A California county cannot impose a tax on a hotel owned by the Rincon San Luiseno Band of Mission Indians even if it is managed by a non-Indian company, a federal judge ruled on Monday.

The tribe won the decision against San Diego County Treasurer and Tax Collector Dan McAllister. Last year, McAllister claimed the tribe owed over $2.1 million in unpaid hotel occupancy taxes, plus penalties, dating back two years.

But in a verbal order, U.S. District Judge Marilyn Huff rejected the county's tax bill, granting the tribe's motion for summary judgment. A written decision is being prepared.

In its motion, the tribe argued that the tax was unlawful because Congress has not authorized it. The courts have ruled that states and local governments are pre-empted from imposing taxes on tribes without express approval.

But since the hotel is managed by a non-Indian gaming company, the tribe also argued that the tax is prohibited under the Indian Gaming Regulatory Act. Tribal attorneys cited a decision from the 9th Circuit Court of Appeals that said states and local governments have limited jurisdiction over gaming-related activities on Indian lands.

"IGRA limits the state's regulatory authority to that expressly agreed upon in a compact," the 9th Circuit concluded in a 1994 case.

County attorneys opposed the summary judgment motion in court, arguing that the tax was lawful because it was not being imposed on the tribe but on Harrah's Entertainment. "Obviously, if the tribe were deemed to be the operator, imposition of the tax would be preempted," the county said in response.

The county called for a trial to prove that a subsidiary of Harrah's was in fact the operator of the hotel. More evidence is needed to determine "whether tribal sovereignty can shield a large, professional giant from paying tax upon the operation of a hotel in the county," a brief stated.

The victory for the tribe appears to be a first in California, home to 56 casinos that generated an estimated $5.3 billion in revenues in 2004, according to the recent Indian Gaming Industry report. More casinos are on the way under compacts signed by Gov. Arnold Schwarzenegger (R) that give local governments more control over tribal activities.

The Rincon Band broke ground on the Harrah's casino in July 2001 and opened the $125 million facility, about 25 miles from San Diego, a year later in August 2002. In addition to 45,000 square feet of gaming space, the facility included a luxury hotel with 200 rooms.

An even bigger hotel with 650 rooms debuted in late December 2004, making it the largest tribal hotel in the state. The expansion, which added more gaming space and other amenities, cost $168 million. The tribe borrowed $467.5 million to pay for everything, according to the tribe's brief.

Last year, San Diego County collected $142 million in transit occupancy tax revenues, the tax at issue in the case. According to the county, the tax -- which amounts to 10.5 percent in San Diego -- is used to promote tourism as well as pay for government services.

Under the tribal-state compact, the Rincon Band contributes to a fund that is distributed to local governments. The tribe said $9.1 million in gaming revenues has made it back to the county and is used to offset the impacts of tribal gaming.

"The IGRA authorizes these payments because the tribes agreed to them in the compact," the tribe said in its motion. "No such authorization was given for county taxes."

Taxation disputes between tribes and state and local governments are common across the country. In several states, tribes have entered into compacts to resolve legal issues surrounding the sale of goods on reservations.

The U.S. Supreme Court will be hearing its first tribal tax dispute in several years. The state of Kansas is trying to force the Prairie Band Potawatomi Nation to pay gas distribution taxes for gasoline sold at the tribe's casino. A hearing for oral arguments has not been set.

Separate from the tax case, the Rincon Band and Harrah's are being sued over an October 2003 fire that claimed the life of a teenager. The family claims the tribe and Harrah's are to blame for not preventing the death.