Opinion ID: 614134
Heading Depth: 3
Heading Rank: 1

Heading: Indian Tax Immunity

Text: The Constitution vests the Federal Government with exclusive authority over relations with Indian tribes . . ., and in recognition of the sovereignty retained by [the] tribes . . ., Indian tribes and [registered] individuals generally are exempt from state taxation within their own territory.' Oklahoma Tax Comm'n v. Chickasaw Nation, 515 U.S. 450, 455, 115 S.Ct. 2214, 132 L.Ed.2d 400 (1995) (quoting Montana v. Blackfeet Tribe, 471 U.S. 759, 764, 105 S.Ct. 2399, 85 L.Ed.2d 753 (1985)). The initial and frequently dispositive question in Indian tax cases, therefore, is who bears the legal incidence of a tax. If the legal incidence of an excise tax rests on a tribe or on tribal members for sales made inside Indian country, the tax cannot be enforced absent clear congressional authorization. Chickasaw Nation, 515 U.S. at 456-57, 115 S.Ct. 2214. However, where the legal incidence of tax does not rest on a tribe or its members, a state may impose the tax so long as the balance of federal, state, and tribal interests favors the [s]tate, and federal law is not to the contrary, and a state may place on a tribe or tribal members `minimal burdens' in collecting the toll. Id. at 459, 115 S.Ct. 2214 (citation omitted). The legal incidence of an excise tax refers to determining which entity or person bears the ultimate legal obligation to pay the tax to the taxing authority. See Colville, 447 U.S. at 150-51, 100 S.Ct. 2069 (We upheld the tax, insofar as sales to non-Indians were concerned, because its legal incidence fell on the non-Indian purchaser as the competitive advantage which the Indian seller . . . enjoy[ed] . . . [was] dependent on the extent to which the non-Indian purchaser is willing to flout his legal obligation to pay the tax.) (emphasis added) (citing Moe v. Confederated Salish & Kootenai Tribes of Flathead Reservation, 425 U.S. 463, 482, 96 S.Ct. 1634, 48 L.Ed.2d 96 (1976)). Identifying legal incidence requires a court to analyze the taxing statute and its implementation to determine which entities or individuals will likely face detrimental legal consequences if the tax is not paid. See Moe, 425 U.S. at 482, 96 S.Ct. 1634; Coeur D'Alene Tribe of Idaho v. Hammond, 384 F.3d 674, 681 (9th Cir.2004) ([T]o discern where the legal incidence lies, we `ascertain [ ] the legal obligations imposed upon the concerned parties[.]' (quoting Crow Tribe of Indians v. Montana, 650 F.2d 1104, 1111 (9th Cir. 1981))). [A] party does not bear the legal incidence of the tax if it is merely a transmittal agent for the state tax collector[,] because that party's legal liability in event of non-payment would depend either on another responsible party's failure to pay to the transmittal agent or on the transmittal agent's withholding collected taxes. Hammond, 384 F.3d at 681 (citing Chickasaw Nation, 515 U.S. at 461-62, 115 S.Ct. 2214). The person or entity bearing the legal incidence of an excise tax is not necessarily the one bearing an economic burden from the tax. Hammond, 384 F.3d at 681 (citing Chickasaw Nation, 515 U.S. at 460, 115 S.Ct. 2214). While a party bearing an economic burden, perhaps as the result of reduced sales, may also bear the legal incidence of the tax, the Supreme Court has clarified that an economic analysis of the realities of taxation should not be a substitute for legal-incidence analysis. Chickasaw Nation, 515 U.S. at 459-60, 115 S.Ct. 2214 (If we were to make `economic reality' our guide, we might be obliged to consider, for example, how completely retailers can pass along tax increases without sacrificing sales volumea complicated matter dependent on the characteristics of the market for the relevant product.). Legal incidence accommodates the reality that tax administration requires predictability, id., and while a state cannot fully control how the market will adjust to a tax, a state can control tax enforcement and the determination of who is ultimately obligated to pay the tax. Id. at 460, 115 S.Ct. 2214 ([I]f a State is unable to enforce a tax because the legal incidence of the impost is on Indians or Indian tribes, the State generally is free to amend its law to shift the tax's legal incidence.). Because few statutes are identical, legal-incidence determinations necessarily will depend on myriad, often situationspecific factors. In Moe v. Confederated Salish & Kootenai Tribes of Flathead Reservation , the Supreme Court upheld a Montana cigarette tax because the legal incidence of the tax was on the non-Indian purchaser, as the Court explained: Since nonpayment of the tax is a misdemeanor as to the retail purchaser, the competitive advantage which the Indian seller doing business on tribal land enjoys over all other cigarette retailers, within and without the reservation, is dependent on the extent to which the non-Indian purchaser is willing to flout his legal obligation to pay the tax. Without the simple expedient of having the retailer collect the sales tax from non-Indian purchasers, it is clear that wholesale violations of the law by the latter class will go virtually unchecked. Id. at 482, 96 S.Ct. 1634 (footnotes omitted). The Moe Court also rejected the argument that collecting the tax from non-Indian customers rendered the retailer an involuntary agent for collection because the obligation to collect was only a minimal burden designed to avoid the likelihood that in its absence non-Indians purchasing from the tribal seller will avoid payment of a concededly lawful tax. Id. at 483, 96 S.Ct. 1634. In Chickasaw Nation, the Court, in holding that the legal incidence of an Oklahoma motor-fuel tax fell on Indian retailers, gave special attention to two factors: whether the legislature specifically identified who bore the tax's legal incidence and whether the tax statute contained an explicit pass through provision requiring distributors and retailers to pass the tax onto consumers. 515 U.S. at 461, 115 S.Ct. 2214. The Court stated that if the Oklahoma legislation expressly identif[ied] who bears the tax's legal incidence, the language would be dispositive. Id. (In the absence of such dispositive language, the question is one of `fair interpretation of the taxing statute as written and applied.' (quoting Chemehuevi Tribe, 474 U.S. 9, 11, 106 S.Ct. 289, 88 L.Ed.2d 9 (1985))). The Court returned to this concept of dispositive legislative identification in Wagnon v. Prairie Band Potawatomi Nation, 546 U.S. 95, 126 S.Ct. 676, 163 L.Ed.2d 429 (2005), by again referencing Chickasaw Nation 's suggest[ion] that [] `dispositive language' from the state legislature is determinative of who bears the legal incidence of a state excise tax. See Wagnon, 546 U.S. at 102, 126 S.Ct. 676. In Hammond, we held that an Idaho motor-fuel tax fell on Indian retailers in light of its striking similarity with the tax voided in Chickasaw Nation, 515 U.S. at 450, 115 S.Ct. 2214. Four key factors guided us: (1) the non-tribal distributors who received the motor fuel and sold it to the Indian tribes were required to pass on and to collect the tax from the retailer, and then to remit the taxes to the State; (2) the statute provided a tax credit to the distributor, but not a retailer, for collecting and remitting the tax on behalf of the State; (3) the State gave tax credits to the distributor for fuel taxes that the distributor has paid but cannot then collect from the retailer; and (4) retailers could not set off their tax liability when consumers failed to pay, nor were they compensated for their tax collection efforts. 384 F.3d at 685-88. In short, in addition to express statements of legislative intent, legal incidence analysis depends on whether a taxing statute contains an explicit pass through which moves incidence down the distribution chain, Hammond, 384 F.3d at 685-86, which individuals or entities are compensated for collecting and remitting the tax on behalf of the State, id. at 686, what invoices show regarding payment of the tax, id., whether a retailer may recoup the tax paid for unsold product, id. at 684, if the retailer is refunded the tax when a consumer fails to pay, id. at 687-88, and ultimately who is penalized by state authorities when the tax is not paid, Wagnon, 546 U.S. at 103, 126 S.Ct. 676; Moe, 425 U.S. at 482, 96 S.Ct. 1634.