Court Opinion

ID: 9601114
Source: CourtListenerOpinion
Date Created: 2023-08-22 01:36:46.22483+00
Date Added: 2024-06-11T09:49:47.920662
License: Public Domain

STRUCKMEYER, Justice.
Appellant, Warren Trading Post Company, appeals from a judgment determining that certain taxes are due to the State of Arizona by reason of retail sales of personal *113property to reservation Indians residing on the Navajo Indian Reservation.1
The Arizona exaction arises out of the provisions of the Arizona Privilege Transaction Act, A.R.S. § 42-1308, requiring every person within Arizona 2 who receives gross proceeds of sale or gross income from sales to acquire a license for a fee of $1.00. A.R.S. § 42-1312 imposes a tax measured by an amount equal to 2% of the gross proceeds of sales or gross income on the privilege of selling any tangible personal property at retail.3
In considering collectively the arguments presented, we observe certain conclusions which weigh heavily in the decision.
Tax immunity is never enjoyed as a matter of right but only as an incidental windfall when, and only as long as, imposition of the state tax impairs or interferes with the exercise of a federal function. Petition of S. R. A., Inc. v. State of Minnesota, 219 Minn. 493, 18 N.W.2d 442, affirmed 327 U.S. 558, 66 S.Ct. 749, 90 L.Ed. 851. The immunity here claimed represents a severe impairment of the taxing power of Arizona. It is one we would not be disposed to sustain unless we entertained grave doubts but that a federal function was impaired.
We have repeatedly held that this tax is on the privilege or right to engage in business and is not a sales tax although generally referred to as such, that it neither imposes a tax on the purchaser nor upon sales but rather taxes the seller for the privilege of engaging in business, that the tax is the direct obligation of the retailer and not that of the consumer, and further that there is no statutory authority for the retailer to attempt to constitute himself an *114agent of the state for the purpose of receiving the tax and transmitting it to the state. The legal incidence of the tax falls upon the seller and not upon the buyer.4 Arizona State Tax Commission v. Garrett Corp., 79 Ariz. 389, 291 P.2d 208; State Tax Commission v. Quebedeaux Chevrolet, 71 Ariz. 280, 226 P.2d 549.
 Were appellant an instrumentality of the United States Government by reason of its being licensed to do business with the Indians under the appropriate acts of Congress,5 no exemption is to be implied.6 Alabama v. King & Boozer, 314 U.S. 1, 62 S.Ct. 43, 86 L.Ed. 3, 140 A.L.R. 615. Exemption of the person upon whom the legal incidence of the tax falls is not to be implied regardless of the fact that the burden is passed on so long as Congress has not expressly exempted such person, Esso Standard Oil Co. v. Evans, 345 U.S. 495, 73 S.Ct. 800, 97 L.Ed. 1174. We conclude that the Navajo Indian Tribe, Amicus Curiae, is not entitled to assert a greater immunity from non-discriminatory taxation for traders with whom its members deal than the United States for its employees, contractees or other chosen agents, even were we certain that the economic burden must inevitably be shifted to the Indians.7
The Arizona exaction is non-discriminatory. It is not levied against Indians or Indian tribes as such but against all who engage in the business of selling within the geographical boundaries of the State of Arizona. The fact of legal title in the United States to the Indian lands is not sufficient to effect an exclusion of the state *115from excise taxes unless it appears that the state by consent or cession has transferred to the United States that residuum of jurisdiction which otherwise it would be free to exercise.8 Silas Mason Co. v. Tax Commission of Washington, 302 U.S. 186, 58 S.Ct. 233, 82 L.Ed. 187. The authority of the state may rightfully extend to all matters not interfering with the Indian’s protection by the government. Utah & Northern R. Co. v. Fisher, 116 U.S. 28, 6 S.Ct. 246, 29 L.Ed. 542. The applicability of state law depends upon “whether the state action infringed on the right of reservation Indians to make their own laws and be ruled by them.” Williams v. Lee, 358 U.S. 217, 220, 79 S.Ct. 269, 3 L.Ed.2d 251, reversing Williams v. Lee, 83 Ariz. 241, 319 P.2d 998.
Historically three powers of the federal government have been used to support congressional action in legislating on Indian affairs. The War Making Power was invoked by the First Congress on August 7th, 1789, by entrusting Indian affairs to the War Department. 1 Stat. 49, 50. It was the practice and policy of the federal government during the many years of tension between Indian and non-Indian to negotiate with the tribes and to settle differences by treaty if possible. See Worcester v. Georgia, 6 Pet. 515, 8 L.Ed. 483. After the Civil War, it was recognized that assimilation not segregation of the Indians was necessary9 and the use of the Treaty Making Power to deal with Indians as dependent alien nationalities was terminated by Congress in 1871. One of the last treaties was entered into with the Navajo Indians in 1868. Cohen, Federal Indian Law, 24, 210. For a more detailed background of the Navajo Tribe see Williams v. Lee, 358 U.S. 217, 79 S.Ct. 269, 3 L.Ed. 2d 251, supra.10 Neither appellant nor Amicus Curiae, the Navajo Indian Tribe, assert a tax immunity arising out of or supported by the terms of the Navajo Treaty with the United States.
In 1886 the Supreme Court of the United States examined a congressional enactment prescribing criminal laws for Indians living on reservations. In sustaining the plenary *116power of Congress to act in behalf of the Indians, the court said:
“From their very weakness and helplessness, so largely due to the course of dealing of the federal government with them, and the treaties in which it has been promised, there arises the duty of protection, and with it the power.” United States v. Kagama, 118 U.S. 375, 384, 6 S.Ct. 1109, 30 L.Ed. 228.
Since then, the recognized relation of tribal Indians together with the commerce clause of the U.S.Const., art. 1, § 8(3), granting to Congress the power “to regulate commerce with * * * the Indian tribes” have been treated as the sources of congressional power, see Williams v. Lee, 358 U.S. 217, 79 S.Ct. 269, 3 L.Ed.2d 251, supra, Perrin v. United States, 232 U.S. 478, 34 S.Ct. 387, 58 L.Ed. 691, Johnson v. Gearlds, 234 U.S. 422, 34 S.Ct. 794, 58 L.Ed. 1383, without always pointing specifically to either.
We do not doubt the plenary power of Congress to legislate in behalf of its wards by providing for them such federal services as education, health and reclamation, or that Congress may permit tribal self-government. The exercise of state jurisdiction may not impede the federal government in the treatment of its wards nor may it undermine the authority of the tribe in the exercise of self-government, Williams v. Lee, supra. Neither may it impair a right granted or reserved by federal law. Organized Village of Kake v. Egan, supra. Otherwise state laws may be applied to Indians.
Congress has customarily carved out reservations from the unreserved public domain lying within the geographical boundaries of the state either to be owned or held by the Indian tribes. Utah & Northern R. Co. v. Fisher, 116 U.S. 28, 6 S.Ct. 246, 29 L.Ed. 542, supra. State law consistent with congressional legislation in behalf of its wards and with the tribal self-government is not excluded on these reservations.
“It is not unusual for the United States to own within a state lands which are set apart and used for public purposes. Such ownership and use without more do not withdraw the lands from the jurisdiction of the state. On the contrary, the lands remain part of her territory and within the operation of her laws, save that the latter cannot affect the title of the United States or embarrass it in using the lands or interfere with its right of disposal.
“A typical illustration is found in the usual Indian reservation set apart within a state as a place where the United States may care for its Indian wards and lead them into habits and ways of civilized life. Such reservations are part of the state within which they lie, *117and her laws, civil and criminal, have the same force therein as elsewhere within her limits, save that they can have only restricted application to the Indian wards. * * *” Surplus Trading Co. v. Cook, 281 U.S. 647, 650, 651, 50 S.Ct. 455, 74 L.Ed. 1091.
Generally, it may he said that state laws apply to the extent they do not conflict with federal Indian laws.
“Enactments of the federal government passed to protect and guard its Indian wards only affect the operation, within the colony [or reservation], of such state laws as conflict with the federal enactments.” United States v. McGowan, 302 U.S. 535, 539, 58 S.Ct. 286, 82 L.Ed. 410. (Emphasis supplied).11
We do not find that Arizona hy taxing appellant interferes with the United States in the use of reservation lands for the purposes for which they were established or that its tax tends to thwart the purpose of the federal government in caring for its Indian wards and leading them into the habits and ways of civilized life.
This brings us to the ultimate proposition advanced by the Navajo Indian Tribe that the commerce clause of the federal constitution by its own force creates an area of trade free from interference by the state. There is here equated the power to regulate commerce among the several states with the Indian tribes in the argument that the states are not allowed “one single — tax—worth of direct interference with the free flow of commerce.” But we do not understand that the commerce clause provides an automatic pre-emption to the federal government of every area wherein conceivably Congress might act.
If there is an analogy to be drawn from the interstate commerce clause, still the possession of power in Congress does not exclude all state power. Southern Pac. Co. v. Arizona ex rel. Sullivan, 325 U.S. 761, 65 S.Ct. 1515, 89 L.Ed. 1915. A state may legislate freely upon those phases of commerce which are left unregulated by the nation and if the prohibition of state action is only inferable from the scope and purpose of the federal legislation, it must be clear that state action is inconsistent with the federal provisions. Cloverleaf Butter Co. v. Patterson, 315 U.S. 148, 62 S.Ct. 491, 86 L.Ed. 754. Local authorities are not foreclosed from regulating matters of local concern merely because there may be some incidental but not burdensome effect on interstate commerce. California v. Zook, 336 U.S. 725, 69 S.Ct. 841, 93 L.Ed. 1005; Cooley v. Board of Wardens, 12 How. 299, 13 L.Ed. 996.
*118This brings us to the further assertion that the federal statutes on trading with Indians pre-empt the field of sales to Indians upon the Navajo Indian Reservation as against the Arizona Transaction Privilege Tax. By act of August 15, 1876, 25 U.S.C. § 261, Congress provided that:
“The Commissioner of Indian Affairs shall have the sole power and authority to appoint traders to the Indian tribes and to make such rules and regulations as he may deem just and proper specifying the kind and quantity of goods and the prices at which such goods shall be sold to the Indians.”
and by § 262:
“Any person desiring to trade with the Indians on any Indian reservation shall, upon establishing the fact, to the satisfaction of the Commissioner of Indian Affairs, that he is a proper person to engage in such trade, be permitted to do so under such rules and regulations as the Commissioner of Indian Affairs may prescribe for the protection of said Indians.”
It is argued that if appellant “proved his fitness to trade with the Indians to the satisfaction of the Commissioner of Indian Affairs and secured a license from the Commissioner, he would thereupon have the right, whether or not he applied for or received a Transaction Privilege Tax License from the defendants [members of the State Tax Commission],, to set up as a trader on the Navajo Indian. Reservation.” But we do not think it follows because appellant is licensed by the-Commissioner of Indian Affairs to engage-in trade that he has also been commissioned to disregard state laws. Rather, we would, think that the Commissioner of Indian Affairs in considering whether a trader is a “proper person” would consider whether-he will or has complied with such state-laws as are constitutionally consistent with the licensee’s business.
By the Arizona Enabling Act, § 20, 36-St at. 557, 568, the people of this state agreed with the United States to forever disclaim all right and title to all lands lying-within Arizona’s boundaries owned or held by any Indian or Indian tribes and that “ * * * until the title of such Indian or-Indian tribes shall have been extinguished' the same shall be and remain subject to the-disposition and under the absolute jurisdiction and control of the Congress of the-United States.” Absolute jurisdiction does, not mean invariably exclusive jurisdiction; the word “absolute” carries the meaning of’ undiminished not exclusive. Organized Village of Kake v. Egan, 369 U.S. 60, 82 S.Ct. 562, 7 L.Ed.2d 573.
The same section of the enabling act-further provides that “ * * * all such; lands shall be exempt from taxation by said State so long and to such extent as Con- ■ gress has prescribed or may hereafter pre--*119scribe.” The taxation here forbidden is that of reservation lands. There is no general ceding of the taxation authority of the state. Congress has not provided non-taxability from excises although it could have.
“If Congress intends to prevent the State of Oklahoma from levying a general non-discriminatory estate tax applying alike to all its citizens, it should say so in plain words. Such a conclusion can not rest on dubious inferences.” Oklahoma Tax Commission v. United States, 319 U.S. 598, 607, 63 S.Ct. 1284, 87 L.Ed. 1612, supra.
Moreover, any inference that this trader was intended by Congress to be relieved of the Arizona general non-discriminatory privilege transaction tax is to the contrary. By 61 Stat. 644, 4 U.S.C. §§ 105, 109, Congress authorized the states to extend sales taxes to persons residing on or carrying on their businesses and to transactions occurring in federal areas. While Congress specifically excluded Indians “not otherwise taxed,” it did not purport to protect those who trade with Indians from taxation.12
We restate our basic conclusions.
First, assuming that appellant is an instrumentality of the United States government, no immunity from the tax will be implied.
Second, the test of state action irrespective of the sources of power is that state action must not be inconsistent with or burdensome to federal purposes or laws.
Under the stipulated facts of this case we hold that the Arizona exaction as applied to the appellant does not thwart the will of Congress in its treatment of its Indian wards nor is it inconsistent with the power of Congress to regulate trade with the Indian tribes.
The judgment of the court below is affirmed.
BERNSTEIN, C. J., UDALL, Vice C. J., and JENNINGS, J., concur.

. Appellant, a domestic corporation, licensed as an Indian trader by the Commissioner of Indian Affairs under Act of Congress, 22 Stat. 179, 25 U.S.C. §§ 261, 264, is authorized by Article III of its Articles of Incorporation to, among other things: (a) Buy, own, hold, sell, barter, pledge, hypothecate cattle and other livestock and in general to conduct and carry on a ranch and livestock business. (b) Deal in cattle and property. (c) Bend money, (d) Deal in shares of stock, bonds, promissory notes, (f) Buy, sell, hold and lease or construct reservoirs, canals, dams, (i) Carry on the business of purchasing, manufacturing, producing, selling, and dealing in goods and wares, merchandise and materials of every kind, (m) Maintain in addition to its principal office at Flagstaff, Arizona, one or more offices for tbe transactions of its business either within or without the State of Arizona.

. Indian reservations are within the political, governmental and geographical boundaries of Arizona. Enabling Act, § 20(2), A.R.S.; Draper v. United States, 164 U.S. 240, 17 S.Ct. 107, 41 L.Ed. 419; Harrison v. Laveen, 67 Ariz. 337, 196 P. 2d 456; Porter v. Hall, 34 Ariz. 308, 271 P. 411.

. The stipulation as to facts in the lower court specifically confined the question to taxes on sales to reservation Indians who reside on an Indian reservation. We assume that taxes arising out of sales to others on the Navajo Reservation have been paid and therefore the right of the state to levy and collect such taxes is not questioned.

. The determination of the incidence of the tax by the state court is eontrollling, Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95, 62 S.Ct. 1, 86 L.Ed. 65, absent facts or construction upon which Federal Constitutional issues rest. Kern-Limerick v. Scurlock, 347 U.S. 110, 74 S.Ct. 403, 98 L.Ed. 546.

. The Navajo Tribe of Indians, Amicus Curiae, asserts that the Warren Trading Post Company is not a federal instrumentality.

. Appellant, as a licensee of the federal government, can scarcely claim a better position as an instrumentality by which the government accomplishes its purposes than an employee of the federal government, Graves v. New York, ex rel. O’Keefe, 306 U.S. 466, 59 S.Ct. 595, 83 L.Ed. 927; or a contractee, James v. Dravo Contracting Co., 302 U.S. 134, 58 S.Ct. 208, 82 L.Ed. 155. See Alward v. Johnson, 282 U.S. 509, 51 S.Ct. 273, 75 L.Ed. 496, 75 A.L.R. 9.

. “ * * * we cannot assume that Congress will choose to aid the Indians by permanently granting them immunity from taxes which they are as able as other citizens to pay. It runs counter to any traditional concept of the guardian and ward relationship to suppose that a ward should be exempted from taxation by the nature of his status, and the fact that the federal government is the guardian of its Indian ward is no reason, by itself, why a state should he precluded from taxing the estate of the Indian.” Oklahoma Tax Commission v. United States, 319 U.S. 598, 607, 63 S.Ct. 1284, 1288, 87 L.Ed. 1612.
■There-is no suggestion arising out of the stipulated facts that the Indians are less able to pay this tax than other residents of Arizona of a like or similar economic status.

. “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” U.S.Const. amend. X.

. See for further changes in the policy of Congress, Organized Village of Kake v. Egan, 369 U.S. 60, 82 S.Ct. 562, 7 L.Ed. 2d 573.

. “There are many cases * * * recognizing that the plenary power of Congress over the Indian Tribes and tribal property cannot be limited by treaties so as to prevent repeal or amendment by a later statute. The Tribes have been regarded as dependent nations, and treaties with them have been looked upon not as contracts, but as public laws which could be abrogated at the will of the United States.” Choate v. Trapp, 224 U.S. 665, 670, 671, 32 S.Ct. 565, 56 L.Ed. 941. Treaty rights would, of course, pre-empt those areas affected thereby and would require congressional sanctions before effective state action.

. See also New York ex rel. Ray v. Martin, 326 U.S. 496, 66 S.Ct. 307, 90 L.Ed. 261; Draper v. United States, 164 U.S. 240, 17 S.Ct. 107, 41 L.Ed. 419, supra. Note too United States v. McBratney, 104 U.S. 621, 26 L.Ed. 869.

. We are not called upon to determine precisely the meaning of the language used by Congress. It is sufficient to say that Congress could have excluded appellant from the scope of the Arizona tax. But it did not.