immunity of the Federal Government would not prevent the effects of a tax comparable to those in issue. In United States v. County of Fresno, 429 U.S. 452 (1977), the State sought to impose a possessory use tax on federal employees occupying federal housing located in federal enclaves within the State of California. This Court upheld the tax even though it accepted the Federal Government’s argument that, in order to remain competitive as an employer or landlord, it would have to reimburse the employees for the payment of the added cost. Id. at 464, and n. 12. See also United States v. Detroit, 355 U.S. 466, 472 (1958); Alabama v. King & Boozer, 314 U.S. 1, 12 (1941). Thus, the State, through its exercise of taxing authority, can effectively require the Federal Government to forgo revenues which would otherwise be available to it in order to remain competitive as an enterprise.

10. The total absence of any suggestion that Congress intended to confer the immunity sought in this action should not be surprising. As this Court has found, other statutes are premised on congressional "recognition of the imperative need of a State to administer its own fiscal operations," free from federal interference. Tully v. Griffin, Inc., 429 U.S. 68, 73 (1976). In Tully, this congressional policy was not found to be diminished even though the State sought to assert its taxing authority over nonresidents.

11. These considerations, determinative in other areas of tax immunity law, are equally appropriate when one of the taxing jurisdictions is an Indian tribe. While Indian tribes are not States, the tribes are also not helpless hostages of the State absent judicial intervention. Two substantial sources of protection are available to them. First, the Indians could not be subjected to the burdens of discriminatory taxation, e.g., a state tax on only cigarette purchases on a reservation with no corresponding off-reservation tax. The prohibition of discriminatory taxation has been recognized by this Court as a substantial safeguard against the potential for any abusive taxation, since only those taxes which the general population are willing to withstand can be imposed. See County of Fresno, supra at 463, n. 11; Alabama v. King & Boozer, supra, (federal immunity); Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977) (state taxation of interstate commerce). Second, Indian tribes are always subject to protection by Congress. This source of protection is more than adequate to preclude any unwarranted interference with tribal self-government. Congress, and not the judiciary, is the forum charged with the responsibility of extending the necessary level of protection beyond that inherent in prohibiting nondiscriminatory taxation.