Central MacHinery Co. v. Arizona State Tax Commission

Mr. Justice Powell,

dissenting in No. 78-1604 (ante, p. 160) and concurring in No. 78-1177 (ante, p. 136).

I write separately because I would distinguish Central Machinery Co. v. Arizona State Tax Comm’n, ante, p 160. from White Mountain Apache Tribe v. Bracker, ante, p. 136. *171I agree with the Court that a non-Indian contractor continuously engaged in logging upon a reservation is subject to such pervasive federal regulation as to bring into play the preemption doctrine of Warren Trading Post Co. v. Arizona Tax Comm’n, 380 U. S. 685 (1965). But Warren Trading Post simply does not apply to routine state taxation of a non-Indian corporation that makes a single sale to reservation Indians. I therefore join the Court’s opinion in White Mountain Apache Tribe, but I dissent from it® decision in Central Machinery.

I

Central Machinery

Warren Trading Post held that Arizona could not levy its transaction privilege tax against a company regularly engaged in retail trading with the Indians upon a reservation. The company operated under a federal license, and it was subject to the federal regulatory scheme authorized by 25 U. S. C. §§ 261-264. “These apparently all-inclusive regulations,” the Court concluded, “show that Congress has taken the business of Indian trading on reservations so fully in hand that no room remains for state laws imposing additional burdens upon traders.” 380 U. S., at 690.

The Court today is too much persuaded by the superficial similarity between Warren Trading Post and Central Machinery. The Court mistakenly concludes that a company having no license to trade with the Indians and no place of business within a reservation is engaged in “the business of Indian trading on reservations. . . .” 380 U. S., at 690. Although “[a]ny person” desiring to sell goods to Indians inside a reservation, must secure federal approval, see 25 U. S. C. §§ 262, 264, the federal regulations — and the facts of this case — show that a person who makes a single approved sale need not become a fully regulated Indian trader. Even itinerant peddlers who engage in a pattern of selling within a reservation are merely “considered as traders” for purposes *172of the licensing requirement. 25 CFR § 251.9 (b) (1979). “The business of a licensed trader,” in fact, “must be managed by the bonded principal, who must habitually reside upon the reservation. . . .” 25 CFR §251.14 (1979).1 Since Warren Trading Post involved a resident trader subject to the complete range of federal regulation, the Court had no occasion to consider whether federal regulation also pre-empts state taxation of a seller who enters a reservation to make a single transaction.2

Our most recent cases undermine the notion that 25 U. S. C. §§ 261-264 occupy the field so as to pre-empt all state regulation affecting licensed Indian traders. The unanimous Court in Moe v. Salish & Kootenai Tribes, 425 U. S. 463, 481-483 (1976), concluded that a State could require tribal retailers to prepay a tax validly imposed on non-Indian customers. Rejecting an argument based on Warren Trading Post, the Court concluded that federal laws “ 'passed to protect and guard [the Indians] only affect the operation, within the [reservation], of such state laws as conflict with the federal enactments.’ ” 425 U. S., at 483, quoting United States v. McGowan, 302 U. S. 535, 539 (1938). In Washington v. Confederated Tribes of Colville Indian Reservation, 447 U. S. *173134, 159-160 (1980), the Court holds that a State can require licensed traders to keep detailed tax records of their sales to both Indians and non-Indians. Cf. Confederated Tribes v. Washington, 446 F. Supp. 1339, 1347, 1358-1359 (ED Wash. 1978) (three-judge court).

Finally, unlike taxes imposed upon an Indian trader engaged in a continuous course of dealing within the reservation, the tax assessed against Central Machinery does not “to a substantial extent frustrate the evident congressional purpose of ensuring that no burden shall be imposed upon Indian traders for trading with Indians . . . except as authorized by Acts of Congress or by valid regulations promulgated under those Acts.” Warren Trading Post, supra, at 691. In this case, the Bureau of Indian Affairs approved all aspects of the only sale Central Machinery made to the Gila River Indian Tribe. The contract price approved by the Bureau included costs attributable to the very tax that Central Machinery now seeks to recover. Ante, at 161-162. Thus, the State’s tax did not interfere with “the statutory plan Congress set up in order to protect Indians against prices deemed unfair or unreasonable. . . .” Warren Trading Post, supra, at 691. Since a seller not licensed to trade with the Indians must secure specific federal approval for each isolated transaction, there is no danger that ordinary state business taxes upon the seller will impair the Bureau’s ability to prevent fraudulent or excessive pricing. To hold the seller immune from state taxes otherwise due upon a single transaction with the Indians gives the non-Indian seller a windfall or the Indian buyer an unwarranted advantage over all others who deal with the seller.

II

White Mountain Apache Tribe

White Mountain Apache Tribe presents a different situation. Petitioner Pinetop Logging Co. operates solely and continuously upon an Indian reservation under its contract *174with a tribal enterprise. Pinetop’s daily operations are controlled by a comprehensive federal regulatory scheme designed to assure the Indian tribes the greatest possible return from their timber. Federal officials direct Pinetop’s hauling operations down to such details as choice of equipment, selection of routes, speeds of travel, and dimensions of the loads. Ante, at 146-148. Pinetop does all of the hauling at issue in this case over roads constructed, maintained, and regulated by the White Mountain Apache Tribe and the Bureau of Indian Affairs. The Bureau requires the Tribe and its contractors to repair existing roads and to construct new roads necessary for sustained logging. Pinetop exhausts a large percentage of its gross income in performing these contractual obligations. Ante, at 148.

Since the Federal Government, the Tribe, and its contractors are solely responsible for the roads that Pinetop uses, I “cannot believe that Congress intended to leave to the State the privilege of levying” road use taxes upon Pinetop’s operations. See Warren Trading Post, 380 U. S., at 691. The State has no interest in raising revenues from the use of Indian roads that cost it nothing and over which it exercises no control. See Washington v. Confederated Tribes, supra, at 162-164.3 The addition of these taxes to the road construction and repair expenses that Pinetop already bears also would interfere with the federal scheme for maintaining roads essential to successful Indian timbering. See 380 U. S., at *175691. The Tribe or its contractors would pay twice for use of the same roads. This double exaction could force federal officials to reallocate work from non-Indian contractors to the tribal enterprise itself or to make costly concessions to the contractors. I therefore join the Court in concluding that this case “is in all relevant respects indistinguishable from Warren Trading Post.” Ante, at 153.

The regulation dealing with itinerant peddlers was promulgated after the decision in Warren Trading Post. See 30 Fed. Reg. 8267 (1965). Thus, the regulations before the Court in Warren Trading Post required all licensed Indian traders to conduct their businesses under the management of a habitual resident upon the reservation. 25 CFR § 251.14 (1958),

At oral argument, counsel for Central Machinery conceded that the State could have taxed the transaction in question if it had been completed at the firm’s usual place of business. Tr. of Oral Arg. 7. Thus, Central Machinery’s argument reduces to the proposition that the locus of the transaction is dispositive. Quite apart from the opportunities for tax evasion that it creates, this position is unsound. Persons who make an unauthorized sale to Indians upon a reservation can be prosecuted. 25 U. S. C. § 264; see United States ex rel. Hornell v. One 1976 Chevrolet Station Wagon, 585 F. 2d 978 (CA10 1978). But that certainly does not prove that all persons who make an authorized sale are subject to the pervasive regulation considered in Warren Trading Post.

The motor carrier license tax imposed by Ariz. Rev. Stat. Ann. § 40-641 (Supp. 1979) is a tax on the privilege of engaging in a business that makes inordinate use of public roads. See Purolator Security, Inc. v. Thorneycroft, 116 Ariz. 394, 396-397, 569 P. 2d 824, 820-827 (1977) ; Campbell v. Commonwealth Plan, Inc., 101 Ariz. 554, 557, 422 P. 2d 118, 121 (1966). All revenues from this tax are earmarked for maintenance and improvement of the State’s highways. Ariz. Rev. Stat. Aim. §40-641 (C) (Supp. 1979). The fuel use excise tax imposed by Ariz. Rev. Stat. Ann. §28-1551 (Supp. 1979) is “for the purpose of partially compensating the state for the use of its highways.” § 28-1552 (Supp. 1979).