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Court bars state from imposing gas tax on tribe
Friday, August 13, 2004

In a victory for tribes seeking to establish and expand their economies, a federal appeals court on Wednesday ruled that state taxation does not outweigh the right of tribes to raise revenue.

For several years, the state of Kansas has been trying to impose a fuel tax on the Prairie Band Potawatomi Nation's gas station. In January 2003, a federal judge said the tax was permissible.

But in a unanimous decision, the 10th Circuit Court of Appeals reversed. A three-judge panel cited "strong federal and tribal interests" that pre-empted the state. At the gas station, the tribe imposes its own taxes on Indian and non-Indian customers alike.

"The nation's interests are particularly strong," Judge Monroe G. McKay wrote for the majority. "Tribes have a recognized 'interest in raising revenues for essential governmental programs, [and] that interest is strongest when the revenues are derived from value generated on the reservation by activities involving the tribes and when the taxpayer is the recipient of tribal services."

The idea of the tribe adding "value" to its services was a crucial element in the decision. The court noted that the customers at the gas station were coming to the reservation to visit the tribe's casino.

The tribes's "fuel sales are derived from value generated on its reservation because its fuel marketing is integral and essential to the gaming opportunity the nation," McKay said.

In a statement, Zach Pahmahmie, chairman of the tribe, said the ruling was "an important victory that supports the inherent sovereign authority of Indian tribes in Kansas and everywhere." "It is unfortunate that it has required five years of litigation to have these tribal rights upheld," he said.

Lance Morgan, a member of the Winnebago Tribe of Nebraska and chief executive of Ho-Chunk Inc., the tribe's economic development corporation, also called the decision a "big win." He said it would have a positive impact on his tribe's battle with Kansas over $1.2 million in fuel taxes the state is claiming.

A federal judge put a halt to the taxes but the state appealed to the 10th Circuit. The tribe has been negotiating a settlement and Morgan said the Potawatomi decision changes the situation. The tribe delivers fuel to gas stations owned by the Sac and Fox Nation, the Iowa Tribe and the Kickapoo Tribe, all of Kansas, and filed a brief in the Potawatomi case.

The tax cases are part of a long-running feud between Kansas and tribes over sovereignty issues. Last August, a federal judge told the state to recognize the Potawatomi tribe's car tags, noting that "[m]otor vehicle registration and titling is a traditional governmental function."

In 2002, the state seized property owned by Ho-Chunk Inc. and issued arrest warrants for Morgan and other tribal officials. Earlier this year, the state raided trust land of the Wyandotte Nation of Oklahoma in a gaming dispute.

Lawyers for the Potawatomi Band Potawatomi expect the state to ask the 10th Circuit to rehear the case and possibly ask the U.S. Supreme Court to review it.

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Get the Decision:
PRAIRIE BAND POTAWATOMI NATION v. RICHARDS (August 11, 2004)

Related Decision:
Prairie Band Potawatomi Nation v. Pierce (10th Circuit June 25, 2001)

Relevant Links:
Prairie Band Potawatomi Nation - http://www.pbpindiantribe.com