Indian Country Deserves Fair Taxation

Anthony Broadman & Chase Iron Eyes

Just as the U.S. Supreme Court’s decision in White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 143 (1980), has been construed to allow state governments to reach into Indian country and collect taxes on reservation transactions involving non-Indians, tribal governments should be able to reach beyond their boundaries, and generate revenue from off-reservation transactions involving their members.

Bracker and its progeny stem from the notion that states are entitled to tax revenue on, for instance, sales to non-Indians buyers, because those buyers rely on state infrastructure and should not be able to spend money without supporting that infrastructure. But for Tribes whose members leave the reservation to spend money, the same rationale should be true. Just as those members use tribal infrastructure, taxes on sales to such members should go to the jurisdictions where they live: reservations.

But current federal Indian tax law presents a major impediment to fair taxation. In general, absent a treaty bar, there is no legal basis for a Reverse Bracker rule. In general, “[a]bsent express federal law to the contrary,” tribal commerce “going beyond reservation boundaries” is nearly always “subject to non-discriminatory state law otherwise applicable to all citizens of the State.” Mescalero Apache Tribe v. Jones, 411 U.S. 145, 148-149 (1973). The theoretical barrier is buttressed by the practical reality that states aggressively pursue any tax revenue with even an tenuous state nexus. See Fond du Lac Band of Lake Superior Chippewa v. Frans, 649 F.3d 849, 850 (8th Cir. 2011) (upholding taxation of tribal members who resided in Indian country but earned income outside state).

Federal Indian tax law, however, has never blocked the way of tribes and tribal members fighting to advance their rights. In fact, tribal disobedience, or the “process by which Indigenous people engage in ‘disobedient’ actions against the colonizing government in order to protect and defend their inherent and treaty-recognized rights,” is absolutely critical to the survival of tribal sovereignty. Without descending into the Tea Party rabbit hole or engaging in “Tribal Lawyer Bullshit,” it’s at least fair to say that good faith resistance to illegal taxation is a shared American value. In short, when we can do so under appropriate procedural and legal scenarios, we should not pay illegal taxes.

Tribes whose borders are delineated by non-Indian liquor stores, discount grocers, used-car dealers, and check-cashing outlets should consider whether taxes paid by Indians just beyond the reservation boundaries can be resisted, openly and civilly. Of course, lawsuits over taxes paid under duress are not subject to a statute of limitations. McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, Fla. Dept. of Business Regulation , 496 U.S. 18, 32 (1990).

Beyond disobedience, tribal spending power and economic self-determination may present even more powerful tools in the fight for economic justice near the reservation. For example, a tribal community could aspire to shut down the Big Box store just beyond reservation boundaries by collectively not shopping there any longer.

Also, if non-Indian retailers want to do business with Indians, they should be forced to support the reservation-based infrastructure that Indian customers use. Recent changes to BIA leasing regulations make this approach pretty obvious. States cannot tax “activities” on Indian land subject to the leasing regulations. 25 C.F.R. § 162.017(b). Tribes, however, can tax or otherwise derive economic benefit from new non-Indian reservation activity fostered under such leasing regulations. Now, more than ever, the federal policy behind Indian self-determination is being expressed as a matter of economic justice—not simply a governmental one.

Finally, just as non-Indian businesses airdrop into reservations to take advantage of tribal customer bases, tribal businesses should take advantage of urban trust land near urban Indians. Like the black-economic-empowerment movement, tribes should provide the opportunity for urban Indians to support urban tribal economic development. Sales to Indians in Indian country are simply not taxable—even if that Indian country is located within the boundaries of a metropolis. McClanahan v. Ariz. State Tax Comm’n, 411 U.S. 164, 168 (1973).

States will not voluntarily give up on the taxation of Indian commerce. They are rational, greedy actors. It will take a financial deterrent, an incentive to accept an alternative arrangement. Many states already have the legal basis to reach such agreements with Tribes. Negotiated resolutions must be made more desirable through the unpleasantness of all other alternatives.

For decades—maybe centuries—urban centers like Rapid City have profited from the Indian dollar. In addition to losing substantive economic development to non-Indian businesses, tribal governments have lost valuable tax revenue. Through Indian disobedience, targeted spending choices, and aggressive urban economic ventures, the non-Indian tax suck driven by Bracker could be reversed.

Anthony Broadman is a partner with Galanda Broadman PLLC. Chase Iron Eyes is a founding writer at Lastrealindians. He’s a lawyer, an activist, a talker and a doer.

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