The Supreme Court
Gambling Taxes Collected at Indian 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 Indian reservations. The Chickasaw Nation believed this act was written in such a way to exempt Indian nations from taxes that state governments don't have to pay.
Just the Facts
The Indian Gaming Regulatory Act was passed in 1988 to govern Indian gaming. There are three classes of gaming specified in the act. Class I is traditional Indian social gaming for minimal prizes, which is exclusively regulated by tribal governments. Class II are common games of chance, such as bingo. Tribal governments are responsible for regulating this class with oversight by the National Indian Gaming Commission. Class III includes all games not in Class I or II, such as slot machines, black jack, craps and roulette, and is fully regulated by the commission.
The Indians 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 Indian Nations and she was joined by Souter. In her dissent, she said:
Indian nations were not granted exemption and must pay the same taxes as other nongovernmental gambling operations.