STORE OWNED BY ENROLLED MEMBER OF COLVILLE CONFEDERATED TRIBES AND LOCATED ON 'DEEDED LANDS' SALES TO NON-INDIANS.

INDIANS ‑- RESERVATIONS ‑- RETAIL SALES, BUSINESS AND OCCUPATION AND COMPENSATING TAXES ‑- STORE OWNED BY ENROLLED MEMBER OF COLVILLE CONFEDERATED TRIBES AND LOCATED ON "DEEDED LANDS"  SALES TO NON-INDIANS.

1. An enrolled member of the Colville Confederated Tribes who owns a store located upon "deeded" lands within the confines of the reservation is obligated to collect the retail sales tax on sales if "deeded lands" mean land which has been allocated to an Indian and the alienation of which is in no way restricted or lands which have been sold to non-Indians.1/

2.Same:  Such Indian would be liable for the sales tax on sales made to Indians or non-Indians.

3. Same:  Such Indian would be liable for payment of business and occupation tax and compensating tax.

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                                                                 January 30, 1963

Honorable Rodney E. Young
Prosecuting Attorney
Okanogan County
Hancock Building
Okanogan, Washington                                                                                                                  Cite as:  AGO 63-64 No. 7

Dear Sir:

            By letter previously acknowledged, you have requested the opinion of this office on the following questions:

            "1. Is a member of the Colville Confederated Tribes obligated to collect retail sales tax on sales made of merchandise from a store owned by an enrolled Colville Indian and which store is located upon deeded lands within the confines of the Colville Indian Reservation?

            "2. Also I would like to know whether or not under the same statement of facts as set forth  [[Orig. Op. Page 2]] in Question No. 1, would such Indian be liable for tax on sales to Indians and would the same ruling apply to sales made to white persons?

            "3. I would also like to know under the same set of facts as set forth in Question No. 1, would the Indian who is operating the store where merchandise is sold, be liable for payment of business and occupation tax and compensating tax?"

            We answer your questions in the analysis.

                                                                     ANALYSIS

            The questions you have presented are dealt with in Tax Commission Rule 192 [[TCR 192]], a copy of which is enclosed for your information and convenience.  Because of the complex legal issues presented by this rule, we shall not only apply this rule to the questions you have presented, but we shall also discuss the legal basis and background for this rule.

            Rule 192 provides in pertinent part as follows:

            "The term 'Indian reservation,' as used herein, means such of the lands set aside by the United States for tribal Indians by treaty, law or proclamation as remain held in trust for the tribes or the Indians, or the alienation of which by Indians remains restricted.  It does not include lands the title to which has been allotted in fee simple, or which have been sold, or the alienation of which is otherwise unrestricted, even though such lands may be within the boundaries of an Indian reservation as originally set aside.

            "The term 'Indian,' as used in this ruling includes only persons registered on the tribal rolls at Indian agencies and who live within the boundaries of an Indian reservation.

            "Indians are under the guardianship of the United States and are considered to be governmental wards with respect to their activities upon Indian reservations.  Tax liability of Indians under the Revenue Act of 1935 and of persons conducting business with Indians is as follows:

             [[Orig. Op. Page 3]]

            "Business and Occupation Tax

            "Indians are not taxable with respect to business conducted by them wholly within an Indian reservation.

            ". . .

            "Retail Sales Tax

            "Sales of tangible personal property to Indians are subject to the Retail Sales Tax except where the seller makes actual delivery of the property sold to a point within an Indian reservation.

            "Sales to persons other than Indians are subject to the Retail Sales Tax irrespective of where delivery takes place.  Indians are not required to collect the Retail Sales Tax upon sales made by them within an Indian reservation.

            "Compensating Tax

            "Indians are not subject to the Compensating Tax upon the use of tangible personal property in an Indian reservation.  However, Indians will become liable for the Compensating Tax when any such property is placed into actual use outside the reservation, irrespective of the fact that the first use of the property may have been within the reservation."

            In summary, the answer to all three of your questions is in the affirmative if the term "deeded lands," as used in question 1, means lands which have been allotted to an Indian and the alienation of which is in no way restricted, or lands which have been sold to nonIndians.  If, on the other hand, there are restrictions remaining on the alienation by Indians of the deeded lands, the answer to all three questions would be in the negative.

            There are two features of Rule 192 which merit extended treatment.  The first feature is the fact that under this rule the state asserts no taxing jurisdiction over Indians for sales, compensating, or business and occupation taxes when such Indians are engaged in otherwise taxable activities on an Indian reservation.  The second  [[Orig. Op. Page 4]] feature is the fact that Rule 192 limits the term "reservation" to lands ". . . the title to which has been allotted in fee simple, or which have been sold, or the alienation of which is otherwise unrestricted, even though such lands may be within the boundaries of an Indian reservation as originally set aside."

            As to the first feature, in 57 I.D. 124, the Solicitor of the Interior Department stated as follows:

            ". . . The regulation of trade with Indian tribes is one of the powers expressly delegated to Congress by section 8 of Article I of the United States Constitution.  Congress has exercised this power in statutes restricting trade with the Indians and giving exclusive authority to the Commissioner of Indian Affairs to regulate such trade and the prices at which goods shall be sold to the Indians.  (Sections 261 through 266, Title 25 of the United States Code.) These statutes, by their terms or by judicial construction, are limited in their application to Indian reservations.  United States v. Taylor, 44 F. (2d) 537 (C.C.A. 9th, 1930), cert. den. 283 U.S. 820;Rider v. LaClair, 77 Wash. 488, 138 Pac. 3;United States v. Certain Property, 25 Pac. 517 (Ariz. 1871).  Congress has not exercised its power to regulate trade with the Indians in so far as trade off the reservation is concerned except in the case of traffic in liquor.

            "(a) Where Congress has exercised its authority it is axiomatic that the field is closed to State action.  Sperry Oil and Gas Co. v. Chisholm, 264 U.S. 488.  Therefore, persons selling to or buying from Indians on Indian reservations are not subject to State Laws which regulate or tax such transactions. . . ."

            Thus, it appears that Rule 192 has adopted the conclusions expressed in the analysis in the language quoted above, to the effect that a state should assert no taxing jurisdiction over otherwise taxable activities when such activities are performed by Indians on Indian reservations.

            As to the second feature, it should be noted that the term "reservation" is nowhere defined in §§ 261 through 266 of Title 25 of the United States Code.  Therefore, even if these sections do preclude a state from asserting taxing jurisdiction over certain activities of Indians on an Indian reservation, the question of what constitutes  [[Orig. Op. Page 5]] a "reservation" remains.  Since there have been no judicial determinations on the question of what constitutes a reservation, for purposes of these sections, we must resort to analogous case law.

            As stated inUnited States v. Celestine, 215 U.S. 278 (1909):

            ". . . The word [reservation] is used in the land law to describe any body of land, large or small, which Congress has reserved from sale for any purpose . . ."  (p. 285.)

            It seems obvious, then, that any land which an Indian can alienate without any restrictions cannot be said to be part of a "reservation," since it is in no sense "reserved from sale for any purpose."

            This conclusion is strengthened by the case of Sperry Oil and Gas Co. v. Chisholm, 264 U.S. 488 (1924), cited by the Solicitor of Interior Department in his ruling quoted above.  This case involved the question of whether or not state law could be applied to certain leases made by an Indian and covering tribal lands which had been allotted to him.  These lands were of two types: the first type was a "homestead" allotment, the alienation of which was restricted under federal law.  The second type had no restrictions on alienation.  The court held that state law did not apply to leases involving the first type of land, but did apply to leases involving the second type.

            As to this second type of land, the court stated as follows:

            ". . . It had become in all respects subject to his [the Indian's] control, under the laws of the state, just as the property of other citizens. . . . All questions pertaining to its disposal fell under the scope and operation of those laws. . . ."

            If, as the Solicitor of the Interior Department argues, the Sperry case is authority for the proposition that §§ 261 through 266 of Title 25 of the United States Code render Indians on a "reservation" immune from state sales taxes, this immunity from state law should be limited to the situation to which the immunity was limited in Sperry itself.  That is, the immunity should apply only to transactions on land which is subject to restrictions on alienation by Indians.

            Moreover, prior to the enactment of 18 USC 1151, federal statutes establishing exclusive federal criminal jurisdiction over certain major crimes committed within an Indian "reservation" have been applied only where there have been restrictions on the alienation by  [[Orig. Op. Page 6]] Indians of the land on which the crime was committed.  CompareUnited States v. Pelican, 232 U.S. 442 (1914); Yohyowan v. Luce, 291 Fed. 425 (1923), with State v. Smokalem, 37 Wash. 91, 79 Pac. 603 (1905), andState v. Johnson, 212 Wis. 301, 249 N.W. 284 (1933).