Washington The U.S. Supreme Court ruled Tuesday that Kansas can tax the fuel sold on American Indian reservations without violating tribal sovereignty, reversing a lower court.
In a 7-2 vote, the high court said Kansas can tax distributors who sell fuel at an Indian-owned and operated gas station near the Prairie Band Potawatomi tribe's casino. Most customers of the Nation Station are off-reservation patrons of the casino, which is 15 miles north of Topeka.
Writing for the majority, Justice Clarence Thomas said the Denver-based 10th U.S. Circuit Court of Appeals was wrong in ruling that the tax was an affront to tribal sovereignty.
Thomas said Kansas is not trying to regulate tribal activity but is simply taxing non-Indian companies based outside the reservation that distribute fuel to tribal operators.
"Kansas law makes clear that it is the distributor, rather than the retailer, that is liable to pay the motor fuel tax," Thomas wrote. "While the distributors are 'entitled' to pass along the cost of the tax to downstream purchasers ... they are not required to do so."
The tribe had argued that it already collects taxes on fuel to pay for maintaining the reservation's roads, which are among the worst in the nation.
Kansas Atty. Gen. Phill Kline said he was pleased with the decision.
"The court gave proper balance to the relationship between Native American tribes and the state and recognized the importance of state sovereignty and authority," Kline said in a written statement.
Zachariah Pahmahmie, chairman of the Potawatomi tribal council, said the decision is part of a "misguided trend of indifference by conservative judges" toward Indian commerce issues.
"The court has glorified form over substance and permitted the state to violate tribal rights indirectly that the state could not violate directly," Pahmahmie said in a written statement.
Justices Ruth Bader Ginsburg and Anthony M. Kennedy dissented, arguing that the fuel is "effectively double-taxed" and may force the tribe's gas station to operate at a deficit or go out of business.
Ginsburg also said Kansas is not gaining much through the tax - about $300,000 annually. But, in doing so, she wrote, the state is preventing the tribe from imposing its own tax.