The Flandreau Santee Sioux Tribe owns and operates the Royal River Casino and Hotel in Flandreau, South Dakota. Photo: Royal River Casino and Hotel

Flandreau Santee Sioux Tribe secures victory over state in tax dispute

The Flandreau Santee Sioux Tribe has once again emerged victorious in a taxation dispute with the state of South Dakota.

The state attempted to tax construction activities at the Royal River Casino and Hotel on the reservation. But the Indian Gaming Regulatory Act prohibits that, and the tribe's Class III gaming compact does not authorize taxation either, a federal judge ruled on Tuesday.

“The state’s excise tax undermines the objective of IGRA because the tax is passed from the contractor to the tribe which interferes with the tribe’s ability to make a profit from gaming activities,” Judge Karen Schreier wrote in the 32-page decision, which was first reported by The Sioux Falls Argus Leader. “Thus, Congress intended for IGRA to completely regulate Indian gaming and there is no room for the state’s imposition of an excise tax.”

The ruling marks the second time in which the tribe has defeated the state in a taxation lawsuit. Last fall, a different federal judge barred a tax on products and services sold at Royal River.

"A state's authority to tax in Indian Country is operationally curtailed by a tribe's sovereign immunity," Judge Lawrence Piersol wrote in the 29-page ruling in September 2017.

The tribe is spending $24 million on an expansion at Royal River amid increased competition in the region. The state unsuccessfully argued that non-Indian contractors must pay a 2 percent excise tax for working on the project.

“The state will analyze the decision and decide next steps,” the chief of staff to Gov. Dennis Daugaard (R) told The Argus Leader in response to the loss in court.

Further litigation is possible, as the state has already taken the first taxation case to the 8th Circuit Court of Appeals. Briefing is complete but oral arguments have yet to be scheduled.

The lower court case is Flandreau Santee Sioux Tribe v. Sattgast. The 8th Circuit case is Flandreau Santee Sioux Tribe v. Gerlach.

Read More on the Story:
South Dakota loses bid to force Flandreau Santee Sioux Tribe to pay tax (The Sioux Falls Argus Leader July 16, 2018)

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Flandreau Santee Sioux Tribe claims victory in long-running state taxation fight (September 19, 2017)