Atkinson Trading Co. v. Shirley, Joe, Jr., et al. (05/29/2001)

By: Mindy Jensen, Medill News Service

Questions presented

Whether an Indian tribe has taxing authority over non-Indian businesses located on privately-held land within the boundaries of the Indian reservation.

Brief

In 1916 Hubert and C.D. Richardson established a trading post in Cameron, Arizona, 54 miles north of Flagstaff, just outside a southeast entrance to Grand Canyon National Park, along the Little Colorado River.

The post was also on the edge of Hopi and Navajo country, and the Indians used it to buy, sell and trade goods.

The trading post continued to grow, as did the Navajo country around it. In 1934 Congress expanded the boundaries of the reservation, causing the Richardsons' trading post to be surrounded by the reservation.

The Cameron Trading Post is still open today and is owned by C.D. Richardsons grand-nephew, Joe Atkinson, president of the Atkinson Trading Co., a New Mexico-based company.

The trading post still sells goods, but now it also has a hotel, a restaurant and an RV park.

Customers must travel through the reservation via U.S. Highway 89 and Arizona Highway 64 to reach the trading post.

In 1992 the Navajo Nation imposed a five percent Hotel Occupancy Tax on any room costing more than $2 a day that is located within the exterior boundaries of the Navajo Nation. The tax was raised to eight percent in 1994.

According to the Navajo Nation, the tax, which is derived from the number of tourist visits each year, provides programs that benefit the tourists, include police protection and health inspections.

Atkinson Trading Co. opposed the tax and filed suit in Indian court against Joe Shirley, Jr., a member of the Navajo tax commission, claiming the Navajo Nation did not have jurisdiction to tax the company.

The hearings and trials progressed through the tribal system to the Navajo Supreme Court, which ruled against Atkinson Trading Co.

The Navajo Supreme Court cited a 1981 U.S. Supreme Court ruling in Montana v. United States, 450 U.S. 544.

In the Montana opinion, the Supreme Court held that a tribe could not prohibit the activities of nonmembers of the tribe.

However, the Court allowed for an exception that permits a tribe to ""regulate, through taxation, licensing, or other means, the activities of nonmembers who enter consensual relationships with the tribe or its members through commercial dealing, contracts, leases, or other arrangements.""

A second exception allows the tribe to exercise sovereign power over non-Indians on their reservations when the conduct ""threatens or has some direct effect on the political integrity, the economic security, or the health or welfare of the tribe.""

The Navajo Supreme Court wrote, ""The second Montana exception also implicates Indian nation police power ... Cameron, Navajo nation (Arizona) is not a Ôhole within Navajo Nation territorial jurisdiction. The Navajo Nation has responsibilities to everyone who is present within its jurisdiction.""

After the Navajo Supreme Courts ruling, Atkinson Trading Co. appealed to a federal judge who also ruled against them. They then appealed to the 10th Circuit Court of Appeals.

A divided appeals court panel also ruled against Atkinson Trading Co., holding that the exception in the Montana decision gives an Indian nation taxing authority.

The 10th Circuit also cited a 1905 decision by the 8th Circuit Court of Appeals in Buster v. Wright, 135 F. 947. In the Buster case, the court held that ""the legal right to purchase land within an Indian nation gives the purchaser no right of exemption from the laws of such nation"" and that anyone who had purchased the land was liable to pay the taxes of the tribe.

Judge Mary Beck Briscoe dissented, saying she did not agree with the courts interpretation of the Montana decision.

Briscoe wrote that Montana operates from a presumption that a tribe lacks jurisdiction over nonmembers conduct on nonmember fee land.

""Only in those limited circumstances where a nonmember has entered into a consensual relationship with the tribe or its members, or where a nonmembers conduct, Ôthreatens or has some direct effect on the political integrity, the economic security, or the health or welfare of the tribe, does a tribe possess inherent sovereign authority Ôto exercise civil authority over the conduct of non-Indians on fee lands within its reservation,"" Briscoe wrote.

Briscoe also noted that even though the trading posts customers must travel through the reservation, the roads leading to the trading post are maintained by the state of Arizona. Navajo tribal police, as well as state of Arizona police, patrol the roads.

On Nov., 27, 2000, the U.S. Supreme Court granted certiorari in the case, and on May 29, 2001, a unanimous Court reversed, invalidating the hotel occupancy tax imposed by the Navajo Nation upon nonmembers on non-Indian land within its reservation.

""In Montana...we held that, with limited exceptions, Indian tribes lack civil authority over the conduct of nonmembers on non-Indian fee land within a reservation."" Chief Justice William Rehnquist wrote for the Court. ""The question with which we are presented is whether this general rule applies to tribal attempts to tax nonmember activity occurring on non-Indian fee land. We hold that it does...""