Wagnon v. Prairie Band Potawatomi Nation: State Tax on Motor Fuels Distributed to Indian Tribal Retailers

Publication Date: November 2005

Publisher: Library of Congress. Congressional Research Service

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Research Area: Banking and finance

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Abstract:

On October 3, 2005, the U.S. Supreme Court heard oral arguments in Wagnon v. Prairie Band Potawatomi Nation (No. 94-631), which tests whether Kansas may apply its motor fuels tax to gasoline sold by off-reservation distributors to Indian tribal retailers for on-reservation sales. While the Court has consistently upheld state authority to tax on-reservation tobacco and gasoline sales to non-tribal members, tribal sovereign immunity bars states from collecting such taxes directly from Indian tribes. The Kansas tax is designed to resolve this problem by imposing the tax on the non-Indian, offreservation distributor. The appellate court found the state tax to be preempted by the federal interest in tribal sovereignty and economic development. Although legislation has been introduced in several recent Congresses to compel tribes to remit state sales taxes on retail sales to non-Indians, to date no such requirement has been enacted. This report will be updated upon the issuance of a Supreme Court decision.