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No fuel tax for tribal members in South Dakota

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PIERRE, S.D. - Sovereignty and treaties have won in South Dakota and tribal members will be rewarded with savings on motor fuel purchased on reservations.

The South Dakota Supreme Court overturned a lower court ruling and confirmed the state had illegally imposed motor fuel taxes against American Indians on the Pine Ridge Reservation.

A complaint that has been in the courts for some eight years filed by Loren "Bat" Pourier, owner of Muddy Creek Oil Company of Pine Ridge, paralleled many cases on reservations across the country. The issue of motor fuel taxes collected under coercion by tribally owned and privately owned businesses on Indian reservations and passed on to American Indian consumers is an issue many tribes face and most win.

"This is a great victory for sovereignty and treaties. It shows what a modern day warrior can do. It was a fair thing for our people. We Oglalas don't have anything and we have to fight for everything," Pourier said. He said he has been fighting this issue from the day he opened Big Bats Texaco in Pine Ridge in 1994.

Pourier claimed he was entitled to a refund of $950,000 for taxes paid to the state since July 1995.

In the court's ruling, however, the Supreme Court did not award the refund to Pourier, but to the tribal members.

"For me it's not about the money. Someone needed to fight. Millions of dollars may now come back to the people, it was a great victory," Pourier said.

The Circuit Court ruled against Pourier and used the Hayden-Cartwright Act established in 1936 as a means to support the state's claim that Indian reservations were open to state taxes on its residents.

The South Dakota Supreme Court said the 1936 Act did not authorize the tax collection on Indian reservations. "A state has no power to tax tribes, Indian reservations lands, or tribal member residing on Indian reservations unless there has been a cession of jurisdiction or other federal statute permitting the tax," the court stated.

"This is a significant victory for Indian consumers," said Vanya Hogen, attorney with Faegre and Benson.

"Other states have similarly tried to broaden the reach of the 1936 law, and this decision sends a clear signal that the courts won't support this interpretation," Hogen said.

The part of the 1936 Act that constantly comes under scrutiny comes from the interpretation of what are classified as "reservations."

The Act states that taxes can be levied against licensed vendors and others located on United States military or other reservations, except for federal government use.

South Dakota's high court stated Congress was not specific in the 1936 Act in reference to Indian reservations; therefore Indian reservations are not included in a state's right to collect taxes on tribal members.

The U.S. Supreme Court has held that unless there is an agreement from the tribal government or an act from Congress, tribal members cannot be charged for state motor fuel taxes when on the reservation.

"Fuel taxes on Indian country have run out of gas," Hogen said.

The state of South Dakota looks at this matter a little differently. Attorney General Larry Long said there were no winners given the fact that Pourier would not be receiving the refund. He said there was no determination how the refund would be distributed.

Pourier will be refunded the amount of state taxes used by his company on the reservation.

The state claims the tax was imposed on the consumer not the vendor. However, Pourier argued that the tax was paid by Muddy Creek as the marketer and importer and that the tax did not pass to the consumer. He said the refund would help the reservation because it would have been reinvested in the business, Big Bats Texaco, in the Pine Ridge village to help the economy of the community.

He claimed to the lower court that he did not include the 22-cent state tax in his pump price to tribal members, however, a Circuit Court ruling said it was found that the 22-cents was removed from all federal purchases of gas.

Four issues were brought before the state's high court: one - whether or not the Hayden-Cartwright Act permitted state taxation; two - whether Muddy Creek Oil bore a legal incidence of the fuel tax; three - whether the state's motor fuel taxation scheme deprived Muddy Creek of procedural due process and four - whether the state statutes of limitation bar a challenge to an illegal tax in the case.

Two of the justices dissented on issues three and four but concurred on the first two.

The issue of due process was argued by Muddy Creek that the state does not allow for refund of illegally collected taxes to the marketer, but only to the consumer.

The Supreme Court decision declared the state's statute of limitations did not apply in this case. The state knew or suspected as early as 1994 that the taxes may be illegal but did not prepare for that possibility.

"A wrong was righted and it gives me personal satisfaction knowing we won. It was a modern day battle and we won," Pourier said.