State-Tribal Relations

Case in Brief: Oklahoma Tax Commission v. Sac and Fox Nation (1993)

Respondent Sac and Fox Nation (Tribe) is a federally recognized Indian tribe located in Oklahoma. It initiated this action to seek a permanent injunction order to bar petitioner Oklahoma Tax Commission (Commission) from, among other things: 1) taxing the income of tribal members who work or reside within tribal jurisdiction; and 2) imposing the state of Oklahoma’s motor vehicle excise tax and registration fees on tribal members who live and garage their cars primarily on tribal land and register those cars with the Tribe. The U.S. Supreme Court held that absent explicit congressional direction to the contrary, the presumption is that a state does not have jurisdiction to tax tribal members who live and work in Indian country, whether the particular territory consists of a formal or informal reservation, allotted lands or dependent Indian communities. The Court also held Oklahoma’s vehicle excise tax and registration fees to be outside the state’s scope of taxing jurisdiction.

Q. What was the case about?

A. The Sac and Fox Nation, apprised approximately of 2,500 members has a fully functioning tribal government with its headquarters on the 800 acres reserved to it under the Dawes Act of 1891 (24 Stat. 388). The Tribe imposes a tribal earnings tax and a motor vehicle tax.

The state of Oklahoma also administers income taxes and motor vehicle taxes and fees. The Commission attempted to tax the income of tribal members living on the reservation, whose income was solely derived from reservation sources. The Commission maintained this was possible because the Tribes 1891 Treaty with the federal government disestablished the Sac and Fox Reservation in favor of allotments of trust land for individual tribal members. Thus, as the tribe was not on an established reservation, the Commission asserted Oklahoma’s right to administer the individual income tax.

As to the motor vehicle registration and excise tax fees, the Commission contends that tribal members must register their vehicles with the state, just as everyone who lives within Oklahoma must do.

Q. What did the U.S. District Court say?

A. The District Court for the Western District of Oklahoma declined to determine whether the reservation had been disestablished or its boundaries diminished. Instead, it held that the Commission could levy and collect state income tax on the income that non-members of the tribe earned from tribal employment on trust lands, but not on the income that tribal members earned from tribal employment on trust lands. The court also held that the Commission could not require, as a prerequisite to issuing an Oklahoma motor vehicle title, payment of excise taxes and registration fees for the years a vehicle properly had been licensed by the tribe.

Q. What did the U.S. Court of Appeals say?

A. The U.S. Court of Appeals for the Tenth Circuit affirmed the findings of the U.S. District Court. It also declined to determine the boundaries of the Sac and Fox Reservation. The court looked only to the status of the land on which the income was earned, in this case, trust land. The court concluded that for tribal immunity purposes, there was no difference between trust land validly set apart for Indian use and reservation land. Therefore, the income of tribal members who worked for the tribe on trust land was immune from state taxation; however, the income of non-members was not immune.

As to the vehicle taxes, the Court of Appeals found that the excise tax was not enforced as a sales tax and was “flatly prohibited.” Furthermore, the taxes are not imposed on all vehicles using the roads in Oklahoma. Residents of nearby states pay neither the excise tax nor the registration fee. However, the court also rejected the tribe’s argument that vehicles registered with the tribe by non-members also should be immune from state taxation.

Q. What did the U.S. Supreme Court say?

A. The residence of a tribal member is a significant component of the presumption against state tax jurisdiction. But, a tribal member need not live on a formal reservation to be outside the state’s taxing jurisdiction; it is enough that the member live in “Indian country.” Congress has defined Indian country broadly to include formal and informal reservations, dependent Indian communities and Indian allotments, whether restricted or held in trust by the United States. Therefore, the Court stated that upon remand it must be determined whether the relevant tribal members live in Indian country. If they do, the court must analyze the relevant treaties and federal statutes against the backdrop of Indian sovereignty. Unless Congress expressly authorized state tax jurisdiction in Indian country, the presumption counsels against finding such jurisdiction.

With respect to the motor vehicle taxes, the Court stated that the excise tax and registration fee are imposed in addition to a sales tax; the two taxes are imposed for use both on and off Indian country. If the state tailored its tax to the amount of actual off-Indian country use, the outcome may be different, but that was not the case here.

Q. What does this ruling mean for other states and tribes?

A. The U.S. Supreme Court still presumes that states are preempted from taxing Indian activities, income or property in Indian country. Additionally, a state may not impose vehicle excise and registration fees upon Indians who live in, and garage their vehicles in Indian Country.

Case Citation:
Oklahoma Tax Commission v. Sac and Fox Nation, 508 U.S. 114 (1993)

For More Information:
Contact Andrea Wilkins of NCSL's State-Tribal Relations Project at 303-856-1558 or State-Tribal Relations Program.

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