Ninth court finds that the tribal company may be subject to state tax laws
July 07, 2021
Snell & Wilmer
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Co-authored by Kelsey Haake1
On June 21, the US Court of Appeals for the Ninth District ruled that the District Court had lawsuits brought against the California Attorney General and the California Department by Big Sandy Rancheria Enterprises (“Big Sandy”), a federally established tribal company of the Western Mono Indians of Tax and Fee Administration. Big Sandy, a cigarette wholesaler, claimed that the California cigarette excise tax would not apply to its cigarette wholesale business if it were distributed directly to other Indian tribes. Big Sandy also claimed that California’s cigarette distribution regulations and licensing, reporting, and record-keeping requirements did not apply to them and were anticipated by federal laws for Indian traders because it was a tribal-owned and operated company.
The district court dismissed Big Sandy’s tax lawsuit on grounds of jurisdiction under the Tax Injunction Act, 28 USC, Section 1341. This law prohibits the district courts from[ing]to suspend[ing] or hold back[ing] the assessment, collection or collection of taxes under state law when a simple, quick and efficient remedy can be lodged in the courts of that state. ”While there is an exception to the law under 28 USC § 1362 which gives jurisdiction to the federal district court for Granted claims by Native American tribes or gangs, the district court ruled that Big Sandy is a federal company rather than a Native American tribe, but the exception does not apply. In addition, the district court dismissed remaining claims that tribal sovereignty and federal laws for Indian traders anticipated other California regulations on cigarette distribution because Big Sandy does some of its business outside of its reservation.
Big Sandy appealed and the Ninth District concluded that the District Court correctly dismissed the tax claim for lack of jurisdiction under the Tax Injunction Act and “correctly declined to apply the Indian Tribe Exemption to the Jurisdiction of the Tax Injunction Act”. Since the tribe waived the corporation’s tribal immunity under Section 17 of the Indian Reorganization Act when the corporation was formed, the corporation is not subject to the exception in the Tax Injunction Act.
The Ninth Circle also contradicted the tribe’s claims that they were banned from federal statutes for Indian traders because Big Sandy does business outside of his reservation. Big Sandy also argued that California’s regulations were against its tribal self-government. The Ninth Ward, however, dismissed this claim, arguing that Big Sandy “implausibly claims that California is hindering the tribe’s ability to rule its territory and its members by allowing the corporation, an unlicensed dealer, to sell cigarettes outside of it.” the rancheria forbidden. ” The Ninth Ward confirmed that tribe-to-tribe sales made outside of their tribal area constitute an “off-reserve activity” and are subject to non-discriminatory state laws.
In summary, the Ninth District agreed that the federal courts have no material jurisdiction since Big Sandy is not a tribe but a corporation. The court concluded that the Tax Injunction Act required the case to be heard through the correct channels in the California court. Although the court has not specifically ruled that Big Sandy is subject to California cigarette taxes and regulations, the case is now being referred back to California State Court for further trial, given the decisions made by the Ninth District.
1. Kelsey Haake is a 2021 Summer Associate at Snell & Wilmer and is a 2023 JD candidate at the University of Pennsylvania’s Carey School of Law.
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