State Taxation of American Indians, the Tribes, and Those Doing Business With Them: Sovereignty, Indian Commerce Clause, Treaties, and Statutes (Portfolio 1440)

The Portfolio opens with a detailed and lengthy history of Colonial America, the Crown, and their dealings with the Indians. It describes the circumstances leading up to the adoption of the Articles of Confederation, with a special focus on Article IX—the precursor to the Indian Commerce Clause. To view this Portfolio, visit Bloomberg Tax for a free trial.

Bloomberg Tax

This Portfolio is available with a subscription to Bloomberg Tax, a comprehensive research solution including over 500 Tax Management Portfolios™, practice tools, primary sources and timely news.

Description

The Portfolio opens with a detailed and lengthy history of Colonial America, the Crown, and their dealings with the Indians. It describes the circumstances leading up to the adoption of the Articles of Confederation, with a special focus on Article IX—the precursor to the Indian Commerce Clause.

The Portfolio surveys the Constitutional Convention and the birth of the Indian Commerce Clause and contrasts that Clause with the Interstate and Foreign Commerce Clauses. The Portfolio highlights two competing schools of interpretation of the Indian Commerce Clause.

The historic context offered by the Portfolio offers insights into the unique set of circumstances and events that shaped the Indian Commerce Clause and distinguished it from the Interstate Commerce Clause and the Foreign Commerce Clause.

The Portfolio explains how, unlike these other Clauses, the Indian Commerce Clause was drafted and formulated at a different time during the Constitutional Convention, had its unique roots in the Articles of Confederation, and was apparently tagged onto the already drafted Interstate and Foreign Commerce Clauses, more for stylistic convenience than for substantive reasons.

The Portfolio attempts to answer why the promise of the Indian Commerce Clause has gone unfulfilled.

Throughout the Portfolio is detailed analysis and discussion of prominent U.S. Supreme Court cases and other seminal Indian tax cases. The Portfolio identifies the applicable jurisprudents and rules governing the state taxation of Indians, the tribes, and those doing business with them.

Subscribers to the print version of the Portfolio will find late-breaking developments reported in the Bloomberg Tax Multistate Tax Report . Subscribers to the Internet version of the Portfolio will find late-breaking developments reported in the Bloomberg Tax Daily Tax Report - State.

For additional relevant Bloomberg Tax Portfolios consult the “Multistate Tax Portfolio Classification Guide” in the Tax Management Multistate Tax Portfolio Index binder.

This Portfolio may be cited as Pomp, 1440 T.M., State Taxation of American Indians, the Tribes, and Those Doing Business With Them: Sovereignty, Indian Commerce Clause, Treaties, and Statutes . Within the Multistate Tax Portfolio Series, however, references to the portfolios will include only the portfolio numbers and titles.


Authors

Professor Richard D. Pomp

Professor Richard D. Pomp is a summa cum laude graduate of the University of Michigan and a magna cum laude graduate of Harvard Law School. He has taught at Harvard, New York University, Columbia, University of Texas, and Boston College. He has been a Distinguished Professor in Residence at the Chulalongkorn Law School, Bangkok, Thailand, and a Visiting Scholar at the University of Tokyo Law School and at Harvard Law School. Professor Pomp has served as an expert witness in various courts throughout the country and as counsel and a litigation consultant to law firms, corporations, accounting firms, and state tax administrations. He has participated in various capacities in U.S. Supreme Court litigation. Professor Pomp has served as a consultant to cities, states, the Multistate Tax Commission, the Navajo Nation, the U.S. Congress, the U.S. Treasury, the Department of Justice, the Internal Revenue Service, the United Nations, the International Monetary Fund, the World Bank, and foreign countries, including the People's Republic of China, the Republic of China, Indonesia, Gambia, Zambia, Mexico, the Philippines, Pakistan, India, and Vietnam.

He is the former Director of the New York Tax Study Commission. Under his tenure, New York restructured its personal and corporate income taxes, and created an independent tax court. Professor Pomp's casebook, “State and Local Taxation,” has been used in more than 90 schools, state tax administrations, and major accounting firms for internal training. Portions of the casebook have been translated into Chinese, Dutch, German, Japanese, Spanish, and Vietnamese.

He has authored more than 80 articles, numerous chapters in books, and various books and monographs. His writings have also appeared in The New York Times, The Wall Street Journal, and the Financial Times. Professor Pomp has been interviewed by NPR, Bloomberg Radio, The New York Times, The Wall Street Journal, and other media outlets. He sits on numerous advisory and editorial boards, including the Bloomberg Tax State Tax Advisory Board. He is Chairman of the Board of the Institute on Taxation and Economic Policy. In 2007, he received the New York University Institute on State and Local Taxation Award for Outstanding Achievement in State and Local Taxation. In 2008 and 2009, he served as a co-reporter for the revision of UDITPA. In 2013, Professor Pomp was the hearing officer for the Multistate Tax Commission's proposed amendments to Article IV of the Multistate Tax Compact. In 2009 and 2010, he was a member of the California Commission on the 21st Century Economy. In 2011, he received the Bloomberg BNA Lifetime Achievement Award. State Tax Notes selected him as the 2013 State Tax Person of the Year.

Table of Contents

Detailed Analysis
1440.01. STATE TAXATION OF AMERICAN INDIANS, THE TRIBES, AND THOSE DOING BUSINESS WITH THEM: SOVEREIGNTY, INDIAN COMMERCE CLAUSE, TREATIES, AND STATUTES
Introductory Material
A. Introduction
1440.02. THE EARLY DAYS
A. Colonial America and the Crown
B. The Revolutionary War and the Confederation
1. The Revolutionary War
2. Articles of Confederation
3. Article IX of the Articles of Confederation
C. Post-Revolutionary War
1440.03. BIRTH OF THE INDIAN COMMERCE CLAUSE
Introductory Material
A. The Constitutional Convention
B. Interstate and Foreign Commerce Clauses
C. Two Schools of Interpretation
1440.04. EARLY U.S. SUPREME COURT JURISPRUDENCE
A. Cherokee Nation v. Georgia
1. Article III of the Constitution
2. The Oxymoronic Domestic Dependent Nation
B. Worcester v. Georgia
1. Discussion of Extra- and Pre-Constitutional Sovereignty (Dicta)
2. The Judiciary Act of 1789
3. The Holding: Violation of the Indian Commerce Clause
4. The Holding: Violation of the Treaties
5. The Holding: Violation of Federal Statutes
C. The Kansas Indians and The New York Indians
1. The Teaching of Worcester
2. The Application of a Treaty
D. Utah & Northern Railway v. Fisher
1. The Railroad's Property Was “Withdrawn” From the Reservation
2. “Just Rights” of the Indians Are Not Impaired
E. United States v. Kagama
1. Inapplicability of the Indian Commerce Clause
2. The Indians Are Wards of the Nation
3. Nontextual and Nonconstitutional Trusteeship
4. Holding Is Unsupported by the History of Relations With the Indians
F. Thomas v. Gay
1. Misstatement of Utah & Northern Railway
2. Indians' Property Rights Not Seriously Affected
3. Indian Commerce Clause
4. Taxation of Nonresidents
1440.05. THE DAWN OF MODERN JURISPRUDENCE AND THE INFRINGEMENT TEST
A. Williams v. Lee
1. The Infringement Test
2. Defects in the Opinion
3. An Alternative Opinion
1440.06. PREEMPTION AND THE INDIAN TRADER CASES
A. Warren Trading Post Co. v. Arizona Tax Commission
1. Interference With the Federal Regulatory Scheme
2. Inapplicability of the Indian Commerce Clause
3. Arizona's Right of Taxation
4. Lack of State Services
5. Tribal Sales Taxes and Double Taxation
B. Central Machinery v. Arizona State Tax Commission
1. Differences With Warren Trading
2. Stewart's Dissent
3. Powell's Dissent
4. Implications of the Decision
5. Defining a Sale
6. The Solicitor General and the Indian Commerce Clause
1440.07. THE DISTINCTION BETWEEN ON-AND OFF-RESERVATION ACTIVITIES
A. McClanahan v. Arizona State Tax Commission
1. Interpreting the 1868 Treaty
2. Interpreting the Arizona Enabling Act
3. Mischaracterizing the Sales Tax as an Income Tax
4. Further Erosion of Worcester
5. Inapplicability of the Indian Commerce Clause
6. Inapplicability of Williams v. Lee
7. An Alternative Approach
B. Mescalero Apache Tribe v. Jones
1. Revisiting McClanahan
2. Inapplicability of McClanahan to Off-Reservation Activities
3. The New Mexico Enabling Act
4. Section 465 of the IRA
5. The Illogic of the Opinion
6. Geographical Restrictions on the Indian Commerce Clause
1440.08. THE CIGARETTE CASES
A. Moe v. Confederated Salish and Kootenai Tribes of the Flathead Reservation
1. Revisiting Mescalero and McClanahan
2. No Congressional Authorization for the Montana Tax
3. Application of McClanahan
4. The Indian Commerce Clause
5. Non-Indian Purchasers
6. Tax Avoidance
7. Burdens of Collecting the Montana Tax
8. Inapplicability of Warren Trading
9. An Alternative: Drawing a Line Between the Right to Impose a Tax and the Obligation of a Vendor to Collect a Tax.
B. Washington v. Confederated Tribes of the Colville Reservation
1. Why Moe Did Not Resolve Colville
2. “Rehabilitating” the Indian Commerce Clause
3. The Right of a Tribe to Impose Its Own Tax
4. The Washington Tax Is Not Preempted by Either the Tribal Tax or Federal Statutes
5. Rejection of Warren Trading
6. Inapplicability of Williams v. Lee (Again)
7. Value Generated on the Reservation
8. Indian Commerce Clause Limited to Preventing Discrimination
9. Role of a Credit for the Tribal Taxes
10.  Preemption and Collection Burdens
11.  State Taxation of Non-Member Indians
12.  Seizure of Cigarettes in Transit
13.  Rehnquist's Concurrence
14.  Brennan's Dissent
15.  Do the Tribal “Taxes” Have Independent Economic Significance?
16.  Stewart's Willingness to Require a (Meaningless) Credit for the Tribal Taxes
17.  The Economic Implications of Moe and Colville
1440.09. THE PREEMPTION/BALANCING CASES
A. White Mountain Apache Tribe v. Bracker
1. Justice Marshall and the Indian Commerce Clause
2. Justice Marshall's Views on Preemption
3. The Role of Economic Incidence
4. Particularized Inquiry and Balancing
5. Stevens's Dissent
B. Ramah Navajo School Board v. New Mexico
1. Justice Marshall's Particularized Inquiry
2. Possible Role of State Services
3. New Mexico's Defense
4. Marshall's Views on Economic Incidence
5. The Solicitor General and the Indian Commerce Clause
6. Marshall's Rejection of the Solicitor General
7. Rehnquist's Dissent
1440.10. THE NATURAL RESOURCE CASES
A. Merrion v. Jicarilla Apache Tribe
1. Origin of a Tribe's Right of Taxation
2. The Interstate Commerce Clause
3. The Majority Refuses to Save Merrion From Not Anticipating a Tribal Tax
4. Stevens's Dissent
5. Policy Considerations Regarding the Taxation of Nonresidents
B. Cotton Petroleum Corp. v. New Mexico
1. The Merrion Footnote
2. The Tribe's Amicus Briefs
3. State Taxes Are Presumptively Valid
4. Misuse of the Intergovernmental Doctrine
5. No Federal Preemption
6. Rejection of White Mountain and Ramah
7. Possible Role of Economic Incidence
8. Apportionment Not Required
9. Relationship of Taxation and Services
10.  Why an Interstate Commerce Clause Analysis at All?
11.  Rejecting the Indian Commerce Clause
12.  Blackmun's Dissent
1440.11. THE GASOLINE CASES
A. Oklahoma Tax Commission v. Chickasaw Nation
1. Legal Incidence Is Determinative
2. Formalism and Legal Incidence
B. Wagnon v. Prairie Band Potawatomi Nation
1. Ambiguity of Legal Incidence
2. White Mountain Balancing
3. Ginsburg's Dissent
4. Should the Tribe's Tax Be Viewed as Having Independent Economic Significance?
1440.12. THE INCOME TAX
A. Chickasaw Redux
1. McClanahan Does Not Apply to Indians Working on, But Living Off, the Reservation
B. Rationale for the Holding
C. Breyer's Interpretation of the Treaty in Dissent
1440.13. CONCLUSION

Working Papers

Item Description Sheet
Worksheet 1 Warren Trading Post Co. v. Arizona Tax Commission
Worksheet 2 McClanahan v. Arizona Tax Commission
Worksheet 3 Moe v. Confederated Salish and Kootenai Tribes of the Flathead Reservation
Worksheet 4 White Mountain Apache Tribe v. Bracker
Worksheet 5 Merrion v. Jicarilla Apache Tribe
Worksheet 6 Oklahoma Tax Commission v. Chickasaw Nation