ATKINSON TRADING v. SHIRLEY
Atkinson Trading Company, Inc. owns the Cameron Trading Post, which is located on non-Indian fee land within the Navajo Nation Reservation. The Cameron Trading Post consists of a hotel, restaurant, cafeteria, gallery, curio shop, retail store, and recreational vehicle facility. In 1992, the Navajo Nation enacted a hotel occupancy tax, which imposed an 8 percent tax upon any hotel room located within the exterior boundaries of the reservation. Atkinson challenged the tax under Montana v. United States. Under Montana, with two limited exceptions, Indian tribes lack civil authority over the conduct of nonmembers on non-Indian land within a reservation. The District Court upheld that tax. In affirming, the Court of Appeals concluded that the tax fell under Montana's first exception because a "consensual relationship exists in that the nonmember guests could refrain from the privilege of lodging within the confines of the Navajo Reservation and therefore remain free from liability for the [tax]."
Does the rule in Montana v. United States, that, with limited exceptions, Indian tribes lack civil authority over the conduct of nonmembers on non- Indian fee land within a reservation, apply to tribal attempts to tax nonmember activity occurring on non-Indian fee land?
Legal provision: 25 U.S.C. 261
Yes. In a unanimous opinion delivered by Chief Justice William H. Rehnquist, the Court held that the Navajo Nation's imposition of a hotel occupancy tax upon nonmembers on non-Indian fee land within its reservation is invalid. Chief Justice Rehnquist wrote that "Indian tribes are 'unique aggregations possessing attributes of sovereignty over both their members and their territory,' but their dependent status generally precludes extension of tribal civil authority beyond these limits. The Navajo Nation's imposition of a tax upon nonmembers on non-Indian fee land within the reservation is, therefore, presumptively invalid. Because respondents have failed to establish that the hotel occupancy tax is commensurately related to any consensual relationship with [Atkinson] or is necessary to vindicate the Navajo Nation's political integrity, the presumption ripens into a holding."
Argument of Charles G. Cole
Chief Justice Rehnquist: We'll hear argument first this morning in Number 00-454, the Atkinson Trading Company v. Joe Shirley.
Mr. Cole: Mr. Chief Justice, and may it please the Court--
This case presents the question of whether an Indian tribe may tax a transaction between nonmembers on fee land within the reservation.
This Court has already held that nonmembers who are involved in an auto accident on the equivalent of fee land are not subject to the jurisdiction of tribal courts absent consent.
A transaction between nonmembers on fee land is similarly outside the tribe's jurisdiction because it does not involve a consensual relationship with the tribe and does not threaten tribal self government.
Chief Justice Rehnquist: What precisely is the incidence of the tax, Mr. Cole?
Who was the tax on?
Mr. Cole: The incidence of the tax is on the guests of the hotel.
Chief Justice Rehnquist: And they... what?
The hotel owner simply acts as a collector?
Mr. Cole: Yes.
The hotel owner acts as a collector.
If it fails to collect, however, the hotel owner would be held liable for the tax.
Justice O'Connor: What if... what if the tax were imposed, or a tax were imposed on the hotel itself instead of the guests?
Mr. Cole: We believe there would still be no basis for the taxation on these facts.
It's still a transaction between nonmembers on fee land.
Justice O'Connor: Is there... does the hotel have to get any license or permission from the tribe to operate under the federal statutes governing Indian traders?
Mr. Cole: The hotel must have a license from the Federal Government in order to trade with the members of the tribe.
Justice O'Connor: Even though in conducting the hotel it isn't dealing with members of the tribe?
Mr. Cole: It needs that license to deal with members of the tribe, but in dealing with nonmembers of the tribe, the Federal regulatory scheme is not applicable.
This Court's tax cases illustrate that point, because there is no preemptive effect in dealing with nonmembers.
Justice Scalia: Suppose it didn't deal with members of the tribe.
It could still run the hotel without... without getting any Federal license?
Mr. Cole: Yes, I think that's right.
Justice Scalia: You think it... you're not sure that's right?
Mr. Cole: Well, I... that's the way I read the regulations, yes.
Justice Ginsburg: Does it have to do with being within the borders of the reservation, because even though it's fee land, it is inside the reservation boundaries.
Mr. Cole: That's correct, Your Honor.
Justice Ginsburg: But you don't know for sure whether an Indian trader's license would be necessary for the hotel, even if it were serving guests from outside the tribe.
You're not certain about that?
Mr. Cole: No.
If all the hotel were doing, the act of serving nonmembers of the tribe on fee land, it would not need a license by virtue of the fact that it was within the reservation.
Justice Ginsburg: Is there on this hotel... is it subject to an Arizona room tax?
Mr. Cole: Yes, it is.
Justice Ginsburg: Do you know what... what would that amount to?
Mr. Cole: Five point five percent from the state, as I understand the state law.
And I understand there is also... this isn't in the record... a local county tax that would be in the neighborhood of point eight eight percent.
Justice Ginsburg: So this would be three... three room taxes essentially, then.
Are there other hotels on this reservation?
Mr. Cole: Yes, there are, Your Honor.
Justice Ginsburg: Are they also on fee land, or are they on tribal land?
Mr. Cole: The record doesn't reflect the kind of land that they're on, and I don't know all those facts.
Justice Souter: It seems to be a... no, please--
Justice Breyer: --On that particular thing, it seemed to me quite important, and I seem to be missing a fact.
If there is no other hotel on fee land, then your position is stronger.
If there are several, then I guess it's the fact that you who don't have a connection is not the answer because maybe everybody in your category has a lot of connections with the tribe's services that they provide.
Mr. Cole: Well, I don't think this is decided, Your Honor, on a generic basis across all the hotels.
The question is whether this landowner and these guests have in some way submitted themselves to the jurisdiction of the tribe.
Justice Breyer: Well, that's my question, I guess, because suppose that there are a hundred hotels, ninety nine of which use the sewerage systems, the water systems, the police, the hospitals, all kinds of other services provided by the tribe.
Well, that might be a basis for imposing a tax on hotels.
And then I don't know that one could get out of it by the happenstance that that particular hotel doesn't use all those services, only uses a couple.
Mr. Cole: Well, we don't have those facts in the record at all, and I think that the law is still that the individual nonmembers' rights not to be governed by the tribe would be respected.
It's not an equal protection question.
Justice Breyer: Whose burden is it to provide the facts?
Mr. Cole: Well, it's the tribe that's asserting jurisdiction in this instance, and we have provided the facts to show that there are no... there's no consensual relationship that we have with the tribe, and we are not on tribal lands.
Chief Justice Rehnquist: Well, didn't this also go through the tribal court?
Mr. Cole: Yes, it did.
This establishment that we're talking about originally sat outside the reservation.
In 1934, an Act of Congress redefined the borders of the reservation with the result that this land was included within it.
The Act specifically preserved the valid rights of the landowner.
Justice Scalia: You had an option, didn't you, to get compensated for it, or to trade for land outside the reservation?
Mr. Cole: --Yes, that's true.
But at that point, something had already been built on the land, and this land was located right there on a Federal highway.
Justice Scalia: They wouldn't compensate you for what was already built?
You don't know.
Mr. Cole: Well, the history here is unusual.
The case is representative insofar as the presence of Indians... non Indians on fee land within the reservation was the result of a Federal statute.
As a result of other Federal statutes, there are non Indians on fee land in other reservations around the United States.
While they may live and work there, they typically have no right to participate in tribal government.
They can't vote in tribal elections or serve in elected roles in tribal government--
Justice Ginsburg: But that would be... that would be true, too, if this hotel were on tribal land itself.
And is that the distinction you're making... that this happens to be on fee land?
Mr. Cole: --Yes.
Justice Ginsburg: Would it be different?
Mr. Cole: Yes, it does make it different because in building on tribal land they create a relationship with the tribe.
They are on the land that the tribe controls, and it's a different situation.
Justice Ginsburg: Even though they still can't vote, and most of their guests are not members of the tribe.
Mr. Cole: Right.
But the point that I wanted to make, Your Honor, is that because of this relationship with people who can't vote, it's a sensitive issue.
And this Court has developed some general rules that deal with the relationship between the nonmembers and the tribe, and those rules brought a distinction between fee land and tribal lands as a way of setting to each group what its rights would be.
Justice Souter: You said that if the building were on tribal land, that there would be a relationship with the tribe by virtue of that.
What would that relationship consist of?
What would its practical consequences be?
Mr. Cole: There are really two relationships.
As a practical matter, you would ordinarily have some kind of a lease or contractual document between the tribe and the landowner, and the very fact of being on tribal land means that the tribe would have power over the nonmember in that situation.
This Court's decision in Montana, as I was saying, supplied a general clear understandable rule for nonmembers on the reservation.
In Montana, this Court reasoned that members of the tribe had inherent power to govern themselves but could govern nonmembers only in exceptional circumstances.
Those exceptions were grounded in the rationale of the main rule.
If nonmembers enter tribal lands, as I've mentioned, they subjected themselves to the tribe's power to govern its own lands.
If they entered into a consensual relationship with the tribe or its members, they subjected those relationships to the tribe's power of self government.
Justice Kennedy: Well, would the Buster case out of the... I think the Eighth Circuit... figures rather largely in the briefs here.
That was a tax on people who wanted to do permit fee... for people who wanted to do business within the reservation.
There was no distinction in fee land and non fee land there, was it?
Mr. Cole: Your Honor, the origins of that case, I think, have been a little obscure with time, but here is the background there.
That case dealt with what were then called the five civilized tribes.
There were a number of Attorney General opinions and judicial opinions that said that those tribes had the power to exclude non Indian intruders from their lands and therefore had the power to impose a licensing fee upon them if they decided to do business within those lands.
At the turn of the century, the last century I'm talking about that ended in the late 1800s... as Congress began to open up those lands, it gave the settlers the right to remain on their lands and essentially not be excluded.
But at the same time there was a specific statutory and presidential and treaty framework that dealt with the problem of the licensing fees.
There was an Act called the Curtis Act which said that any ordnance, including this ordnance that was adopted by the tribe, would have to be approved by the President, wasn't valid until it was.
And then there was a treaty that followed when they opened up the land and said there wouldn't be removal that eliminated certain licensing fees and did not eliminate others.
In Morris v. Hitchcock, this Court looked at that situation, and what it said is that we can see from the surrounding laws and treaties an intent to preserve that original power to charge the license fee for these tribes.
And it said that quite clearly in Morris v. Hitchcock, and that theme is then picked up in Buster, which is, yes, originally there was some inherent power here coming from the ownership dominion over the land to charge a license fee as a condition.
And we can see that in this case, Congress by what it did, the President by what he did, and the treaties by what they did, intended to carry that forward and, therefore, the license fee is still valid even as to settlers who can't be removed.
So that's, I think, the best explanation.
Justice Scalia: Buster wasn't one of our cases, anyway.
It was a Ninth Circuit case, wasn't it?
Mr. Cole: No, it wasn't--
Justice Scalia: Eighth Circuit?
Mr. Cole: --Eighth Circuit case, Your Honor.
I spoke in general terms of the Montana rule.
Respondents seem to suggest that a different rule might apply to taxation.
There is no basis for that distinction.
The central question is still the same... whether the tribe is governing itself or not... and the exceptions have to be the same.
Thus in Strate, this Court said that the Montana rule would apply broadly to forms of civil jurisdiction.
And in Montana itself, this Court referred to taxation as one form of regulation that might be permissible where a consensual relationship was sought... shown.
A consistent rule for all forms of tribal jurisdiction, including taxation, is important from the perspective of the nonmembers who invest in homes and businesses on fee land within the reservation.
Justice Stevens: May I just interrupt this?
How do you work in the Jicarilla tax on the oil company into your reasoning?
Mr. Cole: I'm sorry, Your Honor?
Justice Souter: The Jicarilla Merrion case... how do you fit that into this analysis?
Mr. Cole: Well Merrion was a case about, as you said, the lease with the tribe, I guess, for drilling on tribal trust lands... that entire reservation was tribal trust lands, and the Court said--
Justice Stevens: Yes, and the outcome is they'd been given a lease to take the oil out, so they did have a property interest in the oil wells.
Mr. Cole: --But that... but the lease was with the tribe, so they directly entered into a consensual relation--
Justice Stevens: It was made before the tax was imposed.
Mr. Cole: --Well, that's true, Your Honor, and there was a difference of views in that case.
Justice Stevens: I'm just wondering how you reconcile the majority's holding with your position here.
Mr. Cole: The majority's holding was simply that in signing that lease, the tribe did not give up its power over... dominion over its own trust land.
It said at one point in the opinion that there was no tribal authority until the nonmember entered tribal lands or engaged in business with the tribe.
So even that case, on its own terms, essentially excluded a situation where someone was not on tribal trust lands.
Justice Souter: Mr. Cole... no, I was being... Mr. Cole, you spoke a moment ago the fact that we had referred to the possibility of a taxation exception as part of the first Montana exception essentially arising from consensual relationships.
It strikes me that it's certainly possible that a taxation exception might arise under the second Montana category, and that brings me back to something that has already come up, but I just want to get clear on your position on it.
Under the second exception in effect for the integrity of tribal government, I think there's probably a pretty fair argument that if the tribe is, in fact, providing services, then the tribe ought to be able to tax to pay for, in effect, a proportionate share of the costs that those services cost the tribe.
I realize that there's a factual dispute in this case... I realize from the briefs... about the extent of the services that the tribe is providing.
My question is, do you take the position that your client gets no services whatsoever, or no benefit of municipal services whatsoever from the tribe?
Mr. Cole: I would say that the benefits are incidental, Your Honor, that the services are focused on the Navajo population in this part of the reservation, and there can be incidental benefits from that.
Justice Souter: The fact that there is generally law and order and that sort of thing?
Mr. Cole: --Exactly.
But that shouldn't be a basis for taxation.
In the first place, we can draw a distinction between those situations in which the nonmember on fee land requests the service from the tribe... for example, ambulance service.
And the record reflects here that when ambulance service for a nonmember is requested, the tribe charges for that.
And that would be a consensual relationship and a voluntary request, and that could be charged for.
Justice Souter: Okay, now--
Chief Justice Rehnquist: --How about... how about water and electricity and that sort of thing?
Mr. Cole: Well, in the... in this case, there's no such request being made, Your Honor.
Chief Justice Rehnquist: The hotel supplies its own--
Mr. Cole: It takes the water on its own land from the river and returns it to the river, so it does not receive water from the tribe.
Justice Souter: --What about fire protection?
Mr. Cole: Well, there is a dispute in the record about that.
There was only one fire, it was on an employee housing unit, and ultimately fire engines came... both from the state and from a tribal source.
I think that the answer is that when you have people living side by side, you have a community of tribal members and you have nonmembers as well, the nonmembers are paying state taxes, sales taxes... they're paying property taxes, they're paying income taxes... for the benefits of a civilized society.
Justice Souter: But the same thing is true, it seems to me, in many state relationships in which there is a state police force, there's a county police force, there's a local police force, and a given property tax owner is paying taxes through various taxing mechanisms for all three.
So the fact that there may be another source... and maybe even a principal source... of police, fire, or whatnot protection available I don't think necessarily leads to the conclusion that you shouldn't have to pay, as it were, the portion of some... for the same services by an overlapping jurisdiction.
Mr. Cole: Well, each one of those would be a full sovereign in its own right, and would be an entity in which these citizens could participate--
Justice Souter: Well, it's true, but the assumption of the question is that the Indian sovereignty is sufficient to give it authority to provide fire services, police services, and so on.
So I think... I think this argument assumes that we are within an area of sovereignty.
Mr. Cole: --Well, certainly the tribe can provide the services, but the nonmembers cannot participate in tribal government.
Justice Scalia: Could the tribe not provide the services?
Could the tribe say, look, we're not going to send our fire engines unless... unless you agree to pay for them just as you agreed to pay for the ambulance service.
I know that sometimes there are two counties, one of which doesn't... isn't large enough or populace enough to have a fire department, and in my experience very often the neighboring county will send their fire engines but charge the homeowner whom they've serviced in that fashion.
Could the tribe do that here?
Mr. Cole: Yes.
I think the tribe probably could do that here.
Chief Justice Rehnquist: Well, since you say the tax is on the guests at the hotel, and the hotel merely acts as a conduit, then why was the... why did the tribal court say that the hotel owner was liable?
Mr. Cole: There is a specific statutory provision which says that if the taxes are assessed against the guests, that the hotel must pay.
I'm not sure if that's your question.
Chief Justice Rehnquist: So it's statutory in the sense of tribal regulation, or--
Mr. Cole: There... it appears, I think, on page 105(a) of the petition appendix, if I recall correctly.
Chief Justice Rehnquist: --Is it tribal, or Federal, or state?
Mr. Cole: --It is tribal.
Chief Justice Rehnquist: Thank you.
Justice Ginsburg: The state tax works the same way, doesn't it?
The tax... the incidence is on the guests, but the hotel pays it to the state.
Isn't that so?
Mr. Cole: Yes.
Well, I think that's right, yes.
Chief Justice Rehnquist: So is the legal question here, do the guests have a relationship with the tribe, or does the hotel have a relationship with the tribe.
Which is it?
Mr. Cole: Well, I think that the central question is, do the guests have the relationship, because the incidence of the tax as Your Honor pointed out at the outset falls on the guests.
Justice Scalia: Well, you're not going to win very much if that's what we hold... the tribe will just go back and impose the tax on the hotel.
Mr. Cole: And I... and I--
Justice Scalia: You really want us to address that question?
Mr. Cole: --I think that the arguments that have been made by the other side may require this Court to address it, because they have tried to reach the guests through the activities of the hotel, and I think the rationale for why the guests are not taxable is that a transaction between nonmembers on fee land is not one over which the tribe has jurisdiction.
And that also will reach the hotel at the same time.
And I think that if we permit taxation of the hotel based on incidental services, we open the box to any kind of tax on all nonmembers, because all of them, or anyone who's on the reservation, benefits in the same indirect way from law enforcement, and--
Justice Stevens: Mr. Cole, can I go back to kind of a basic question.
Sometimes tribes when they have a reservation they have the power to exclude non Indians from the reservation.
Would this tribe, in your view, have the right... have the power to decide we're not going to let any non Indian tourists in the Navajo reservation.
We want to keep it for tribal members?
Mr. Cole: --No.
This tribe doesn't have that power.
Justice Stevens: Why doesn't it have that power?
Mr. Cole: Because these are roads that are... this is a... it's right on a state highway, at least as for this hotel.
It's on a Federal highway, and there's a crossing state highway.
There are many other Federal and state highways that run through the reservation.
There are National Parks within this reservation.
The reservation is open, and I think under the principles of Strate it couldn't be closed at this point.
Justice Scalia: Does the tribe impose taxes on nontribal members residing on fee land within the reservation?
I mean, other kinds of taxes?
Income taxes, real estate taxes?
Mr. Cole: No, it does not impose... it doesn't impose some of those taxes on anybody within the reservation.
It doesn't tax its own members with an income tax, at least as of the time that this record was created.
Justice Scalia: What about real estate tax?
Do they have a real estate tax?
Mr. Cole: No.
It does not have a real estate tax.
It does have a... it has a possessory interest tax--
Justice Scalia: This sounds pretty good... where is this reservation?
Mr. Cole: --Well, it's... Your Honor, that's a point that... there is a sphere of Federal protection from state taxes that surrounds the reservation so that the members are not being... are not being charged state income taxes... that's the McClanahan decision.
And they don't have state property taxes to pay because a lot of this is tribal lands, and in transactions among themselves, then, they don't have state taxes.
They also don't have, according to this record, very much in the way of individual taxes imposed on individual tribal members.
The Navajo tax director referred to that and said that they are not paying much in the way of taxes.
Justice Souter: Is your client paying property taxes and income taxes?
Mr. Cole: To the state?
Yes, it is.
And those taxes go to fund the school in Cameron, which is in the record... the public school elementary school is being paid for by county taxes.
Coming back to that, the central problem that, Justice Souter, that you raised... you have people living here, members and nonmembers.
Each one benefits to some degree, in some incidental way, from the services provided by the state or the tribe.
But the problem is that the nonmembers are not participating at all in tribal government, and the tribal members are not being taxed at all by the state.
So in this circumstance, the rule of Montana makes good sense that unless there's a consensual relationship, a voluntary transaction as we've discussed, or an entry onto tribal lands, that they wouldn't be taxed.
That we're not going to permit the tribe, essentially, to exercise what this Court called its right of self government under the second exception as a means... and do that by taxing other people who are not able to participate in tribal government.
Justice Scalia: Assuming that the hotel rather than the guests are the object of the tax... why isn't the acceptance of fire service... I think it's conceded that on at least one occasion the tribal fire brigade did come to assist the hotel.
Why isn't the acceptance of that assistance a consensual relationship?
Mr. Cole: There is some ambiguity about how that was requested.
In other words, I'm not sure it's a specific request to the tribe.
It's rather a fire alarm goes off, and it goes down to a number... a 911 number that's off the reservation, and the tribal company then got sent.
But if it were an acceptance... if it were an acceptance of a service, a voluntary transaction, it would be limited to that one transaction.
It would not provide the basis for a generalized tax on the hotel.
I'll reserve the remainder of my time for rebuttal.
Argument of Marcelino R. Gomez
Chief Justice Rehnquist: Very well, Mr. Cole.
Mr. Gomez, we'll hear from you.
Mr. Gomez: Mr. Chief Justice, and may it please the Court--
The question here today is whether the Navajo government can impose its hotel occupancy tax on travelers who elect to travel onto the Navajo reservation, elect to spend the night at a hotel, and receive the benefits of a civilized society that's assured by the Navajo Nation's govern--
Chief Justice Rehnquist: Now, you say they elect to travel onto the Navajo reservation.
Your opponent says that they can travel by a Federal or state highway to the hotel, that they will be technically on the reservation.
But do you think that that is sufficient?
If they never leave the state highway except to go on fee lands?
Mr. Gomez: --We think... in the area of taxation, we think it is sufficient.
The reason we feel that way is the Navajo police patrol these highways.
They patrol the Cameron trading post on a regular basis.
In joint lodging material, page 178, 179, the Navajo police patrol the Cameron trading post a couple of times a day.
Justice Ginsburg: Is it any different from what went on in Strate where it was a Federal highway?
And there were tribal police as well as state police, I think, involved.
Mr. Gomez: We believe that there is a distinction here between the cases cited by the petitioner, Montana, and in Strate.
In Strate you were talking about adjudicatory power of the courts.
Here, you're talking about taxation, and the guests who come on... looking at the reason for taxation, taxation is utilized to share the burdens of the costs of government.
And it's not too much to ask these travelers to contribute a small share--
Justice Ginsburg: I don't follow that distinction, as I would think that the more basic power is the power to tax.
And if you have the power to tax, then you have jurisdiction to enforce that tax.
Is it... Mr. Cole told us that he doesn't... he thinks that jurisdiction to tax and jurisdiction to adjudicate go together.
You seem to think that jurisdiction to tax requires less than jurisdiction to adjudicate.
Mr. Gomez: --I think in certain areas.
For example, in the Strate case, that involved two nonmembers.
Here you have the government of the reservation... the Navajo government... on a reservation boundary that has been drawn by Congress, engaging in services, providing essential governmental services to whomever--
Justice O'Connor: But if I remember correctly, Cameron and Cameron trading post are right on the main highway from Flagstaff up to the Grand Canyon.
And it goes through the reservation, but this is the main highway that everybody takes going up there.
And a visitor wanting to stay overnight who is not a tribal member can drive on the highway right into the Cameron trading post without ever entering reservation land at all, spend the night, get up the next day, and go on up to the Grand Canyon or to Flagstaff.
Isn't that right?
Mr. Gomez: --Yes.
Justice O'Connor: Without ever being on reservation land.
Isn't that right?
Mr. Gomez: That is correct, or they could travel on the state highways which were right of ways granted--
Justice O'Connor: So it may make it a lot closer to Strate... I mean, the hotel itself is owned by a nontribal member and is located on nontribal land.
And so it's maybe closer to Strate.
Do you think this follows... this follows within one of the two Montana case exceptions?
Mr. Gomez: --Your Honor, I think this would... I think this tax would be upheld under either one of the two Montana exceptions.
Justice O'Connor: What's... what's the consensual relationship of the hotel guests with the tribe?
Mr. Gomez: --We feel that the consensual relationship that the hotel guests have with the Navajo tribe would be that they travel onto the Navajo reservation and they're receiving the benefits of police and fire protection.
Whether they actually need it or not, those services are available.
And hopefully they will never need it.
I think when any of us travel--
Justice Scalia: Well, that's not as unfair as one might think.
The tribe receives a considerable amount of assistance from the Federal Government, and some from the state government, and these visitors pay Federal taxes and they pay state taxes.
Maybe one of the incidental benefits of that is that when they happen to be on fee land on a tribal reservation, they may get the incidental benefit of some of the tribal services that these Federal and state taxes enable to be provided.
I don't see anything terribly unfair about that.
How much of its... of its income is attributable to the Federal Government?
It was in one of the briefs.
I don't remember which one.
Mr. Gomez: --It may vary, but I think it may be about two thirds.
I think something--
Justice Scalia: So I don't consider that terribly unfair.
I mean, these people are paying their Federal taxes, and they're paying state taxes.
Many of them are perhaps from states other than the state in which the reservation is, but I don't see any terrible injustice there to the tribe.
Justice Breyer: How is it different from Strate in that respect?
Presumably good police and fire protection was there for automobiles as well in Strate.
What's the difference here?
Mr. Gomez: --I think the distinction here... and I guess I am taking a look at the reason for taxation.
It's to spur the cost of government so everybody shares--
Justice Breyer: But no.
I mean, you were saying, in other words, in your opinion if taxes are the same as tribal court jurisdiction, if the rule of power is the same, then you'd lose.
Is that right?
Mr. Gomez: --I think applying the Strate rule, and then I think we would be in a difficult situation.
Justice Breyer: Okay.
Then my next question would be, is there any hotel to which this applies other than this one?
Mr. Gomez: There are nineteen--
Justice Breyer: That's on fee land.
Mr. Gomez: --Okay.
There are nineteen hotels on the Navajo reservation, four of which are on fee land.
Justice Breyer: All right.
Now, if four of them are on fee land, do we have any information that although this hotel doesn't use a lot of tribal resources, in fact none except the theoretical possibility of police and fire, maybe those other four hotels do.
Do we know anything about that?
Mr. Gomez: I think with respect to the other four that are located on fee land, their ownership may be different than here, and that one, maybe two, are owned by tribal members.
One hotel is not owned by a tribal member.
The others may have agreements, for example, for water, for use of land, for landing... for air landing strips, so that they may have a different factual situation in the Cameron trading post as--
Justice Stevens: Do all those hotels pay the occupancy tax?
Mr. Gomez: --All of the hotels on the Navajo reservation pay this tax.
And this tax is paid by those hotels on behalf of their guests, regardless of whether they are members or nonmembers.
Justice O'Connor: But presumably for the hotels that are not on fee land, at least, they are not... the guests are not paying a state tax or a county tax.
Mr. Gomez: They... the hotels that are located on trust land?
Justice O'Connor: On the reservation trust land.
Mr. Gomez: It's my understanding those hotel... those guests would also be paying the state and county taxes.
Justice O'Connor: Do you have... is there anything on the record to tell us about that?
That surprises me, because generally transactions on trust land might be dealt with differently in terms of state and county taxes.
Mr. Gomez: It's my understanding that the nonmember owned hotels on trust land collect the Arizona and county taxes that are imposed on the hotel guests because of--
Justice O'Connor: Nonmember owned hotels on trust land.
How about member owned hotels?
Mr. Gomez: --Member owned hotels... they may have... it's getting complicated here.
This gets into a situation where they... it would depend upon where the legal incidence of the tax falls.
Justice O'Connor: Well, let's say it falls on the guest.
Mr. Gomez: If it falls on the guest and then member owned hotels would be subject to collecting that tax and paying it over to the state.
Justice Ginsburg: Well, the incidence would be the same.
It's the same tax.
Can you tell us for sure... you said there were nineteen hotels, four of them on fee land.
You say they're all equally subject to the tax.
Mr. Gomez: All nineteen... all nineteen pay the tax.
Everybody is subject to the tax.
Justice Ginsburg: Is this the only one that has protested?
Mr. Gomez: This is... this is the only one who has litigated... there is one other hotel, I think, that has filed a... an appeal and they asked to wait until the outcome of this case.
Justice Ginsburg: But as far as you know, the hotels that are owned by tribal members on tribal land... trust land... are paying the Arizona and the county tax as well.
Mr. Gomez: Yes.
Justice Scalia: And the tribal tax, as well.
Mr. Gomez: Yes.
They're paying all... all the taxes.
It's our understanding--
Justice O'Connor: And the record somewhere discloses this?
Mr. Gomez: --It would be... it would be in the record.
Nobody testified on that legal... on legal tax theories.
But we feel that this case is a lot different than Montana.
In Montana, it dealt with a... a regulation that applied only to nonmembers on hunting and fishing.
Here, you have a tax that applies to everybody, irregardless of whether they are members or not.
There's no distinction here as to your liability to pay your tax based on whether you're a member or not.
The... there's no state interest involved here.
For example, in Montana you had the state interest involved with the ownership of the riverbed, and also some conflicting hunting and fishing regulations.
Here, in fact, the Arizona Department of Revenue and the office of the Navajo Tax Commission both have entered into joint enforcement agreements regarding this tax and other taxes.
Justice Kennedy: Well, I think the state has an interest in making sure that owners of fee land are treated fairly and equitably.
Mr. Gomez: Yes.
Justice Kennedy: In the state of Arizona, and all of the Arizona citizens who are using the hotel... that's the state's interest.
Mr. Gomez: That's correct.
And as I pointed out, the tribal taxes apply to everybody, irregardless of who you are, so that you don't get any benefit by being a member... you don't avoid paying the tax.
You're still responsible for paying this tax.
And for example, some of the other taxes that are paid include a fuel excise tax, business activity tax, tobacco products tax, oil and gas severance tax... all these taxes are collected by the Navajo Nation from whomever engages in that type of activity, irregardless of whether they are members or not, and nonmembers.
Justice Stevens: Mr. Gomez, can I ask you a question about how far your position would extend?
We've had cases that I remember from time to time, what we call checkerboard reservations where about half the land might be owned by non Indians, and about half by tribal members.
And in those cases, one of the concerns was that taxation without representation with the nonmembers being taxed without having a voice in opposing the tax.
Would your rule apply, regardless of the percentage if the reservation was owned by nonmembers?
Mr. Gomez: You know, I think what we're asking for is a rule that applies to the Navajo reservation, and--
Justice Stevens: This is a specific... Navajo reservation specific case, in other words, not a general rule.
Mr. Gomez: --You know, we think that the facts here were more than ninety nine percent of the land is held in trust on the Navajo reservation.
Justice Stevens: And if the next case involves one where eighty five percent is held in trust, what will we do with that case?
Mr. Gomez: I think you have to look at the facts of the case--
Justice Stevens: Each case would be fact specific.
Mr. Gomez: --on its merits.
Justice Scalia: In a way... in a way that's a better case for the tribe.
I mean, gee, you're only talking about one percent of the land that you can't tax... one percent of the land that you can't impose taxes on, at least when the land is controlled by non Indians.
Why wouldn't it be the case that we'd be more likely to uphold the tribe's ability to tax under the second of the Montana exceptions where much of the reservation is in fee?
There you would say that the tribe needs the money a lot more from the fee land.
I don't... you know, I just don't see which way it cuts.
I'm not sure of the fact that a very small portion of the land on this reservation is fee land, that it helps your case rather than hurts it.
Mr. Gomez: We believe that in taxation what the Navajo government has tried to do is it's tried to be as fair as possible so that when they pass a tax, everybody that engages in that business has a responsibility of paying that tax.
And if you were to hold that just because it was less than one percent of the land was held in fee, this would give these people an economic advantage over all the other people who did pay the tax... all the other hotel operators who operate on the Navajo reservation.
Chief Justice Rehnquist: But I don't think any of our cases dealing with this issue of, you know, what percentage of the land is held in trust, or what might be fee land?
If it ever made that sort of a distinction.
Can you... would you know of one that has?
Mr. Gomez: The only case that I'm aware of where it seemed where a percentage of fee land was the Brendale closed reservation judgment of this Court, where I think ninety seven percent of the land was held in trust in the closed reservation in Brendale.
Justice Ginsburg: Mr. Gomez, may I... may I ask about the weight you put on the Indian trader status that this hotel has had?
You did say something about that in your brief, and it seems to me that would be highly relevant if we were talking about a buyer seller relationship between the trader and the tribal members.
But in what way did the Indian trader status affect the hotel guest relationship?
Mr. Gomez: Well, it's my understanding that for this operation to even engage in economic activity within the exterior boundaries of the Navajo reservation, it is required to obtain an Indian trader's license under the Indian trader statutes and regulations... a Navajo business reservation license... and that it cannot engage in business in the absence of acquiring that license.
Justice Scalia: But this is like a statute till business... it just couldn't trade with the Indians.
Isn't that right?
I mean, if it gave... if it said, you know, we will no longer buy from or sell to Indians, but we'll continue to run our hotel, it wouldn't have to get the Federal Indian trader license, would it?
Mr. Gomez: It is my reading that previously this hotel operation or the store... in fact, it's a trading company... challenged the Indian trader... the applicability of the Indian trader regulations in the Ninth Circuit in a previous case, Ashcroft, and in that case it was determined that they were required to obtain an Indian trader's license even though they had just a small amount of sales to tribal members.
Justice Scalia: Oh, I understand that, but suppose they had no tribal members.
Isn't it clear... and did nothing but rent hotel rooms to... to nontribal guests.
Would they have to have an Indian trader's license?
Mr. Gomez: Well, I--
Justice Scalia: Certainly not.
Mr. Gomez: --It seems like the regulations may require--
Justice Scalia: Well, then everybody is an Indian trader.
Everybody needs an Indian trader, I mean--
Mr. Gomez: --Within the exterior boundaries of the Navajo reservation, I think that would be true.
Justice Kennedy: --Well, but of course in this case it's as if the buyer had to have a license.
You admit... everybody agrees the incidence of the tax is on the guests--
Mr. Gomez: Yes.
Justice Kennedy: --I've never heard of an Indian trader statute... maybe I'm wrong... where buyers have to have a license?
Mr. Gomez: No.
And I think it's also important to point out that some of these guests... or they made the comment that people pay Federal taxes, they pay state taxes.
The record shows that many of these guests are... are... come from Japan and Europe, so they would not pay either one of those income taxes.
They are travelers who travel to any location.
For example, I expect to be paying a hotel occupancy tax on my hotel room this evening, and I will not be--
Justice Ginsburg: A tax, but do you expect to pay three?
Mr. Gomez: --I'll look at my bill this evening, but--
Chief Justice Rehnquist: You never know.
Mr. Gomez: --I think that this case is different than Montana in that the demographics are much different.
We're talking about a tax here that's utilized to fund services that benefit these travelers who come onto the Navajo reservation.
And they may never need these services, but these services are there.
And in the absence of funding to provide these services, it would be a bad situation if you called the police and they didn't answer.
And what happens here is the 911 call may go down to Flagstaff, but it's immediately routed to the Navajo police force that has a substation in Cameron.
Argument of Beth S. Brinkmann
Chief Justice Rehnquist: Thank you, Mr. Gomez.
Ms. Brinkmann, we'll hear from you.
Mr. Brinkmann: Mr. Chief Justice, and may it please the Court--
This case is not the Strate case because in the Strate case there was no privilege to which the tribe could attach a condition or a tax.
Here, that was a just a regulation of conduct between two individuals.
Here, there is a privilege of trade on the reservation.
It is the transaction that gives rise to the subject of Federal regulations that gives rise--
Justice Breyer: I understand... I thought they didn't trade with the reservation.
I thought that they had a license that they never use.
Mr. Brinkmann: --Your Honor, the record is clear that, in fact, they do trade with Indians on the reservation.
Justice Breyer: But what percent of their revenue comes from trade on the reservation?
Mr. Brinkmann: I don't believe that's... they say that one or two percent of their... the total sales.
Justice Breyer: You're saying less than one percent, so it really has nothing to do with it.
Mr. Brinkmann: I don't--
Justice Breyer: --In other words, if a person opens up a huge shopping mall and he happens to have... he sells one yo yo to somebody on a reservation, that then the reservation could impose any tax they want?
Or tax the whole operation?
Mr. Brinkmann: --No, Your Honor, that's not quite what I'm saying.
I think I have three responses to make to that.
First of all, the percentage is the record is the sales.
That doesn't account for the number of customers.
The Indian customers here are primarily at the grocery store, the convenience store.
They're not the overnight guests.
However there is also record evidence that there have been Indians who have been overnight guests... there was some conference down there where Indians did stay at the hotel.
In the Ashcroft case that my cocounsel mentioned, petitioner litigated this issue to the Ninth Circuit, and this Court denied review.
And in that case they challenged the applicability of the particular reservation business regulations that apply to three reservations that are applicable here... the Navajo, the Zuni, and the Hopi.
Those are detailed regulations that apply to all reservation businesses.
A reservation business is defined as anyone who is engaging in business on these reservations with Indians, but those regulations--
Chief Justice Rehnquist: This is a Federal regulation?
Mr. Brinkmann: --Yes, it is, Your Honor.
It's 25 C.F.R. 141, and the following sections.
Justice Kennedy: But as Justice Scalia said, it might not... it may be formalistic, but at least in this case the incidence is on the guests.
Everybody agrees with that.
Mr. Brinkmann: Yes, Your Honor, and I would say two things.
We think that that--
Justice Kennedy: And they haven't consented to do business with the tribe.
Mr. Brinkmann: --We think that that makes the consent prong perhaps a more complicated analysis, Your Honor, but we do believe because the guest is engaging in a transaction that cannot exist but for the license that has to be obtained under these regulations--
Justice Scalia: Why?
You say you need a license to run a hotel?
Mr. Brinkmann: --Yes.
Justice Scalia: I read the statute... the statute says power to appoint traders with Indians.
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.
I don't see how in the world this has any application to a hotel owner who has a hotel that serves visitors from off the reservation.
Mr. Brinkmann: Two things, Your Honor.
There are other provisions of the statute I'll refer to in a moment.
There is also statutory direct authority for the Secretary of the Interior to promulgate regulations which control here.
The other provisions are--
Chief Justice Rehnquist: What sort of regulations?
I mean, could you tell us more about the Secretary's authority?
Mr. Brinkmann: --Yes, Your Honor.
On... statutory authority comes from Sections 2 and 9 of Title 25 to promulgate regulations.
Chief Justice Rehnquist: Well, where is that in the brief?
Mr. Brinkmann: Your Honor, I don't believe it's in... the regulations in the statute are, Your Honor... this is simply the authority to promulgate the regulations.
In Title 25 it refers to the authority specifically to... for the Secretary to promulgate these regulations, and it is to regulate trade with the Indians.
Those regulations, then, apply to all traders that deal with Indians.
Section 2 provides the--
Chief Justice Rehnquist: Well, where's the trade with the Indians in this case?
Mr. Brinkmann: --Your Honor, that was the question that was litigated in the Ashcroft case.
Chief Justice Rehnquist: Well, yes, but we're not bound by the Ashcroft decision.
Mr. Brinkmann: No, I was just explaining, however, that the claim there was that these regulations should not apply because they do not deal primarily with Indians.
Justice O'Connor: But didn't that deal with the trading post... the little markets that sell things?
That wasn't the hotel operation in Ashcroft, was it?
Mr. Brinkmann: Well, it was the business which includes all of these operations, we believe Your Honor.
But the point is this, when Congress enacted the statute to control trade with the Indians and gave the Commissioner expressed authority to promulgate regulations thereunder.
In the 1970s these tribes complained that those... that there were not sufficiently adequate regulations promulgated thereunder, and that led to the promulgation of 25 C.F.R. Section 141.
Those regulations, which are not challenged here, are key we believe to this case because they do govern the business relations of all reservation businesses.
Chief Justice Rehnquist: And what is the statutory section again that authorizes it?
Mr. Brinkmann: Section 2 and Section 9.
Chief Justice Rehnquist: Twenty five 2... and 2 through 9.
Mr. Brinkmann: Yes.
And then the substantive regulations governing the Indian trader statutes are Sections 261 through 264, Your Honor.
Justice Souter: And can you quote from them an expressed statement to the effect that the Government is purporting to require the license not merely to trade in the terms that Justice Scalia quoted a moment ago, but to provide non Indian services.
Mr. Brinkmann: The regulations... the statutory authority is to regulate trade with the Indians.
Justice Souter: Right.
Mr. Brinkmann: And to... and to introduce, for example, goods into that area.
Justice Souter: --Okay.
And how could... but what we're trying to get at is how do we make the leap from that to the provision of hotel services by a non Indian to a non Indian on fee land, and my question is, does the regulations... or does a regulation you have been alluding to expressly say yes, trade with the Indians is broad enough to include this.
Mr. Brinkmann: Yes, Your Honor, we believe they do.
In the regulations--
Justice Souter: Can you... can you quote?
Mr. Brinkmann: --In the regulations governing the Navajo business reservations... in those provisions, it expressly provides that for an Indian trader to apply for a license, it has to include any approval that is required by tribal or Federal regulations.
It also includes that for renewals of licenses, it then also expressly provides that the--
Justice Scalia: If he's an Indian trader, but Justice Souter's question is, do you become an Indian trader by running a hotel on fee land by non Indians for non Indians.
That's the question.
Does that make them an Indian trader?
Mr. Brinkmann: --Yes, Your Honor, to the extent that they also trade with Indians.
Justice Breyer: No, no.
In other words, everybody I think... at least my question... imagine this hotel just where it is, no Indian has ever come anywhere near it.
Mr. Brinkmann: The point--
Justice Breyer: It's only for tourists--
Mr. Brinkmann: --The point--
Justice Breyer: --Knowing now, do you... it is, however, on fee land on the reservation.
Is there anything in the regulations you have in front of you that says to run a hotel like that you need a license?
Mr. Brinkmann: --No, Your Honor, because the hotel would not be permitted to deny customers based on their Native American status.
Justice Scalia: You have to be an Indian trader.
Everybody has to be an Indian trader, so you--
Mr. Brinkmann: If you are operating a business--
Justice Scalia: --My, my.
You can't go on fee land... your own land... and open any business there without becoming an Indian trader.
Mr. Brinkmann: --Your Honor, that's the history of the Navajo... of the Indian trader statutes.
Justice Scalia: Well, that's remarkable.
Justice Souter: All right.
Mr. Brinkmann: This was directed--
Justice Breyer: Let's assume you just didn't have the license.
What would happen?
He just doesn't have it.
He says, here I am, I'm opening a hotel, and I don't have a license.
Then what happens?
Mr. Brinkmann: --I think--
Justice Breyer: By the way, the only people who ever come are people who are not Indians.
Mr. Brinkmann: --I think then, if you set all of that aside, you also then come back to the analysis under Montana, Your Honor, and I would like to address that.
Justice Souter: No, but before you do, please, is there... I just want to know whether the Secretary has gone so far as to say in so many words that the provision of these kinds of hotel services that we keep describing over and over again requires the Indian trader license.
Is there... is there a phrase in a regulation to that effect?
Mr. Brinkmann: I will read you the definition of reservation business which explains that it governs businesses on reservations that deal with Indians.
I can read that provision.
Justice Souter: That's your best shot?
Mr. Brinkmann: Yes, Your Honor.
Justice Souter: Okay.
Mr. Brinkmann: --And that's the overall scheme--
Justice Souter: Okay, what's--
Mr. Brinkmann: --This is to regulate--
Justice Souter: --No, but I don't want... you talk about overall schemes.
The only thing that I've heard quoted is, in fact, a series of statements that refer to trading in goods with Indians.
We're not dealing with that here, and the overall scheme doesn't get me any further from trading with goods with Indians.
What I want to know is, has the Secretary gone so far as to purport, as to claim, that this overall scheme does in fact include the provision of these non Indian hotel services.
So what's the best shot at the Secretary's claim?
Mr. Brinkmann: --We believe that the Navajo business reservation regulations at 25 C.F.R. 141 include several provisions that anticipate that.
There are requirements concerning pricing of goods, a bond that is required--
Justice Souter: Goods, goods.
How about hotel services?
Mr. Brinkmann: --For example, there is a bond requirement that every trader must post, and any--
Justice Souter: That every trader must post.
Mr. Brinkmann: --And any customer that would recover is entitled to go against that bond for the recovery of their judgment.
It spans... it applies beyond simply Indian customers.
Many of the regulations do.
Rebuttal of Charles G. Cole
Chief Justice Rehnquist: Thank you, Ms. Brinkmann.
Mr. Cole, you have four minutes remaining.
Mr. Cole: I'd like to put this discussion of the Indian trader statute in a somewhat broader context.
In every one of the cases that this Court's decided, Montana, Bourland, dealing with nonmembers, Brendale, this... and Strate.
This Court has repeated that if Congress is going to... if there's going to be an expansion of the inherent powers of the tribes, it must be done by an expressed congressional delegation.
And if we apply that standard to this whole problem with the Indian trader statute, it becomes relatively easy.
To the extent that the traders are trading directly with Indians, then perhaps there would be some form of consensual relationship where the tribe would have some degree of power, and these statutes and regulations may deal with it.
But if the United States--
Chief Justice Rehnquist: Well, Williams against Lee has held that it did, and it--
Mr. Cole: --Well, right, but the United States is arguing that these statutes in this regulatory scheme gives the tribes additional powers over nonmembers on fee lands.
And in order to have that, there has to be an expressed congressional delegation.
We don't have that here... mostly we've had a discussion of regulations, and I won't go into the clarity of those regulations but, at best, they are regulations... they are not statutes.
And the statutes themselves don't purport to give the tribes additional powers.
They may give the Secretary some powers, but they are not an express delegation of additional powers for the tribe.
So on that basis alone, there is no basis for saying that the tribe has some sort of privilege here it can grant or deny, a power given to it by the Federal Government that it can use to extract this tax on transactions between non Indians on fee land.
The other point I wanted to make was that when we look at the second exception and whether there should be some form of power that comes from the incidental impacts of these tourists on the reservation, if we look back at Strate, there this Court considered what was the standard, and it was in effect on tribal self government.
This Court looked at the possibility that accidents on the reservation might create some health risks and certainly would call on some tribal services, but that wasn't enough to find that there would be tribal jurisdiction in those circumstances.
Here we have these guests that travel on the highway and end up in the hotel and, in effect, there is less of a showing of an effect on the tribe, and there is no showing of an effect on tribal self government.
This is a difficult area when we look at the possibility of a tax being imposed by one government in which a group of citizens can't participate, and we have a well established set of rules that deals with that in Montana and the cases that have followed it.
This case should be decided under that framework.
Chief Justice Rehnquist: Thank you, Mr. Cole.
The case is submitted.
Argument of Chief Justice Rehnquist
Mr. Rehnquist: The second opinion of the Court I have to announce is No. 00-454, Atkinson Trading Company against Shirley.
The Navajo Indian Tribe imposes an 8% tax upon all hotel rooms located within the exterior boundaries of its reservation.
The Atkinson Trading Company operates such a hotel near Cameron, Arizona, just south of the Little Colorado River on the road from Flagstaff up to the Grand Canyon.
The trading company is not a member of the Navajo Nation and owns the land itself.
It argues that the Navajo Tribe lacks the authority to enforce this hotel tax against non-members residing on non-Indian land.
The Court of Appeals for the Tenth Circuit rejected this argument.
In an opinion filed with a Clerk of the Court today, we reverse.
Our cases in this area have established that with limited exceptions Indian Tribes lack civil authority over non-members on non-Indian land within a reservation.
We hold that this general rule applies to revenue raising taxes imposed by tribes.
Although, we have upheld an Indian tribes ability to tax non members extracting oil and gas from tribal land.
Indian Tribes have never been allowed to tax non members conducting business on their own land.
This is because the Indian Tribes are dependent sovereigns and therefore, have only limited civil authority.
The Navajo Indian Tribe however, says that the exceptions to this general rule apply here; an Indian Tribe may assert civil jurisdiction over a non-Indian land where the non-members entered into a consensual relationship with the Tribe or whether non-members conduct threatens the political integrity of the Tribe, but we think that neither exception obtains here.
First although the Trading Post has a license to conduct business with Navajo Indians, this relationship cannot support the hotel tax, which is imposed upon the Trading Post’s non member guests who reach the hotel on public roads, and while the Trading Post benefits from the availability of tribal police, fire and emergency services, this is not sufficient to trigger the Navajo Nation’s civil authority otherwise the exception would simply swallow the rule.
Second the Trading Post operation of a hotel on its own land cannot be said to imperil the political integrity of the Navajo Nation.
Because the exceptions do not apply the rule of the Indian Tribes lacks civil authority over non-members on non-Indian land controls this case, the hotel tax is invalid.
Justice Souter has filed a concurring opinion in which Justice Kennedy and Thomas joined.