The Supreme Court: Gambling Taxes Collected at Native American Reservations

Gambling Taxes Collected at Native American Reservations

Companies that run gaming operations must pay federal wagering excise and occupational taxes. State-sponsored gambling activities are exempt from these taxes. The Chickasaw Nation wanted that state exemption as well and filed a case in federal court. The court of appeals rejected that claim and the Chickasaw Nation took the case to the Supreme Court in 2001.

This case was based on the Indian Gaming Regulatory Act, which permits and governs gambling operations on Native American reservations. The Chickasaw Nation believed this act was written in such a way to exempt Native American nations from taxes that state governments don't have to pay.

The Native Americans based their claim on a technicality that involved certain wording in parenthetical reference. The Supreme Court ruled that the language outside the parenthesis was unambiguous and related only to the reporting and withholding of taxes.

In the majority opinion announced on November 27, 2001, the Supreme Court declared this a drafting mistake and said it could “find no comparable instance in which Congress legislated an exemption through a parenthetical numerical cross-reference.”

Associate Justice Sandra Day O'Connor dissented in this case in support of the Native American Nations and she was joined by Souter. In her dissent, she said:

• “Exempting Nations from federal gaming taxation in the same manner as States preserves the Nations' sovereignty and avoids giving state gaming a competitive advantage that would interfere with the Nations' ability to raise revenue in this manner. Because nothing in the text, legislative history, or underlying policies … clearly resolves the contradiction inherent in the section, it is appropriate to turn to canons of statutory construction. The Nations urge the Court to rely upon the Indian canon, that 'statutes are to be construed liberally in favor of the Indians, with ambiguous provisions interpreted to their benefit.' … In this case, because Congress has chosen gaming as a means of enabling the Nations to achieve self-sufficiency, the Indian canon rightly dictates that Congress should be presumed to have intended the Nations to receive more, rather than less, revenue from this enterprise.”

Native American nations were not granted exemption and must pay the same taxes as other nongovernmental gambling operations.