Opinion ID: 768546
Heading Depth: 2
Heading Rank: 1

Heading: State Authorized Wagers

Text: 5 We first address the parties' arguments concerning whether wagers placed on Indian pull-tab games are subject to taxation under I.R.C. §§ 4401 and 4411. Little Six argues that these tax provisions only apply to wagers authorized under state law and therefore do not apply to pull-tab games, which are authorized under federal law. The government responds that these tax provisions do apply to wagers on pull-tab games because all legal wagers, including those authorized under federal law, are state authorized. 6 We agree with the government that wagers placed on Indian pull-tab games are subject to taxation under sections 4401 and 4411, because they are state authorized. We reach this conclusion based upon the plain language of the relevant statutes. See Consumer Prod. Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980) ([T]he starting point for interpreting a statute is the language of the statute itself. Absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive.). Section 4401(a) provides as follows: 7 (1) State authorized wagers.-There shall be imposed on any wager authorized under the law of the State in which accepted an excise tax equal to 0.25 percent of the amount of such wager. 8 (2) Unauthorized wagers.--There shall be imposed on any wager not described in paragraph (1) an excise tax equal to 2 percent of the amount of such wager. 9 I.R.C. § 4401(a) (emphasis added). Section 4411 imposes a related occupational tax and provides in relevant part that: 10 (a) In general.--There shall be imposed a special tax of $500 per year to be paid by each person who is liable for the tax imposed under section 4401 . . . 11 (b) Authorized persons.--Subsection (a) shall be applied by substituting $50 for $500 in the case of-- 12 (1) any person whose liability for tax under section 4401 is determined only under paragraph (1) of section 4401(a), and 13 (2) any person who is engaged in receiving wagers only for or on behalf of persons described in paragraph (1). 14 I.R.C. § 4411. Thus, according to the clear language of these two statutes, all wagers are either state authorized or unauthorized, and any person who is liable for the excise tax under section 4401 must also pay the related occupational tax under section 4411. 15 The statutory basis for the regulation of Indian gaming is set forth in the Indian Gaming Regulation Act (IGRA), Pub. L. No. 100-497, 102 Stat. 2467 (1988) (codified as amended at 25 U.S.C. §§ 2701-2721 (1994 & Supp. 1997)). Under the IGRA, tribes may operate class II gaming activities, which includes pull-tabs, provided that such Indian gaming is located within a State that permits such gaming for any purpose by any person, organization or entity. 25 U.S.C. § 2710(b)(1)(A); see also 25 U.S.C. § 2703(7)(A)(i) (defining class II gaming to include pull-tabs). Thus, in order for pull-tab games to be authorized under federal law, class II gaming must be permitted by the state in which such gaming is located. 16 In the present case, the parties do not dispute the fact that Minnesota permits non-profit organizations to conduct pull-tab games. Thus, such Indian gaming is located within a state that permits such gaming by an organization. 25 U.S.C. § 2710(b)(1)(A). Accordingly, any wagers placed on Indian pull-tab games cannot be unauthorized, because they are authorized under the IGRA. See id.; 25 U.S.C. § 2703(7)(A)(i). We therefore conclude that pull-tab games are authorized under both federal law and the law of the state in which they are conducted, and that wagers placed on those games are state authorized for the purpose of assessing taxes under sections 4401 and 4411 of the Internal Revenue Code.