Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-92-07117/USCOURTS-ca10-92-07117-0/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

) 

CHICKASAW NATION, ) 

) 

Plaintiff-Appellant, ) 

) 

v. ) 

) 

STATE OF OKLAHOMA ex rel. OKLAHOMA ) 

TAX COMMISSION, ROBERT E. ANDERSON, ) 

CHAIRMAN OF THE TAX COMMISSION, ) 

ROBERT L. WADLEY, VICE-CHAIRMAN OF ) 

THE TAX COMMISSION, AND DON ) 

KILPATRICK, SECRETARY OF THE TAX ) 

COMMISSION I ) 

) 

Defendants-Appellees. ) 

Fil.~ED UnitfJd at.~Le& Court rtt Apptta.la 'I't~flth CI!'N1it 

JUL a 9 1994 

ROBERT L. HOECKER 

Clerk 

No. 92-7117 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF OKLAHOMA 

(D.C. No. CV-91-310-NJ) 

Bob Rabon of Rabon, Wolf & Rabon, Hugo, Oklahoma, for PlaintiffAppellant. 

David Hudson, General Counsel (with David Allen Miley, Assistant 

General Counsel, on the brief), Oklahoma Tax Commission, Oklahoma 

City, Oklahoma, for Defendants-Appellees. 

Before ANDERSON, McKAY, and EBEL, Circuit Judges. 

McKAY, Circuit Judge. 

Appellate Case: 92-7117 Document: 01019283598 Date Filed: 07/29/1994 Page: 1 
Appellant Chickasaw Nation ("Tribe" or "Chickasaw"), a federally recognized Indian tribe, challenged the State of Oklahoma's 

authority to impose certain taxes on sales, income, motor fuel and 

3.2% beer to transactions occurring in Chickasaw Indian country. 

The case was submitted to the district court upon stipulated facts 

on cross motions for summary judgment. The Chickasaw appeal from 

the district court's grant of summary judgment on each of the 

issues in favor of the State of Oklahoma and from that court's 

denial of the Chickasaw's cross-motion for summary judgment. 

I. FACTS 

In submitting the case to the district court for rulings on 

the cross-motions for summary judgment, the parties stipulated, 

inter alia, that 

B. Plaintiff [the Tribe] owns and operates retail 

sales outlets on lands held in trust for it by the 

United States on which it sells tobacco products, motor 

fuel, beer and other goods. It does not collect sales 

taxes on its sales to tribal or non-tribal members but 

is required to pay sales taxes on motor fuel products 

and beer when it purchases them from its wholesale 

vendors at said retail locations. Defendants [the 

State] impose sales taxes on retail purchases of goods 

made by plaintiff where defendants contend such goods 

are used for "proprietary" as opposed to "governmental" 

purposes and when defendant contends the goods are purchased for resale to non-tribal members. 

C. Plaintiff has approximately 275 tribal member and 

non-tribal member employees who earn their wages on 

tribal trust lands. Defendants are collecting state 

income taxes on the earnings of said employees. 

(Amended Pre-Trial Order at 2-3, Appellant's App. Doc. 11.) 

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We review the grant or denial of summary judgment de novo, 

applying the same legal standard used by the district court. 

Applied Genetics Int 1 1, Inc. v. First Affiliated Sec., Inc., 912 

F.2d 1238, 1241 (lOth Cir. 1990). We view the record in the light 

most favorable to the party opposing the grant of summary judgment, here, the Tribe, to determine whether there is any genuine 

issue of material fact remaining for trial. Russillo v. 

Scarborough, 935 F.2d 1167, 1170 (lOth Cir. 1991); Deepwater 

Invs .. Ltd. v. Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (lOth 

Cir. 1991). 

In their Amended Joint Pretrial Order, the parties stipulated 

that the sole issues of "fact" remaining to be litigated were as 

follows: 

A. The Chickasaw Nation is beneficiary to treaties 

with the United States which agree that no state may 

pass laws for it. (Defendant contends that this is a 

question of law and not an issue of fact.) 

B. Defendants have attempted to and are imposing state 

tax laws on the plaintiff tribal government and its constitutents [sic] in violation of said treaties, congressional enactments and federal policy. Such conduct by 

the defendant is preempted by federal law and infringes 

on plaintiff 1 S right to self-government and frustrates 

federal policy. (Defendant contends that this is a 

question of law and not an issue of fact.) 

(Amended Pre-Trial Order at 4) . With respect to the first issue, 

the Chickasaw point to treaty language stating that "no territory 

or state shall ever have a right to pass laws for the government 

of the [Chickasaw] or their descendants." 1 The State responds 

1 The treaty actually refers to the Choctaw Nation rather than 

the Chickasaw. However, the treaty provisions were later applied 

by Congress to the Chickasaw. See supra n.9. 

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that the treaties cited by the Chickasaw are not relevant because 

they were later abrogated by acts of Congress. The district court 

did not address the issue, finding that the taxes did not abridge 

the Tribe's right of self-government and thus did not violate the 

treaty language. We agree with the State that both the continuing 

viability of the treaties cited by the Chickasaw and the interpretations thereof are questions of law and not of fact. Turning 

to the second stipulated issue remaining for trial, we conclude 

that whether the taxes imposed by the State contravene the aforementioned treaties and are violative of the Chickasaws' right to 

self-government is also a question of law rather than an issue of 

fact. 

Accordingly, as the parties have stipulated to all of the 

facts before us, there can be no genuine issue of material fact 

remaining for litigation, and our review is limited to the question whether the substantive law was correctly applied. Franks v. 

Nimmo, 796 F.2d 1230, 1235 (lOth Cir. 1986). We therefore review 

de novo the district court's treatment of both of these issues and 

their impact on the four taxes in dispute in this case. 

II. BEER TAX 

The Chickasaw operate retail stores in which they sell 3.2% 

beer. This beer is purchased from wholesale distributors. Oklahoma law provides for a tax upon 3.2% beer, in the amount of 

$11.25 per 31 gallons. 37 Okla. Stat. Ann. § 163.3 (West 1990). 

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The district court concluded that the State of Oklahoma had a 

strong interest in regulating 3.2% beer and that under our holding 

in Citizen Band Potawatomi v. Oklahoma Tax Com'n, 975 F.2d 1459 

(lOth Cir. 1992), this regulatory authority encompassed the power 

to tax the sale of such beer. The district court thus assumed 

that the power to tax is encompassed within the power to regulate. 

We first address this assumption. 

In Rice v. Rehner, 463 U.S. 713 (1983), the Supreme Court 

faced the issue whether California could require a member of an 

Indian tribe who operated a general store on an Indian reservation, in which she sold alcoholic beverages, to obtain a state 

liquor license. The Court set out a two-part test to determine 

when state regulation of activities in Indian country is preempted. Id. at 718. Such preemption occurs when application of 

state law: 1) "would interfere with reservation self-government," 

or 2) "would impair a right granted or reserved by federal law." 

Id. (quoting Mescalero Apache Tribe v. Jones, 411 U.S. 145, 148 

(1973). In determining whether application of state law would 

interfere with Indian self-government, the court must consider the 

tradition of Indian sovereignty. If there is a tradition of 

Indian sovereignty in the area concerned, then an explicit statement from Congress providing that state law shall apply is usually 

required. Id. at 719-20. The Rice Court concluded that "tradition simply has not recognized a sovereign immunity or inherent 

authority in favor of liquor regulation by Indians." Id. at 722. 

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Turning to the second prong of the test, the Court considered 

whether the state liquor licensing provisions were preempted by 

federal law. The Court held that, in enacting 18 U.S.C. § 1161, 2 

Congress intended to delegate both to the states and to the 

tribes, its authority to regulate liquor transactions. Id. at 

730-31. Accordingly, the Court held that section 1161 authorized 

state regulation rather than preempting it, and the state could 

properly require tribe members to obtain a state liquor license. 

Id. at 734. 

In Potawatomi, this court held that the Supreme Court's 

reasoning in Rice was applicable to Oklahoma's licensing requirements with respect to 3.2% beer, notwithstanding the argument that 

such beer was not an "alcoholic beverage" within the scope of 

§ 1161 because of the bifurcated Oklahoma regulatory scheme 

classifying such beer as a "nonintoxicating beverage." 

Potawatomi, 975 F.2d at 1462-64. We held that Congress in § 1161 

had delegated the authority to regulate liquor, including 3.2% 

beer, and that Oklahoma had a "significant regulatory interest" in 

3.2% beer despite its classification as a "nonintoxicating beverage." Id. at 1464. 

2 "The provisions of sections 1154, 1156, 3113, 3488, and 3669, 

of this title [barring introduction of alcoholic beverages into 

Indian country] , shall not apply . . . to any act or transaction 

within any area of Indian country provided such act or transaction 

is in conformity both with the laws of the State in which such act 

or transaction occurs and with an ordinance duly adopted by the 

tribe having jurisdiction over such area of Indian country 

.... " 18 u.s.c. § 1161 (1988). 

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The Tribe argues that, notwithstanding the Court's statements 

in Rice about the power to "regulate" liquor transactions, and 

notwithstanding this court's statements on that matter in 

Potawatomi, that power has nothing to do with the power to tax 

those transactions. We agree that the power to regulate does not 

automatically encompass the power to tax in all circumstances. 

However, "[t]he mere fact a statute raises revenue does not 

imprint upon it the characteristics of a law by which the taxing 

power is exercised." American Petrofina Co. of Texas v. Nance, 

859 F.2d 840, 841 (lOth Cir. 1988) (quoting State ex rel. Tindal 

v. Block, 717 F.2d 874, 887 (4th Cir. 1983), cert. denied, 465 

U.S. 1080 (1984)). Likewise, we do not find the fact that the 

beer taxes are deposited into the general treasury of the State of 

Oklahoma, Okla. Stat. Ann. tit. 37, § 163.6 (1992), determinative 

of the issue. Where the taxation is an integral part of the overall regulatory structure in a traditionally heavily regulated 

area, as opposed to a simple revenue measure, the tax may properly 

be considered to be regulatory and to fall within the regulatory 

authority. See, e.g., Colville, 447 U.S. at 158 (noting that 

taxes may be used for regulatory purposes as well as for raising 

revenue). Such is the case here. Not only is the tax imposed on 

transactions involving a heavily regulated commodity, but the tax 

provisions themselves are contained within Title 37 of the Oklahoma Statutes, the portion of the Oklahoma Code establishing that 

regulation, rather than in the Revenue and Taxation Code contained 

in Title 68. The beer tax is thus clearly differentiated in the 

Oklahoma statutory structure from the sales, gasoline, and income 

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taxes, which are included in Title 68. We therefore hold that the 

beer taxes at issue in this case are encompassed in the congressional delegation of authority to regulate the sale of alcohol in 

Indian country contained in 18 u~s.c. § 1161. 

Moreover, even were we to conclude that the taxation of 3.2% 

beer is not part of the State's regulatory authority, we would 

conclude that the beer tax is valid because it is not a tax 

imposed on the Indian retailer. The statute provides that the 

following persons are liable for payment of the tax: 

(a) Manufacturers. When the sale is made by a manufacturer, located and doing business in this state, to a 

wholesaler, located and doing business in this state, 

the tax shall be paid by the wholesaler. 

(b) Wholesalers. When the sale is made by a wholesaler, 

located and doing business in this state, to a retail 

dealer located and doing business in this state, the tax 

shall be paid by the wholesaler. Such wholesalers may 

sell only to licensed retail dealers nonintoxicating 

beverages upon which the tax provided by this act has 

first been paid by such wholesaler. 

When the sale is made by a wholesaler, located and doing 

business outside this state, and who has obtained an 

Oklahoma wholesale beverage dealer's license, to a 

retail dealer located and doing business in this state, 

the wholesaler shall be liable for and must pay to the 

Tax Commission the beverage tax due on such sales. In 

the event of a retail dealer, doing business in this 

state, purchases beverage from a wholesaler doing business outside this state, and who does not have an 

Oklahoma wholesale beverage dealer's license, the 

retailer shall be liable for and must pay . . . the tax 

due on such sales .... 

For the purpose of collecting and remitting the tax 

imposed under this act, the wholesaler collecting such 

tax is hereby declared to be the agent of the state for 

such purposes, and his failure to remit or pay such tax 

to the state, when due, shall constitute embezzlement, 

any any such wholesaler, upon conviction, shall be 

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punished as provided by law for the embezzlement of 

public funds. 

(c) Retail Dealers. Retail dealers, where the out-ofstate manufacturer or wholesaler has paid the tax under 

the provisions of this act, shall not be required to pay 

the tax. However, nothing in this act shall operate to 

relieve any retail dealer from payment of the tax where 

such retail dealer has at any time in his possession 

. nonintoxicating beverages upon which the tax has 

not been paid. 

37 Okla. Stat. Ann. § 163.4 (West 1990 & Supp. 1994) (emphases 

added). 

The Tribe argues that, since the statute does not explicitly 

provide that the legal incidence of the tax is on the consumer, as 

was the case in the cigarette tax considered in Washington v. 

Confederated Tribes of Colville, 447 U.S. 139 (1980), or on the 

wholesaler, the cases such as Colville upholding cigarette taxes 

are inapplicable, and the tax must properly be seen as legally 

falling on the Indian retailers. 

First, we observe that the Supreme Court has squarely 

rejected the idea that an explicit statutory mandate that the tax 

be "passed on and collected" is required in order to determine 

that the legal incidence of a tax does not fall on the Tribe. 

California Bd. of Equalization v. Chemehuevi Tribe, 474 U.S. 9, 11 

(1986) (per curiam). Rather, the test to be derived from 

Coleville and analogous cases "is nothing more than a fair interpretation of the taxing statute as written and applied, without 

any requirement that pass-through provisions or collection 

requirements be 'explicitly stated.'" Id.; see also, Colville, 

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447. U.S. at 141-42 and n.9 (accepting conclusion that cigarette 

tax fell upon first event upon which tax can constitutionally be 

imposed, i.e. the sale to the consumer, despite lack of explicit 

statutory language imposing legal incidence of tax on consumer) ; 

Indian Country, U.S.A. v. Oklahoma Tax Comm'n, 829 F.2d 967, 984 

(lOth Cir. 1987) (accepting district court's conclusion that legal 

incidence of Oklahoma sales tax fell on consumer despite lack of 

explicit provision so providing), cert. denied, 487 U.S. 1218 

(1988). 

A fair interpretation of the beer tax at issue here establishes that the legal incidence of the tax is on the beer wholesaler, and not on the Indian retailer. As set forth above, the 

statute specifically provides that the wholesaler must pay the 

tax. The wholesaler is liable for the tax when it first purchases 

the beer from the manufacturer and when it sells the beer to the 

retailer. In addition, the statute provides that the wholesaler 

may only sell beer upon which the tax has first been paid. The 

triggering event for the payment of the tax thus occurs before the 

sale to the retailer. 

The Tribe argues that the triggering event for the imposition 

of the tax is the actual sale of the beer by the wholesaler to the 

tribal retailer. This argument is based on the statutory language 

stating that 11 [wlhen the sale is made by the wholesaler, . the 

tax shall be paid by the wholesaler. 37 Okla. Stat. Ann. 

§ 163.4(b) (emphasis added). According to the Tribe, since the 

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trigger for the imposition of the tax is an event, i.e. the sale 

transaction itself, that occurs wholly in Indian country, the 

State has no jurisdiction to tax. This argument is dependent on 

an erroneous conception of the function of the word "when" in the 

statute. Contrary to the Tribe's characterization, we believe the 

word does not carry a temporal connotation, but instead serves as 

a substitute for the phrase "in the event that." Thus, the proper 

reading of the above-quoted language is "in the event that the 

sale is made by the wholesaler, ... the tax shall be paid by the 

wholesaler." This construction is consonant with the structure of 

§ 163.4, which sets forth a series of potential transactions, 

indicating which entity is responsible for paying the tax in each 

example, and is the only construction that is compatible with the 

requirement that a wholesaler only sell beer upon which the tax 

has first been paid. 3 

3 We are aware that the statute does make retailers responsible 

for paying the tax in two circumstances--when the retailer purchases beverage from a wholesaler located outside the state who 

does not have an Oklahoma wholesaler's license and who has not 

paid the tax, and in any other case where the retailer possesses 

beer upon which the wholesaler has not paid the tax. Okla. Stat. 

Ann. tit. 37, § 163.4(b)- (c). Neither situation is before us 

today. However, we note that the provisions of the statute making 

the retailer liable for the tax are evidently designed to give the 

retailer an incentive to ensure that the wholesaler has paid the 

tax, rather than to make the retailer primarily liable. Of 

course, in the event that the Tribe were to possess beer upon 

which the tax had not been paid, the Tribe's sovereign immunity 

would prevent the state from suing the Tribe to recover the tax. 

See Oklahoma State Tax Com'n v. Potawatomi Indian Tribe, 111 S. 

Ct. 905, 912 (1991). Thus, inasmuch as the statute provides for 

the Tribe's potential secondary liability, it is unenforceable. 

However, in light of the fact that the Tribe is required to have a 

valid state license to sell beer and those licenses are conditioned on compliance with the relevant laws, we believe that the 

statutory prohibition on retailers having in their possession beer 

on which the tax has not been paid provides the state adequate 

power to enforce the tax provisions without being required to sue 

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The Tribe also points to the fact that the statute makes the 

wholesaler the agent of the state for purposes of 11 collecting11 the 

tax as proof that the statute imposes the tax upon the retailer, 

i.e., the Tribe, rather than upon the wholesaler. 37 Okla. Stat. 

Ann. § 163.4(b). After all, the Tribe argues, if the tax is 

11 collected, 11 it must be collected from someone, and that someone 

must be the retailer. We find this argument unpersuasive in light 

of the clear statutory language making the wholesaler liable for 

11 paying 11 the tax. Rather, we conclude that the language making 

the wholesaler the state's agent for 11 collecting11 the tax is 

intended to provide the theoretical basis for the remainder of 

that paragraph making the wholesaler liable for embezzlement of 

state funds in the event of a failure to remit the appropriate 

sums to the state. 

Even if it were true that the economic burden of the tax 

falls on the Tribe because the wholesalers simply incorporate the 

tax into the wholesale cost, this would not be determinative of 

the question of the legal incidence of the tax. Just as a nondiscriminatory tax imposed on a private entity that does business 

with the United States and that passes the cost of that tax on to 

the United States does not violate federal sovereign immunity, see 

South Carolina v. Baker, 485 U.S. 505, 521 (1988) (quoting Alabama 

v. King & Boozer, 314 U.S. 1, 8-9 (1941)); id. at 523; Memphis 

the Tribe to recover the tax. If the Tribe were to possess beer 

on which the wholesaler had not paid the tax, the Tribe's liquor 

license could be revoked. See Oklahoma Stat. Ann. tit. 37, 

§ 163.8; id. §163.11(I) (5). 

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Bank & Trust Co. v. Garner, 459 U.S. 392, 397 (1983), so a nondiscriminatory tax imposed on non-exempt private entities that do 

business with Indian tribes and that pass the cost of those taxes 

on to the tribes does not violate tribal sovereign immunity. See 

Seneca-Cayuga Tribe v. State ex rel. Thompson, 874 F.2d 709, 715 

(lOth Cir. 1989) ("It has long been settled law that retained 

tribal sovereign immunity is co-extensive with that of the United 

States."). 

The Supreme Court has validated the states' authority to 

collect sales taxes from wholesalers where an Indian tribe refuses 

to collect those valid taxes from its sales to non-members, see 

Oklahoma Tax Com'n v. Potawatomi Indian Tribe, 498 U.S. 505, 514 

(1991) , despite the fact that such sales taxes are likely to be 

passed on to the retailer as part of the wholesale price. We 

conclude that the state may similarly impose a beverage tax upon 

wholesalers as an integral part of the overall regulatory scheme, 

despite the possibility that such tax might be included as part of 

the wholesale price of the beer. 

Accordingly, since we hold as a matter of law that the 

Oklahoma tax on 3.2% beer is authorized as part of the regulatory 

authority granted by Congress to the states and because we hold 

that the tax is a tax upon the wholesaler rather than upon the 

retailer, there can be no conflict with the Tribe's right to selfgovernment, and the district court properly granted summary judgment in favor of the state on this issue. 

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III. MOTOR FUEL TAX 

Oklahoma law imposes several taxes on motor vehicle fuel, 

totaling sixteen cents per gallon. Okla. Stat. Ann. tit. 68, 

§§ 502, 502.2, 502.4, 502.6, 516, 520 & 522 (1992). Corresponding 

taxes are imposed on diesel fuel. Id. §§ 502.1, 502.3, 502.5, 

502.7 & 522.1. The State exempts from these taxes fuel purchased 

by the tribe for use in tribally owned vehicles for tribal purposes. (Appellees' Br. at 10.) However, the State contends that 

when the Tribe purchases fuel for resale at tribally owned gas 

stations, the tax must be paid. The Tribe argues that these taxes 

are imposed on the retailer, and consequently are void as direct 

taxes on the Tribe. The State responds that the taxes are passed 

on to the consumer in the retail price. The district court 

accepted the State's analysis as to the incidence of the taxes. 

The court then concluded that the taxes are not preempted by 

federal law, and passing to the second step of the analysis, concluded that the fuel taxes did not infringe on tribal sovereignty. 

We believe that a fair reading of the statutes involved indicates that the district court erred in two respects. First, in 

concluding that the taxes were passed on through the retail price 

to the consumer, the district court substituted economic assumptions for the language of the statutes. The statutes nowhere 

require the amount of the tax to be included in the retail price 

at the pump, a requirement which we could interpret as imposing 

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the tax on the consumer. Cf. Okla. Stat. Ann. tit. 68, § 302 

(cigarette tax to be included in price to consumer). While the 

statutes do not expressly declare the legal incidence of the taxes 

to be on the retailer either, we believe that is the clear import 

of the statutory language. 

The statutes imposing the fuel taxes provide that "[t]here is 

hereby levied an excise tax of [varying amounts] per gallon upon 

the sale of each and every gallon of gasoline sold, or stored and 

distributed, or withdrawn from storage, within the state, for sale 

or use, to be reported and collected as provided by law .... " 

See, e.g., id. § 502. The tax remittance procedure indicates that 

the incidence of the tax is on the retailer. The statute requires 

the distributors to make monthly reports indicating the amount of 

fuel received and sold by the distributor, and to remit to the Tax 

Commission the amount of tax due. Id. § 505(B)- (C). The statute 

goes on to provide that "[m]otor fuel taxes remitted by a distributor on behalf of a licensed retailer . . . that are subsequently determined to be uncollectible by the distributor may be 

credited against subsequent motor fuel tax liability imposed by 

law upon such distributor." Id. § 505(C) (emphasis added). Thus, 

unlike the beer taxes at issue above, the statutes imposing the 

motor fuel taxes explicitly state that the distributor must remit 

the tax on behalf of the retailer. Similarly, the statute provides that if the distributor pays the taxes and is subsequently 

unable to collect the money from the retailer, the distributor may 

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deduct the uncollected amount from its future payments. The 

statute thus ensures that the distributor is not burdened with the 

tax. In the fuel tax scheme, the distributor is no more than a 

transmittal agent for the taxes imposed on the retailer. 

Moreover, the exemptions provided in the fuel tax statutes 

also indicate that the tax is not imposed on the distributor. For 

example, the exemption for fuel purchased for agricultural use 

provides that 11 [e]very person actually engaged in farming . 

may purchase such motor fuel without paying the tax. 11 Id. 

§ 509(b) (emphasis added). The same section provides that the 

person involved in agriculture and claiming the exemption must 

apply for an exemption permit, which he must show to the distributor. Id. § 509(d)-(e). Similarly, § 505 of Title 68 gives the 

retailer the option of paying the tax due on all diesel fuel, or 

meeting the requirements to be considered a distributor. Id. 

§ 505(E). Section 505 thus also indicates that the retailer is 

responsible for paying the tax. 

We think it evident that the import of the language and the 

structure of the fuel tax statutes is that the distributor 

collects the tax from the retail purchaser of the fuel. While it 

may well be that the tax is ultimately passed on to the consumer 

at the pump, the question is whether the statutes in question 

legally impose the taxes on the Tribe. The question of who bears 

the ultimate economic burden of the tax is distinct from the question of on whom the tax has been imposed. See White Mountain 

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Apache, 448 U.S. at 151 n.15; Memphis Bank & Trust Co. v. Garner, 

459 u.s. 392, 397 (1983). 

Having determined that the motor fuel taxes are legally 

imposed on the retailer rather than on the distributor or the consumer, we next confront the second error committed by the district 

court. The district court concluded that the motor fuel taxes 

were not federally preempted. This conclusion may have been based 

on the assumption that the statutes imposed the taxes on the consumer. However, since we conclude that the taxes are imposed on 

the retailer, we must consider the issue of preemption. 

State activity is preempted by federal law when either of two 

independent barriers is present: if application of state law 

"would interfere with reservation self-government," or "would 

impair a right granted or reserved by federal law." Rice, 463 

U.S. at 718 (quoting Mescalero Apache Tribe v. Jones, 411 U.S. 

145, 148 (1973). When determining whether application of state 

law would interfere with Indian self-government, the court must 

consider the tradition of Indian sovereignty. If there is a 

tradition of Indian sovereignty in the area concerned, then preemption is presumed absent an explicit statement from Congress 

that state law shall apply. Id. at 719-20. 

The activity with which we are here concerned is the taxation 

of motor fuel. Motor fuel, unlike alcoholic beverages, is not a 

traditionally heavily regulated commodity and the fuel taxes are 

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not part of a comprehensive regulatory scheme. The fuel tax is a 

simple revenue raising measure of the sort commonly imposed by 

sovereign governments to fund their activities. Unlike the beer 

tax, the motor fuel taxes are contained in Title 68 of the 

Oklahoma statutes, the Revenue and Taxation Code. Here, the proceeds of the fuel tax go almost exclusively to the building and 

maintaining of highways in the state of Oklahoma, both within 

Indian country and without. This fact does not alter the nature 

of the fuel taxes as simple revenue measures. Because they are 

directed toward funding traditional government activities, the 

taxes fall within the ambit of the sovereignty of the tribal government. Accordingly, the district court erred in concluding that 

imposition of the fuel tax on the tribal retailer was not preempted by federal law. Where the state action conflicts with a 

power within the traditional scope of Indian sovereign authority, 

preemption is presumed in the absence of an explicit statement of 

congressional intent to the contrary. Rice, 463 U.S. at 719-20. 

The state has directed our attention to no such explicit grant of 

congressional approval of the taxation scheme here at issue and we 

know of none.

4 Because the presumption of preemption is an independent barrier to the exercise of state authority in Indian 

country, the district court erred in requiring the Tribe to show 

4 In White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 151 

n.16 (1980), the Supreme Court declined to reach the question 

whether Indian reservations might be encompassed by the HaydenCartwright Act, 4 U.S.C. § 104, which provides for the imposition 

of state fuel taxes "on United States military or other reservations." This issue was not raised before this court, and we 

express no opinion on it. 

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that the fuel taxes infringed on the right of tribal selfgovernment. Consequently, the district court's balancing of the 

respective tribal and state interests at stake was not relevant to 

the determination of the propriety of the fuel taxes. We therefore hold as a matter of law that the district court erred in 

granting summary judgment in favor of the State on this issue. We 

reverse the grant of summary judgment in favor of the state and 

the district court's denial of the Tribe's motion for summary 

judgment. We direct the trial court to grant summary judgment in 

favor of the Tribe on the question of the imposition of the state 

motor fuel taxes on Indian retailers. 

IV. SALES TAXES 

The third tax contested by the Tribe in the district court 

was the 4.5% Oklahoma sales tax codified at Okla. Stat. Ann. tit. 

68, § 1354 (Supp. 1994). The Tribe objected that the State was 

requiring retail dealers selling to the Tribe at retail to collect 

the sales tax from the Tribe. The district court granted summary 

judgment to the State. At oral argument, it became apparent that 

the sales tax dispute centered on a misconception engendered by a 

previous position of the Oklahoma State Tax Commission, which 

position has since been clarified. The State had furnished a 

letter clarifying its policy on this issue to the Oklahoma Gas and 

Electric Company in January, 1993. During oral argument counsel 

for the State indicated that the contents of that letter represented the current State position on the sales tax. The Tribe 

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stated that it did not object to the current State policy, but 

argued that the State should be required to let retailers in the 

area know of the new sales tax policy. In light of this development at oral argument, we vacate the district court's grant of 

summary judgment in favor of the State on the question of the 

imposition of the sales tax, and we reprint in haec verba the contents of the letter explaining the current State position on the 

sales tax: 

[I]t is the position of the Business Tax Division 

that sales to an Indian tribe are exempt from state and 

local sales taxes as outlined in the Division's exemption letter of January 21, 1988, which was provided to 

all federally-recognized Indian tribes in Oklahoma. 

However, the 1988 letter indicates that the exemption is limited to purchases made by the Tribe for 

governmental use as opposed to business use. In order 

to clarify the Division's position, I will further outline the proper limits of the exemption as the Division 

understands them. 

A tribe may purchase taxable goods and services 

exempt from sales taxes if the tribe purchases the item 

directly, makes payment for the purchase directly and if 

the tribe is the consumer/user of the item, whether the 

item is used in tribal governmental offices or in a 

tribally-owned and operated business place. 

Therefore, in order to be entitled to the exemption, the sale must satisfy the following requirements: 

1. The sale must be made directly to the 

federally recognized Indian tribe. 

2. Payment must be received directly from 

the tribe. 

3. The tribe must be the consumer or user of 

the purchased good which is consumed or 

used within Indian Country. 

In order to document these requirements your company should maintain the following records: 

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1. Invoices or statements of account should be 

billed to the tribe in its officially 

recognized name and mailed to the tribe. 

2. Payment in the form of a bank draft should be 

drawn on an account owned by the tribe in its 

name. 

3. The location at which the service is 

established should be owned and operated by 

the tribe on its Indian Country. 

This exemption does not extend to individuals, 

corporations, partnerships, or other business or 

legal entities who are purchasing items which may 

be used on Indian Country and which are purchased 

ostensibly "for the Tribe" or for business ventures 

under tribal license or contract with private 

parties. The exemption only applies to transactions with a federally-recognized Indian tribe 

itself. 

The exemption also does not extend to purchases of items which a tribe does not use itself, 

but which it intends to resell to the general 

public from a business place on Indian Country for 

the purpose of marketing a tax exemption to those 

who would otherwise be required to pay sales taxes 

elsewhere. 

(Appellant's Reply Br. Exh. A.) As the Tribe has no objection to 

the sales tax policy as expressed in the letter, we need not 

examine the matter further. 5 

IV. INCOME TAX 

5 Much of the State's Brief on appeal treated the sales tax 

dispute as though it were based on the Tribe's objections to the 

State's decision to collect sales taxes from wholesalers selling 

to the Tribe for resale. The Tribe insisted in its Brief and in 

its Reply Brief that this was a misstatement of the issue. The 

Tribe explicitly denied any objection to the current State practice of collecting the sales tax from wholesalers selling to the 

Tribe for resale, reiterating that its sole objection was to the 

collection of sales taxes on retail purchases made by the Tribe. 

In light of the Tribe's characterization of the issue, we need not 

address the question of the State's requirement that wholesalers 

selling to the Tribe for resale pay the sales tax. 

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The final issue contested by the Tribe is the imposition of 

the Oklahoma state income tax on wages paid by the Tribe to persons employed by the Chickasaw Nation on tribal trust lands. The 

district court ruled this question moot in light of this court's 

holding in Sac and Fox Nation v. Oklahoma Tax Comm'n, 967 F.2d 

1425 (lOth Cir. 1992). In Sac and Fox, we held that, absent 

explicit congressional authorization, the state lacked jurisdiction to tax the income of tribal members earned on tribal reservations. In so holding, we relied on the Supreme Court's decision 

in McClanahan v. Arizona State Tax Comm'n, 411 U.S. 164 (1973), to 

conclude that the residency of the tribal member-employee was 

irrelevant to the question of immunity from the state income tax. 

Sac and Fox, 967 F.2d at 1428 n.3. The State filed a petition for 

certiorari before the Supreme Court on the issue of the applicability of the income tax to employees who are enrolled members of 

the Tribe. The Sac and Fox also filed a petition for certiorari 

on the issue of the applicability of the income tax to non-member 

employees. The Supreme Court denied the petition of the Sac and 

Fox, 113 S. Ct. 466 (1992), and granted the State's petition. 113 

S. Ct. 459 (1992). After the district court dismissed this final 

issue as moot, the Supreme Court vacated our decision in Sac and 

Fox as to the tribal member employees and remanded the case. 113 

S. Ct. 1985 (1993). The Supreme Court held that while residency 

in Indian country was sufficient to invoke the McClanahan 

presumption against state jurisdiction to impose an income tax on 

the income of tribal members earned on tribal reservations, this 

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court had erred in concluding that residency was irrelevant to the 

McClanahan analysis. Id. at 1991. The Court concluded that 

because all of the Indians in question might live in Indian 

country, there was no need to consider the question whether 

Indians not living in Indian country might also be outside the 

taxing jurisdiction of the state. Id. at 1992. The Court 

remanded the case for a determination of the residency of the 

Indians concerned. We further remanded the case to the district 

court for a residency determination. 7 F.3d 925 (lOth Cir. 1993). 

The Tribe conceded in its brief on appeal that, with respect 

to tribal member employees, this issue would be controlled by the 

Supreme Court's ultimate resolution in Sac and Fox, which had not 

been decided at the time the briefs were filed. At oral argument, 

the Tribe contended that despite the Supreme Court's holding in 

Sac and Fox, the specific treaties between the Chickasaw and the 

government of the United States barred the imposition of the state 

income tax on the wages of tribal members employed by tribal businesses, regardless of the residence of those members. The Tribe 

also asserted at oral argument that, notwithstanding the Supreme 

Court's decision in Sac and Fox, the State is barred by the relevant treaties from applying its income tax to the income of nonmembers earned from their employment by tribal businesses on 

tribal lands. 

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We first address the validity of the income tax as applied to 

non-member employees. We hold that the question of the applicability of the Oklahoma income tax to the wages of non-members 

earned from employment on tribal lands is controlled by this 

court's decision in Sac and Fox. As we noted there, the Supreme 

Court has generally approved nondiscriminatory taxation of nonmember activities, "so long as such taxation does not conflict 

with relevant statutes or treaties or impermissibly interfere with 

a tribe's ability to govern itself." Sac and Fox, 967 F.2d at 

1429. The Tribe does not contend that the income tax imposed on 

non-members in any way interferes with the Tribe's ability to 

self-govern. Instead, the Tribe relies on the treaty language 

that "no territory or state shall ever have a right to pass laws 

for the government of the [Chickasaw Nation] or their descendants" 

for the proposition that such taxation is barred. (Appellant's 

Br. at 11). We find this argument unpersuasive on two accounts. 

First, on its face, the treaty language prohibits the states only 

from passing laws governing the Tribe and its descendants, not 

non-members. It is settled that the income tax is imposed on the 

employee, not the employer: "The theory, which once won a qualified approval, that a tax on income is legally or economically a 

tax on its source, is no longer tenable." United States v. County 

of Fresno, 429 U.S. 452, 461 n.9 (1977) (quoting Graves v. New 

York ex rel. O'Keefe, 306 U.S. 466, 480 (1939)). Therefore, to 

the extent that the income tax is imposed on non-member employees 

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who have no established claim to tribal ancestry, the tax does not 

infringe upon the treaty prohibition. 6 

Second, the Supreme Court has rejected the proposition that 

the economic burden of the income tax is passed on through the 

employee to the employer in such a way as to interfere with the 

Tribe's right to govern itself so as to mandate holding the 

employees immune from the state income tax. Id. The purpose of 

tax immunity 

was not to confer benefits on the employees by relieving 

them from contributing their share of the financial support of the other government, whose benefits they enjoy, 

or to give an advantage to a government by enabling it 

to engage employees at salaries lower than those paid 

for like services by other employers, public or private, 

but to prevent undue interference with the one government by imposing on it the tax burdens of the other. 

Id. Since the income tax is not a tax on the source of the 

income, it does not impose any burden on the tribal government. 

While the Court in County of Fresno and in Graves was discussing 

the tax immunity of federal rather than tribal employees, this 

difference is not determinative, as "it has long been settled law 

that retained tribal sovereign immunity is co-extensive with that 

of the United States." Seneca-Cayuga Tribe, 874 F.2d at 715; see 

Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163, 175 (1989). 

6 The fact that the Tribe might be required to withhold and 

submit the tax does not constitute an unreasonable burden on the 

Tribe's ability to govern itself. Colville, 447 U.S. at 159-60; 

Moe v. Confederated Salish & Kootenai Tribes, 425 u.s. 463, 483 

(1976) . 

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We accordingly hold that the Oklahoma income tax is valid as 

imposed on non-member employees of Chickasaw businesses on tribal 

land. 7 

We now consider the question of the validity of the Oklahoma 

income tax as applied to tribal members earning income from tribal 

employment in Indian country. In Sac and Fox, the State of 

Oklahoma argued that the McClanahan presumption against state tax 

jurisdiction over Indians was limited to Indians living on the Sac 

and Fox reservation, and was not applicable to Indians living in 

Indian country. As noted above, this court in Sac and Fox 

disagreed and concluded that, under the rule of McClanahan, 

imposition of a state income tax on the income of tribal members 

earned from tribal employment in Indian country was presumptively 

barred regardless of the residence of the members, in the absence 

of express congressional authorization. The Supreme Court 

reversed and remanded, ruling that the residency of the tribal 

member was 11 a significant component of the McClanahan presumption 

against state tax jurisdiction, .. and that to the extent that this 

court had ruled without such a reference to residency, this court 

had erred. Sac and Fox, 113 S. Ct. at 1991. The Court held, 

however, that McClanahan was not limited to Indians living on a 

7 We need not decide whether, in the event that the Tribe were 

to impose its own income tax upon the salary of non-members 

employed in tribal businesses, such a tax would be entitled to the 

same treatment as the federal income tax under Okla. Stat. Ann. 

tit. 68, § 2358(D) (8), which provides for the deduction of the 

amount of such tax from the Oklahoma adjusted gross income for 

purposes of calculating the Oklahoma income tax, or under any 

analogous provisions of state law. 

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formal reservation, and that residency in Indian country was 

sufficient to invoke the McClanahan presumption against tax 

jurisdiction. Id. With respect to tribal members residing either 

on the formal reservation or in Indian country and earning income 

from tribal employment in Indian country, we think it clear that 

pursuant to Sac and Fox the rule of McClanahan continues to bar 

imposition of the state income tax. 8 

We next turn to the somewhat more difficult question of the 

validity of the state income tax as applied to the income of 

tribal members employed by tribal businesses in Indian country, 

but who do not reside either on the formal reservation or in 

Indian country. The State contends that this issue is controlled 

8 We give no credence whatsoever to the State's argument that 

the 11 disestablishment" of the reservation allegedly incurred as a 

result of the Dawes Act of 1891 removed any bar to state taxing 

jurisdiction. The Supreme Court has thrice rejected this notion, 

twice when presented by the same litigant. See Sac and Fox, 113 

S. Ct. at 1991; Oklahoma Tax Comm'n v. Citizen Band Potawatomi 

Indian Tribe of Okla., 498 U.S. 505, 511 (1991); Moe v. 

Confederated Salish & Kootenai Tribes, 425 U.S. 463, 477-479 

(1976) . We assume, with all the dangers inherent in assumptions, 

that, sooner or later, the State will tire of presenting this 

argument. See Sac and Fox, 967 F.2d at 1428 n.2 ("It appears as 

though the State of Oklahoma persists in fighting a battle it has 

already lost."). See also Indian Country. U.S.A. v. Oklahoma Tax 

Comm'n, 829 F.2d 967, 975 n.3 (lOth Cir. 1987), cert. denied sub 

nom Oklahoma Tax Comm'n v. Muskogee Creek Nation, 487 U.S. 1218 

(1988) ( 11 The State seems to believe that the Indian country status 

of the [reservation] rests on whether the exterior boundaries have 

been disestablished. It does not. . .. Tribal lands, trust 

lands, and certain allotted lands generally remain Indian country 

despite disestablishment."). Cf. Hagen v. Utah, 1994 U.S. LEXIS 

1869 (Feb. 23, 1994). In Hagen, the Court concluded that the 

Uintah reservation had been "diminished" by various acts of 

Congress, and that therefore a town originally within the reservation was now outside the reservation and subject to state criminal 

jurisdiction. Notwithstanding the diminishment of the Uintah reservation in Hagen, there was no question but that the land within 

the diminished reservation retained its status as Indian country. 

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by the Supreme Court's decision in Sac and Fox. Accordingly, the 

State argues that the bar to state tax jurisdiction is limited to 

Indians living on the reservation or in Indian country. 

The State's position fundamentally misreads the Court's 

holding in Sac and Fox. In construing Sac and Fox, it is 

important to view the opinion in context. The Court in that case 

decided a limited question, namely, whether an Indian living in 

Indian country but not on the formal reservation was encompassed 

within the McClanahan presumption against state tax jurisdiction. 

As previously discussed, the Court rejected the State's 

contentions in Sac and Fox and held that such Indians were within 

the scope of McClanahan. The Sac and Fox Court did not address 

the question with which we are faced in this case. The Court did, 

however, indicate that Indians living outside Indian country but 

earning their salary from tribal employment in Indian country 

might nevertheless be outside the taxing jurisdiction of the 

state. 9 Id. at 1992. Thus, the Court recognized that the issue 

in both McClanahan and Sac and Fox was the applicability of the 

presumption against state tax jurisdiction, rather than the 

ultimate determination of whether such jurisdiction existed. This 

9 While the Court made this statement with respect to the 

tribe's right to self-government rather than preemption by federal 

law, the latter argument was not raised in Sac and Fox. As the 

right to self-government and preemption by federal law are each 

independently sufficient bars to the application of state law, we 

do not believe that the Court's reference to the right to selfgovernment in any way implies that federal preemption would not 

suffice. 

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question, which the Court left unresolved, is the issue before us 

today. 

Consonant with the distinction between the presumption 

against tax jurisdiction and the ultimate question of the 

existence of such jurisdiction, the Supreme Court in Sac and Fox 

did not rule that the residency of the tribal members on the 

reservation or in Indian country was the controlling factor in the 

ultimate determination whether an income tax could validly be 

applied to the income of tribal members employed in Indian 

country. Rather, such residency is a 11 significant component 11 

merely of the presumption against state tax jurisdiction, and 

residency in Indian country is sufficient to invoke the benefit of 

that presumption. Sac and Fox, 113 S. Ct. at 1991. To read the 

Court's decision in Sac and Fox as holding categorically that an 

Indian must live on the formal reservation or in Indian country in 

order for taxation to be barred, one would have to ignore the 

plain meaning of the term 11 presumption, 11 as well as the fact that 

the Court expressly acknowledged the possibility that such 

taxation might be barred even as applied to Indians not living on 

the formal reservation or in Indian country. See id. at 1992 

(declining to decide whether taxation might be barred by tribe's 

right to self-government, independently of its territorial 

jurisdiction over Indian country); cf. Mescalero Apache Tribe v. 

Jones, 411 U.S. 145, 148 (1973) (distinguishing between state's 

lack of authority to tax income arising from activities occurring 

on the reservation and the power to tax income arising from 

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activities off the reservation). Under such a view, rather than 

being a "significant component" of the presumption, residency on 

the reservation or in Indian country would be dispositive of the 

entire preemption determination. We do not believe such was the 

Supreme Court's intent. We therefore conclude that the proper 

interpretation of the Court's decisions in Sac and Fox and in 

McClanahan is that they merely establish a presumption in favor of 

Indians and against state tax jurisdiction over Indians living in 

Indian country and earning income from activities in Indian 

country. With respect to Indians living outside Indian country 

but earning income from activities within Indian country, that 

presumption does not exist. A lack of a presumption, however, is 

not equivalent to a determination that the state may impose its 

tax. Rather, the absence of the presumption merely affects the 

burden-shifting engendered by the presumption. In the absence of 

the presumption against state tax jurisdiction, the initial burden 

is no longer on the state to show that there has been an explicit 

congressional grant of authority to tax in order to overcome the 

presumption. Instead, where Indians living outside Indian country 

are concerned, the initial burden remains on the tribe to show 

that the tax is barred by one of the two independent barriers to 

the exercise of state jurisdiction over Indians, i.e. interference 

with reservation self-government or impairment of rights granted 

or reserved by federal law. 

While in Sac and Fox the tribe argued--and the Court refused 

to decide--that the tribe's right to self-government barred the 

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tax, in this case the Chickasaw argue that the taxation is barred 

by the relevant treaties between the Tribe and the United States, 

which are, of course, federal law. Applying the rule set forth 

above, we now turn to the question whether, in the absence of the 

McClanahan presumption, the Tribe has met its burden of showing 

that the state income tax is preempted as applied to tribal member 

employees not residing in Indian country but earning their income 

from tribal employment in Indian country. 

"The beginning of our analysis must be with the treaty which 

the United States Government entered with the [Chickasaw Nation]." 

McClanahan, 411 U.S. at 173-74. This analysis requires a 

particularized examination of the specific treaties involved in 

this case. In McClanahan, the Supreme Court construed the treaty 

between the United States and the Navajo Nation in 1868. That 

treaty provided for the setting aside of land "for the use and 

occupation of the Navajo tribe of Indians," and stated that 

no persons except those herein so authorized to do, 

and except such officers, soldiers, agents, and 

employ[ee]s of the government, or of the Indians, 

as may be authorized to enter upon Indian 

reservations in discharge of duties imposed by law, 

or the orders of the President, shall ever be 

permitted to pass over, settle upon, or reside in, 

the territory described in this article. 

Id. at 174. The Court noted that this language did not constitute 

an explicit statement that the Navajos were to be exempt from 

state law or state taxes. Nevertheless, applying the general rule 

that "[d]oubtful expressions are to be resolved in favor of" the 

Indians, id. (alteration in original) (citation omitted), the 

Court concluded that the state was barred from imposing its income 

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tax upon the Navajo members on income derived from employment on 

tribal lands. In so doing, the Court emphasized that the question 

before it was a narrow one: "whether the State may tax a reservation Indian for income earned exclusively on the reservation." 

Id. at 168 (emphasis added) . 

In light of the ambiguous language of the Navajo treaty and 

the narrow question before the Court in McClanahan, it is not 

unduly surprising that the Court in Sac and Fox declined to 

fashion from McClanahan a blanket exemption from state income 

taxation for all tribal members. This is especially true when one 

considers that the Sac and Fox Court was faced with treaty 

language even more ambiguous than that in McClanahan. The treaty 

between the United States and the Sac and Fox Tribe provided no 

more than that the land that the United States ceded to the Sac 

and Fox "shall remain the property of said Sac and Fox Nation, to 

the full extent that it is now the property of said Nation--

subject· only to the rights of the United States therein . . . and 

subject to the rights, legal and equitable, of those persons that 

are now legally located thereon. " Sac and Fox, 113 S. Ct. 

at 1988. 

In stark contrast to the language in the treaties between the 

United States and the Navajo and the Sac and Fox, respectively, 

the language in the treaty between the Chickasaw and the United 

States is abundantly clear. Article IV of that treaty provides as 

follows: 

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The Government and the people of the United States 

are hereby obliged to· secure to the said 

[Chickasaw] Nation of Red People the jurisdiction 

and government of all the persons and property that 

may be within their limits west, so that no 

Territory or State shall ever have right to pass 

laws for the government of the [Chickasaw] Nation 

of Red People and their descendants; and that no 

part of the land granted them shall ever be 

embraced in any Territory or State; but the U.S. 

shall forever secure said [Chickasaw] Nation from, 

and against, all laws except such as from time to 

time may be enacted in their own National Councils, 

not inconsistent with the Constitution, Treaties, 

and Laws of the United States; and except such as 

may, and which have been enacted by Congress, to 

the extent that Congress under the Constitution are 

required to exercise a legislation over Indian 

Affairs. 

7 Stat. 333 (emphasis added) .10 In 1866, the United States reaffirmed the above obligations, stating that 

[a]ll the rights, privileges, and immunities heretofore 

possessed by said nations or individuals thereof, or to 

which they were entitled under the treaties and legislation heretofore made and had in connection with them, 

shall be, and are hereby declared to be, in full force, 

so far as they are consistent with the provisions of 

this treaty. 

Treaty of April 28, 1866, 14 Stat. 769, Art. XLV; id. Art. X. 

These obligations were again reaffirmed in 1871, which reaffirmation stands to this day. See 25 U.S.C.A. § 71 (West Supp. 1994). 

See also Oklahoma Enabling Act, § 1, 34 Stat. 267, 267-68) (1906) 

( 11 [N]othing contained in [the Oklahoma Constitution] shall be construed to limit or impair the rights of person or property pertaining to the Indians of said Territories .... 11 ). 

10 The treaty actually refers to the Choctaw, rather than the 

Chickasaw. However, in 1837, the Choctaw consented to the formation of a district within their reservation for the Chickasaw, 11 to 

be held on the same terms that the Choctaws now hold it." Treaty 

of January 17, 1837, 11 Stat. 573, Art. I. Thus, the Chickasaw 

became the beneficiaries of the above language referring to the 

Choctaw. 

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In comparison to the treaty at issue in the Sac and Fox case, 

the Chickasaw treaty explicitly provides that no state would ever 

be permitted to pass laws for the government of the Chickasaw or 

their descendants. The crucial question in determining the validity of the income tax under the relevant treaty language is therefore whether the law is one imposed on the Chickasaw Nation or its 

descendants. Residency is simply not relevant to this determination. We believe that, reading the treaty as the Indians would 

have understood it, and construing any ambiguities in the treaty 

language in favor of the Indians as we must, see McClanahan, 411 

U.S. at 174, the specific treaty involved in this case preempts 

the imposition of the state income tax on the wages of Chickasaw 

members, earned on the reservation or in Indian country, 

regardless of the residence of those members. Accordingly, we 

hold that, consistent with the Supreme Court's decision in Sac and 

Fox, the Oklahoma income tax may not be imposed on the income of 

Chickasaw tribal members, earned from tribal enterprises on the 

reservation or in Indian country, regardless of whether the tribal 

11 member actually lives on the reservation or in Indian country. 

We therefore vacate the district court's dismissal of this issue 

as moot, reinstate the claim, and direct the district court to 

grant summary judgment in favor of the Tribe on this issue. 

V. CONCLUSION 

11 In so holding, we do not suggest that the state may not 

impose its income tax on the income of tribal member employees 

earned outside Indian country. This issue is not before us. 

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To summarize, we AFFIRM the district court's grant of summary 

judgment in favor of the State on the issue of the imposition of 

the tax on 3.2% beer. We REVERSE the grant of summary judgment in 

favor of the State on the issue of the imposition of the state 

motor fuel taxes, and we direct the district court to GRANT 

summary judgment in favor of the Tribe on this issue. We VACATE 

the district court's grant of summary judgment in favor of the 

State on the issue of the sales taxes. With respect to the income 

taxes, we AFFIRM the district court's grant of summary judgment in 

favor of the State on the question of the imposition of the state 

income taxes on non-member employees of tribal businesses on 

Chickasaw Indian country. We VACATE the district court's dismissal as moot on the question of the imposition of the state 

income tax on the wages of tribal member employees earned from 

tribal employment in Indian country, and who live in Indian 

country, we REINSTATE the Tribe's claim on this issue, and we 

direct the district court to GRANT summary judgment in favor of 

the Tribe on this issue. We similarly VACATE the district court's 

dismissal as moot on the question of the taxation of the income of 

tribal member employees earned from tribal enterprises in Indian 

country, but who do not reside in Indian country. We also 

REINSTATE that claim, and we direct the district court to GRANT 

summary judgment in favor of the Tribe on that issue. 

AFFIRMED in part, VACATED in part, REVERSED in part, and 

REMANDED with instructions. 

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