Washington State

Office of the Attorney General

Attorney General

Bob Ferguson

AGO 1962 No. 89 -
Attorney General John J. O'Connell


(1) The fact that motor vehicle fuel is sold to Makah Indians for use at their Neah Bay reservation does not prevent the application of the motor vehicle fuel tax (chapter 82.36 RCW).

(2) When motor vehicle fuel is used for marine use, the motor vehicle fuel tax is either inapplicable or refundable depending upon the mode of delivery to the vessel in which the fuel is used and the person making the delivery.

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                                                                 January 22, 1962

Honorable Paul H. Conner
State Representative, 24th District
Route 1, Box 60
Port Angeles, Washington

                                                                                                                Cite as:  AGO 61-62 No. 89

Dear Sir:

            You have requested our opinion on two questions which we paraphrase as follows:

            1. Does the state motor vehicle fuel tax apply when motor vehicle fuel is sold to Makah Indians at their Neah Bay reservation for use on the reservation?

            2. Does such tax apply when such fuel is used for marine use by such Indians?

            We answer your first question in the affirmative and your second question in the negative.


            RCW 82.36.020 provides in part as follows:

            "Every distributor shall pay, in addition to any other taxes provided by law, an excise tax to the director of seven and one‑half cents for each gallon of motor vehicle fuel sold, distributed, or used by him in the state as well as on each gallon upon which he  [[Orig. Op. Page 2]] has assumed liability for payment of the tax under the provisions of RCW 82.36.100:  Provided, That under such regulations as the director may prescribe sales or distribution of motor vehicle fuel may be made by one licensed distributor to another licensed distributor free of the tax. . . ."

            RCW 82.36.010 (3) provides as follows:

            "'Distributor' means every person who refines, manufactures, produces, or compounds motor vehicle fuel and sells, distributes, or in any manner uses it in this state; also every person engaged in business as a bona fide wholesale merchant dealing in motor vehicle fuel who either acquires it within the state from any person refining it within or importing it into the state, on which the tax has not been paid, or imports it into this state and sells, distributes, or in any manner uses it in this state;"

            From these provisions it is clear that the legal incidence of the tax, that is, the legal obligation to pay the tax to the state, is normally upon what we may term the "last licensed distributor."  It is also clear from these provisions that in the usual situation, where gasoline is sold to a retail service station by a wholesaler, or in the case of an integrated oil company, by the producer acting as wholesaler of his own product, the "last licensed distributor" would be the wholesaler or producer, and the legal incidence of the tax would therefore be upon the wholesaler or producer rather than upon the retail service station operator or the retail service station's customer.  As a matter of practice, of course, the tax would be passed on as a part of the price to the ultimate consumer; in fact, RCW 82.36.280, quoted infra, assumes that it will be passed on.  But this does not change the conclusion that the legal incidence of the tax is upon the distributor.  See,Alabama v. King and Boozer, 314 U.S. 1, 62 S.Ct. 43, 86 L.Ed. 3 (1941).

            We assume, for purposes of this opinion, that only the retail operator and/or the retail operator's customers are Indians living upon the reservation, and that no Indian operates a wholesale gasoline business on the reservation.  Under such circumstances, the legal incidence of the tax does not fall upon any Indian, and the tax may be validly imposed.

            Moreover, even if the legal incidence of the tax were upon an Indian, the tax would be valid.

             [[Orig. Op. Page 3]]

            The fact that motor vehicle fuel is sold or used on an Indian reservation does not of itself create a tax exemption.  Neah Bay Fish Co. v. Krummel, 3 Wn. (2d) 570, 101 P. (2d) 600 (1940).  As pointed out in that case, unless there are laws or treaties to the contrary, Indian reservations are a part of the state and subject to its jurisdiction, except as to those things which concern the government and protection of the Indians themselves.  Moreover, even if an Indian reservation is to be considered as much a "federal reservation" as is a military post, the state still possesses taxing jurisdiction so far as gasoline taxes are concerned by virtue of 4 U.S.C. 104, which provides as follows:

            "(a) All taxes levied by any State, Territory, or the District of Columbia upon, with respect to, or measured by, sales, purchases, storage, or use of gasoline or other motor vehicle fuels may be levied, in the same manner and to the same extent, with respect to such fuels when sold by or through post exchanges, ship stores, ship service stores, commissaries, filling stations, licensed traders, and other similar agencies, located on United States militaryor other reservations, when such fuels are not for the exclusive use of the United States.  Such taxes, so levied, shall be paid to the proper taxing authorities of the State, Territory, or the District of Columbia, within whose borders the reservation affected may be located."  (Emphasis supplied.)

            By this section Congress has removed any prohibition against the taxation by states of the sale, use or storage of motor vehicle fuels in federal areas.  It will be noted that the only exemption granted by § 104 is in respect to fuel for the exclusive use of the United States.  It should also be noted that this provision is part of an act (Public Law 389, 80th Cong., 1st Sess., 61 Stat. 641) that covers the general question of the jurisdiction of states to impose excise taxes in federal reservations, and that the provisions relating to sales or use taxes (§ 105) and state income taxes (§ 106) are expressly stated, in § 109, not to authorize the collection of any tax "on or from any Indian not otherwise taxed."  Thus § 109 seems to imply that, although this act does not widen state taxing power over Indians so far as use and sales and income taxes are concerned, it does widen that power so far as gasoline taxes are concerned.

            Perhaps the most frequently expressed reason by courts for exempting Indians from taxation is the doctrine of federal instrumentality.  This doctrine is founded upon the premise that the power and duty of protecting tribal Indians is a federal function, and a state cannot  [[Orig. Op. Page 4]] impose a tax which will burden or impede this function.  United States v. Rickert, 188 U.S. 432, 235 S.Ct. 478, 47 L.Ed. 532 (1902);United States v. Thurston County, Neb., 143 Fed. 287 (1906).

            It is fundamental that a state may not impose a tax on the United States or its instrumentalities without the consent of Congress.  McCulloch v. Maryland, 4 Wheat. 316, 4 S.Ct. 579, 4 L.Ed. 579 (1819).  It was once the law that the collection of excise taxes on motor fuel sold, or stored and sold to federal instrumentalities was forbidden.  Panhandle Oil Co. v. Mississippi ex rel. Knox, 277 U.S. 218, 48 S.Ct. 451, 72 L.Ed. 857, 56 A.L.R. 583 (1927); Graves v. Texas Co., 298 U.S. 393, 56 S.Ct. 818, 80 L.Ed. 1236 (1935).

            However, in considering the applicability of a state sales tax on materials sold to a contractor constructing an army camp on a cost-plus basis, the court said inAlabama v. King & Boozer, supra:

            ". . . The Government, rightly, we think, disclaims any contention that the Constitution, unaided by Congressional legislation, prohibits a tax exacted from the contractors merely because it is passed on economically, by the terms of the contract or otherwise, as a part of the construction cost to the Government.  So far as such a nondiscriminatory state tax upon the contractor enters into the cost of the materials to the Government, that is but a normal incident of the organization within the same territory of two independent taxing sovereignties.  The asserted right of the one to be free of taxation by the other does not spell immunity from paying the added costs, attributable to the taxation of those who furnish supplies to the Government and who have been granted no tax immunity.  So far as a different view as prevailed, see Panhandle Oil Co. v. Mississippi, and Graves v. Texas Co. supra, we think it no longer tenable. . . ."

            In short, thelegal and not just the economic incidence of the tax must be on a federal instrumentality in order for an exemption to arise.

            Therefore, the motor vehicle fuel tax as it is passed on to the Indians may burden the government financially by increasing the cost of providing for the Indians, but this is not sufficient to infringe constitutional immunity of the United States from taxation, for the legal  [[Orig. Op. Page 5]] incidence of the tax is not upon the government itself.  The trend is away from immunizing from state taxes private parties doing business with the United States, even though the taxes may be passed on to the government.  Esso Standard Oil Co. v. Evans, 345 U.S. 495, 73 S.Ct. 800, 97 L.Ed. 1174 (1953);United States v. Detroit, 355 U.S. 466, 495, 505, 78 S.Ct. 474, 486, 2 L.Ed. (2d) 424, 460 (1957);Detroit v. Murray Corp., 355 U.S. 489, 78 S.Ct. 458, 486, 2 L.Ed. (2d) 441, 460 (1957).

            In the taxation of Indians, wardship without more does not render them tax exempt.  Oklahoma Tax Com. v. United States, 319 U.S. 598, 63 S.Ct. 1284, 87 L.Ed. 1612 (1943).  It would now appear to be the law that in order for Indians to claim exemption from state taxation, express congressional action is required.

            "We agree with the Government that Indians are citizens and that in ordinary affairs of life, not governed by treaties or remedial legislation, they are subject to the payment of income taxes as are other citizens.  We also agree that, to be valid, exemptions to tax laws should be clearly expressed. . . ."  Squire v. Capoeman, 351 U.S. 1, 76 S.Ct. 611, 100 L.Ed. 883 (1955).

            InOklahoma Tax Com. v. United States, supra, the court said:

            "This Court has repeatedly said that tax exemptions are not granted by implication.  United States Trust Co. v. Helvering, 307 U.S. 57, 60, 83 L.Ed. 1104, 1107, 59 S.Ct. 692.  It has applied that rule to taxing acts affecting Indians as to all others.  As was said of an excise tax on tobacco produced by the Cherokee Indians in 1870,  'If the exemption had been intended it would doubtless have been expressed.'  The Cherokee Tobacco[Boundinot v. United States] 11 Wall. 616, 620, 20 L.Ed. 227, 229. . . ."

            Thus, Indians have been made subject to state income taxation,Leahy v. State Treasurer of Oklahoma, 297 U.S. 420, 56 S.Ct. 507, 80 L.Ed. 771 (1936), and to state inheritance taxes.  Oklahoma Tax Com. v. United States, supra;West v. Oklahoma Tax Commission, 334 U.S. 717, 68 S.Ct. 1223, 92 L.Ed. 1676 (1948).

            The only federal statutes which might be construed to exempt Indians from the motor vehicle tax are those giving the Commissioner of Indian Affairs the power to regulate trade with Indians and to regulate prices at which goods may be sold to them.  25 USCA § 261,et seq.

             [[Orig. Op. Page 6]]

            The United States Solicitor for the Interior Department has expressed the view that while there is no exemption for Indians from state excise taxes on purchases made outside the reservation, they are exempt under the above federal statutes from sales taxes on purchases made within the reservation.  58 I.D. 562.  See, Federal Indian Law, published in 1958 by the Department of the Interior, pp. 867-873.

            However, the federal statutes referred to do not contain the express exemption now required by the United States Supreme Court.  Moreover, under the state law, the motor vehicle fuel tax is, as we have pointed out, not imposed on the consumer unless he is also a "distributor"; and 4 U.S.C.A. § 104,supra, indicates congressional intent to limit the authority of the Commissioner of Indian Affairs to regulate, in so far as he has such authority, the taxation of the sale of motor vehicle fuel on Indian reservations.

            We find no exemption in the state law relating to the motor vehicle fuel tax which grants to Indians any more privileges of exemption than those granted to other persons in general.  We have also examined the Treaty of the Makah Indians with the United States, 12 St. 939, but find nothing which would affect the imposition of this tax.

            In a prior opinion of this office dated April 17, 1930, we held that gasoline sold to be transported to an Indian reservation and there sold to Indians did not relieve the distributor from the motor vehicle fuel tax.  1929-30 OAG 629 [[to State Treasurer]].

            We conclude that there is no exemption from the state motor vehicle fuel tax when such fuel is sold to or by Indians for use on the reservation.

            You have also asked whether the motor vehicle fuel tax is applicable to sales of fuel for the marine use.  The answer to this question is found in two statutory provisions.  RCW 82.36.235 provides in part as follows:

            "The provisions of this chapter requiring the payment of taxes shall not apply to motor vehicle fuel delivered exclusively for marine use by a distributor directly into the fuel tanks connected to the engine of any marine vessel (excluding any amphibious vehicle) owned or operated by the purchaser of the fuel:  Provided, That such purchaser holds at the time of the delivery a permit issued pursuant to the provisions of RCW 82.36.270.  Each invoice covering such sale shall have  [[Orig. Op. Page 7]] the statement, 'Ex Washington Motor Vehicle Fuel Tax' clearly marked thereon.

            "In support of the aforementioned exemption the distributor shall obtain from the person so purchasing the motor vehicle fuel, and retain in his possession, an exemption certificate in such form and detail as the director may require.  The certificate shall contain a statement signed by the purchaser of the fuel to the effect that the fuel so purchased will be used solely for marine use.  The distributor may either obtain a separate exemption certificate from the purchaser for each delivery of fuel thereto or he may obtain one certificate covering all deliveries made to such purchaser during any given calendar month."

            It should be noted that this provision applies only when the delivery into the tanks is made by a distributor.  (See, RCW 82.36.010.) When delivery into the tanks is made by a person who is not a "distributor" as defined in RCW 82.36.010 (3), supra, or is made by a "distributor," but not directly into the tanks, RCW 82.36.280 may be applicable.  This section reads as follows:

            "Any person who uses any motor vehicle fuel for the purpose of operating any internal combustion engine not used on or in conjunction with any motor vehicle licensed to be operated over and along any of the public highways, and as the motive power thereof, upon which motor vehicle fuel excise tax has been paid, shall be entitled to and shall receive a refund of the amount of the motor vehicle fuel excise tax paid on each gallon of motor vehicle fuel so used, whether such motor vehicle excise tax has been paid either directly to the vendor from whom the motor vehicle fuel was purchased or indirectly by adding the amount of such excise tax to the price of such fuel.  No refund shall be made for motor vehicle fuel consumed in any motor vehicle as herein defined licensed to be operated over and along any public highway except that a refund shall be allowed for motor vehicle fuel consumed in a motor vehicle owned by the United States and operated off the public highways for the  [[Orig. Op. Page 8]] official use thereof."

            It should be noted that the two statutory provisions quoted above apply to Indians and non-Indians alike.

            We trust that the foregoing will be of assistance to you.

Very truly yours,

Attorney General

Assistant Attorney General