Flandreau Santee Sioux Tribe claims victory in long-running state taxation fight

Tuesday, September 19, 2017

The Flandreau Santee Sioux Tribe owns and operates the Royal River Casino and Hotel in Flandreau, South Dakota. Photo: Royal River Casino and Hotel

As the Trump administration debates whether to take a stand on a major taxation issue in Indian Country, one tribe is claiming victory over the state of South Dakota.

In a decision issued on Friday, a federal judge barred the state from imposing taxes on products and services sold at the casino owned by the Flandreau Santee Sioux Tribe. Doing so contravenes the Indian Gaming Regulatory Act, not to mention the tribe's inherent authority, the ruling said.

"A state's authority to tax in Indian Country is operationally curtailed by a tribe's sovereign immunity," Judge Lawrence Piersol wrote in the 29-page ruling.

The dispute arose after the state refused to renew a set of liquor licenses on the reservation. The tribe was told it had to collect taxes on the sale of products and services to non-Indians in order to secure the licenses, three of which are at issue.

According to the judge, the licenses for the Royal River Casino and the Royal River Family Entertainment Center, a bowling alley, cannot be held hostage by the state because the activities at those facilities are based on gaming. Therefore, they are pre-empted by tribal and federal interests, Piersol determined.

Patrons at the oyal River Family Entertainment Center, owned and operated by the Flandrea Santee Sioux Tribe in Flandreau, South Dakota. Photo: Flandreau Mixed League

But the same cannot be said for the First American Mart, a convenience store and gas station. Piersol said the tribe, at this point, hasn't presented enough evidence to show how the business is "sufficiently complementary to gaming" even though it's located near the casino and the entertainment center. All three tend to attract the same patrons.

Despite the lack of clarity on that issue, which could be addressed in future stages of litigation, the tribe's legal team is celebrating. John Peebles of the Fredericks, Peebles & Morgan firm called the decision a win for tribes everywhere.

“It is a victory that will stimulate economic development in Indian Country for years to come,” Peebles said in a press release on Monday.

The judge's analysis of tribal, federal and state interests in the case is typically described in legal terms as a balancing test. But tribes and their advocates contend it is more of a clash because state and local governments have long imposed taxes on Indian Country without impunity.

Yet that could be changing, if tribes get their way with the Trump administration. An update to the so-called Indian Trader regulations could ensure the Flandreau Santee Sioux Tribe and others are on solid ground when they go up against states.

The First America Mart, owned and operated by the Flandreau Santee Sioux Tribe in Flandreau, South Dakota. Image: Google Maps

"You know, when we make a good deal and we hire 3,000 people and gaming is rolling, people are very friendly," Ernie Stevens, Jr., the chairman of the National Indian Gaming Association said at an August 29 tribal consultation on the Indian Traders proposal. "But then as we go forward, the surrounding influence has changed."

The Trump team has not committed to addressing dual taxation in the proposed rule. One powerful Republican in Congress, who has otherwise supported the new administration's agenda, has already warned the Department of the Interior not to pick a fight.

But a senior official at the Bureau of Indian Affairs has made no secret of his desire to help tribes enjoy more freedom, whether it's from state, local or the federal governments. Gavin Clarkson, a citizen of the Choctaw Nation, spent two weeks in August soliciting input on the proposed update. At times, he sounded more like an advocate than a policy-maker.

"We are trying to reduce the regulatory burden nationwide, but we certainly recognize there's an oppressive burden on almost all tribal economies," Clarkson said during the August 29 session, which took place at a hotel and convention center owned by the Oneida Nation in Green Bay, Wisconsin.

In announcing the August sessions, the BIA acknowledged that it appeared to be moving quickly to finalize the rule. But that no longer seems to be the case, since the agency has since scheduled three more consultations that will take place in October. The schedule follows:

Monday, October 2, 2017
1:30 PM Local Time
Native American Finance Officers Association 2017 Fall Finance & Tribal Economies Conference
Tulsa, Oklahoma
Monday, October 16, 2017
9:00 AM Local Time
National Congress of American Indians Annual Convention
Milwaukee, Wisconsin
Saturday, October 21, 2017
9:00 AM - 11:00 AM Local Time
Alaska Federation of Natives Annual Convention
Dena'ina Civc and Convention Center
Room 3 (2nd Floor of the Dena'ina Center)
600 W 7th Ave.
Anchorage, Alaska

Indian Trader Federal Register Notices:
Traders With Indians (February 8, 2017)
Traders With Indians (December 9, 2017)