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Flandreau Santee Sioux Tribe Wins Trial Victory Against State’s Attempt To Collect Contractor’s Excise Taxes On The Casino Renovation Project

22 Oct 20

By Peebles Kidder

Oct. 22, 2020 – The Flandreau Santee Sioux Tribe achieved victory in its challenge to South Dakota’s imposition of a contractor’s excise tax on the Tribe’s casino renovation. On October 21, 2020, Judge Karen E. Schreier of the U.S. District Court for the District of South Dakota entered a judgment in favor of the Tribe. The decision follows a six-day trial held in June by video conference and represents a major victory for the Flandreau Santee Sioux Tribe in its ongoing litigation against South Dakota on taxation issues.

Peebles Kidder represented the Tribe as lead counsel in the closely watched case.

In Judge Schreier’s 121-page opinion accompanying its judgment, the Court ruled that federal law preempts the South Dakota contractor’s excise tax for several reasons. First, the tax interferes with the congressional purpose behind the Indian Gaming Regulatory Act (“IGRA”), the federal law that authorizes Indian tribes to operate casinos on tribal land. IGRA protects tribal gaming as a means of generating tribal revenue and promoting tribal self-governance. The state sought to collect the tax to serve the state’s general interest in raising revenue. Applying the “Bracker“ interest-balancing test and relying on decades of Supreme Court precedent and recent decisions by the Eighth Circuit Court of
Appeals, the Court held the state’s interests did not justify the interference with federal policies and tribal sovereignty, and that the tax is therefore preempted.

Second, the Court held that the state tax is expressly preempted by the Indian Trader Statutes, a set of federal laws dating back over two hundred years, which allow Indians and Indian tribes to purchase goods and services on Indian reservations without state interference.

Finally, the Court held that even if the Indian Trader Statutes do not expressly preempt the tax, the tax interferes with the federal policies implicated in the Indian Trader Statutes, including tribal self-governance and the protection of tribal commerce against burdens not authorized by Congress.

Again applying the Bracker balancing analysis, the Court found these policies outweigh the state’s interest in
raising revenue where there is a complete lack of State responsibility over Indian commerce on the

The Tribe’s Royal River Casino renovation opened in October 2019.  With this win at trial, the Tribe preserves its sovereign authority to engage in business on its reservation – gaming-related business in particular – without being burdened by hundreds of thousands of dollars in state taxation.

In response to the decision, Flandreau Santee Sioux Tribal President Anthony Reider explained that “the renovation of the Royal River Casino and Hotel was pivotal to the vitality of the tribal economy, and the attempted imposition of contractors excise tax by the State frustrated the overall project.  The Tribe has always taken a firm position on taxation, and believes that there is no stronger sovereignty position that imposing and collecting taxes within a Tribe’s jurisdiction.  It would be far more beneficial to the citizens of the State and members of the Tribe if the State would work with the Tribe versus against it.”

Rebecca Kidder of Peebles Kidder commented about the decision: “Judge Schreier’s well-reasoned 121-page opinion fortifies the tribal government position that States that do not provide services to tribal businesses or citizens on the reservation cannot siphon away tax dollars and use those tax dollars for the State’s purposes wholly unrelated to the tribal business or the tribal communities where these businesses operate.”

“Where a Tribe invests in its own economy, and provides the essential services for these businesses, and uses the revenue generated from these businesses to provide essential services to all of the residents of the tribal community, the State has not met its burden and is preempted from taxing. This is just and fair and in accordance with well-established law,” said Kidder.

“In short, yesterday’s decision vindicates the Flandreau Santee Sioux Tribe’s claims and sends a powerful message to state governments tempted to tax tribal government gaming enterprises without providing any services that justify those taxes: hands off,” said Kidder.

The case is Flandreau Santee Sioux Tribe v. Terwilliger, No. 4:17-cv-04055-KES (Dist. S.D.).
The Tribe was represented by Peebles Kidder LLP, Tribal attorney Seth Pearman, and Shannon Falon and her colleagues at the Janklow Abdallah firm of Sioux Falls.
Peebles Kidder has offices in Sacramento, California; Rapid City, South Dakota; Kansas City, Missouri; and Washington DC.
Peebles Kidder LLP is dedicated to the representation of American Indian tribes and Native American organizations throughout the United States. Legal services include a wide spectrum of services related to Indian concerns in the areas of business transactions, litigation, and governmental affairs.

To learn more, visit www.ndnlaw.com.