The U.S. Constitution grants Congress the exclusive power to regulate “commerce with the Indian tribes,” a general term used to describe indigenous Native American groups. The federal government presently recognizes 562 American Indian tribes representing nearly 2 million individuals. The secretary of the interior oversees tribal reservations, and federal law exempts such lands from state and local taxes, including sales tax.
The scope of American Indian sales tax exemptions is presently the subject of a dispute between Florida’s Department of Revenue and the Seminole Tribe of Florida, a group of about 2,000 Native Americans with six reservations located throughout the state. The Seminole lease parts of their land to outside commercial businesses. The department’s executive director, Marshall Stranburg, argued these leases are subject to Florida’s 6% “transient rental tax,” a form of sales tax on commercial property. The Seminole replied federal law prevents Stranburg from requiring the tribe to collect such a tax.
On Sept. 5, 2014, U.S. District Judge Robert N. Scola, Jr., of Miami agreed with the Seminole and granted the tribe’s motion for summary judgment against Stranburg. Scola said the secretary of the interior’s regulations governing Indian tribes clearly prohibit a state from assessing any form of tax on the “permanent improvements” or “activities conducted” on restricted reservation lands, including leases to non-Indians. While acknowledging higher federal courts, including the U.S. Supreme Court, have not directly addressed this particular situation, Scola was confidant current law preempted Florida’s authority to collect sales tax on the Seminole leases.
Scola said the courts should defer to the secretary’s “comprehensive analysis” of the impact of state taxes on Indian tribes. Scola noted the Interior Department, through its Bureau of Indian Affairs, deals with tribes on a day-to-day basis and therefore understands the “chilling effect” Florida’s sales taxes could have on Seminole lands. At a minimum, such taxes reduce the amount of money available to the Seminole for the benefit of its members.
Scola also rejected the Department of Revenue’s efforts to tax the utility services provided to the Seminole. Florida assesses a 2.5% tax on the “gross receipts” of the delivery or sale of gas or electricity to a “retail consumer.” Scola determined that this was an “impermissible direct tax” on the Seminole Tribe, which could not be collected on any utilities delivered to reservation lands.
The Florida Department of Revenue may still appeal Scola’s decision to the U.S. Eleventh Circuit Court of Appeals in Atlanta.
S.M. Oliva is a writer living in Charlottesville, Virginia. He edits the international legal blog Bonham’s Cases.
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