United States District Court, D. South Dakota, Southern Division
FLANDREAU SANTEE SIOUX TRIBE, A FEDERALLY-RECOGNIZED INDIAN TRIBE; Plaintiff,
RICHARD L. SATTGAST, TREASURER OF THE STATE OF SOUTH DAKOTA; ANDY GERLACH, SECRETARY OF REVENUE OF THE STATE OF SOUTH DAKOTA; AND DENNIS DAUGAARD, GOVERNOR OF THE STATE OF SOUTH DAKOTA; Defendants.
ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY
JUDGMENT IN PART AND DENYING IN PART AND DENYING
DEFENDANT'S MOTION FOR SUMMARY JUDGMENT IN PART BUT
DISMISSING PLAINTIFF'S FOURTH CLAIM WITHOUT
E. SCHREIER UNITED STATES DISTRICT JUDGE.
Flandreau Santee Sioux Tribe, filed this action against
defendants Richard L. Sattgast, Andy Gerlach, and Dennis
Daugaard seeking a judicial declaration that, under federal
law, the State of South Dakota does not have the authority to
impose the State's excise tax in connection to services
performed by non-Indian contractors in the Tribe's
on-reservation construction project. Docket 1. Plaintiff and
defendants move for summary judgment. Docket 31; Docket 66.
undisputed facts are:
Flandreau Santee Sioux Tribe is a federally recognized Indian
tribe. Docket 32 at 2; Docket 75 at 10. The Flandreau Indian
Reservation is wholly located in Moody County, South Dakota.
Docket 32 at 2. The Tribe owns and operates the Royal River
Casino on the reservation. Docket 32 at 2; Docket 75 at 11.
The State and the Tribe entered into a Tribal-State gaming
compact under the Indian Gaming Regulatory Act (IGRA) that
took effect on September 14, 2016. Docket 72-14. IGRA
regulates Class III gaming activities at the Royal River
Casino. Docket 32 at 2; Docket 75 at 11-12. The compact does
not contain provisions specifically relating to construction
standards, construction activities, or the taxation of
construction activities at the casino. Docket 32 at 2; Docket
75 at 13. Casino revenue comprises approximately forty
percent of the Tribe's income. Docket 75 at 12-13.
Federal funding accounts for approximately fifty-two percent
of the Tribe's income. Id. at 13. The Tribe also
utilizes proceeds from the casino to help fund
off-reservation projects in the local community including
donations to the local school and fire department.
Tribe first opened the casino in 1990 and relocated it to the
present building in 1997. Docket 75 at 11. Casino gaming
amenities used or consumed at the casino by gaming patrons
include: hotel rooms, alcoholic drinks consumed on the gaming
floor and at the bar, concert tickets, and food eaten at the
restaurant, on the gaming floor, and at the snack bar. Docket
77 at 35. The Tribe decided to invest in a $24 million
renovation and expansion of the casino. Docket 32 at 2. The
project includes doubling the number of slot machines, adding
a VIP lounge, renovating the casino cage area, relocating the
bar, and renovating the snack bar, restaurant, and hotel.
Docket 75 at 14-15. The Tribe retained Leo A. Daly as the
architectural firm and Henry Carlson Company as the general
contractor. Docket 32 at 2.
SDCL § 10-46A-1, a contractor's gross receipts are
subject to a two percent excise tax. SDCL § 10-46A-1.
The excise tax is deposited into the general fund. The
general fund is used for a number of services, but for
purposes of this case, the State points out that the general
fund is used for professional licensing such as attorneys,
electricians, plumbers, and notaries, and for the supervision
of parolees. Certain construction projects within Indian
country are exempt under federal law. Docket 32 at 3. The
South Dakota Department of Revenue requires contractors to
complete an “Indian Country Project Request for
Exemption” form to receive an exemption from the tax.
Id. at 3. The Department of Revenue denied requests
by the Tribe and its construction manager for an exemption
for the casino construction project. Docket 75 at 15-16. As a
result, Henry Carlson has paid contractor's excise tax
under protest consistent with SDCL § 10-27-2. Docket 32
at 4; Docket 75 at 16. Henry Carlson's protest letters
requested that the state issue refunds to the Tribe as the
entity who paid the cost of taxes. Docket 75 at 16. The Tribe
seeks to have a judicial declaration that the State does not
“have the authority to impose the State's
contractor's excise tax” and seeks a refund of the
“contractor's excise tax paid, or to be paid, under
protest.” Docket 1. Currently, the Tribe estimates that
the contractor's excise tax on the project will be
approximately $480, 000.
judgment is proper “if the movant shows that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). “[A] party seeking summary judgment always bears
the initial responsibility of . . . demonstrat[ing] the
absence of a genuine issue of material fact.”
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
The moving party must inform the court of the basis for its
motion and also identify the portion of the record that shows
there is no genuine issue in dispute. Hartnagel v.
Norman, 953 F.2d 394, 395 (8th Cir. 1992) (citation
avoid summary judgment, “[t]he nonmoving party may not
‘rest on mere allegations or denials, but must
demonstrate on the record the existence of specific facts
which create a genuine issue for trial.' ”
Mosley v. City of Northwoods, 415 F.3d 908, 910 (8th
Cir. 2005) (quoting Krenik v. County of Le Sueur, 47
F.3d 953, 957 (8th Cir. 1995)). “[T]he mere existence
of some alleged factual dispute between the parties is not
sufficient by itself to deny summary judgment . . . .
Instead, ‘the dispute must be outcome determinative
under prevailing law.' ” Get Away Club, Inc. v.
Coleman, 969 F.2d 664, 666 (8th Cir. 1992) (quoting
Holloway v. Pigman, 884 F.2d 365, 366 (8th Cir.
1989)). On a motion for summary judgment, the facts and
inferences drawn from those facts are “viewed in the
light most favorable to the party opposing the motion.”
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 587-88 (1986) (quoting United
States v. Diebold, Inc., 369 U.S. 654, 655 (1962)).
Per se Invalidity
initial and frequently dispositive question in Indian tax
cases . . . is who bears the legal incidence of a tax.”
Okla. Tax Comm'n v. Chicksaw Nation, 515 U.S.
450, 458 (1995). “If the legal incidence of an excise
tax rests on a tribe or on tribal members for sales made
inside Indian country, the tax cannot be enforced absent
clear congressional authorization.” Id. at
459. But if the legal incidence of the tax rests on
non-Indians, no categorical bar prevents enforcement of the
tax[.]” Id. Here, the legal incidence of the
tax is on the non-Indian contractor because under South
Dakota law, the contractor has the legal obligation to pay
the contractor's excise tax. See SDCL §
10-46A-1. As a result, the state is not categorically barred
from imposing its tax and the tax is not per se invalid.
Barriers to State's Exercise of Taxing Authority
difficult questions arise where, as here, a state asserts
authority over the conduct of non-Indians engaging in
activity on the reservation.” White Mountain Apache
Tribe v. Bracker, 448 U.S. 136, 144 (1980). There are
two potential “barriers” to the state's
exercise of authority to tax non-Indian on-reservation
activity. Ramah Navajo Sch. Bd., Inc. v. Bureau of
Revenue of N.M., 458 U.S. 832, 837 (1982). “First,
the exercise of such authority may be preempted by federal
law.” Bracker, 448 U.S. at 142. “Second,
it may unlawfully infringe ‘on the right of reservation
Indians to make their own laws and be ruled by them.'
” Id. (quoting Williams v. Lee, 358
U.S. 217, 220 (1959)). These barriers are “independent
but related.” Id.
The two barriers are independent because either, standing
alone, can be a sufficient basis for holding state law
inapplicable to activity undertaken on the reservation or by
tribal members. They are related, however, in two important
ways. The right of tribal self-government is ultimately
dependent on and subject to the broad power of Congress. Even
so, traditional notions of Indian self-government are so
deeply engrained in our jurisprudence that they have provided
an important ‘backdrop' . . . against which vague
or ambiguous federal enactments must always be measured.
Id. at 143 (quoting McClanahan v. Arizona State
Tax Comm'n, 411 U.S. 164, 172 ...