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Order blocking gas tax on reservations to stand

A lawsuit claiming the state of North Dakota owes Indian consumers more than $2 million a year for an illegal gas tax is moving forward.

Four tribal members sued the state in August 2003 to bar the collection of the tax. They said it violated federal law and 19th-century treaties signed by the Three Affiliated Tribes and the Turtle Mountain Band of Chippewa Indians.

A year ago last month, a state judge agreed. Northwest District Judge Gary A. Holum issued an injunction permanently barring the state from collecting the tax, saying it was not authorized by federal law.

"Because Congress has not instructed otherwise," Holum wrote in a 21-page opinion, "the court finds that North Dakota's motor fuels tax, as applied to Native American reservation residents who purchase fuel on reservation land, is illegal."

But before the plaintiffs got a chance to seek a decision on the amount owed to Indian consumers, state attorneys appealed the case. They asked the North Dakota Supreme Court to sanction the tax under the Hayden-Cartwright Act, an obscure 1936 federal law that has been used by other states to justify gas taxes on reservations.

The effort failed on Wednesday when the court dismissed the appeal. In a unanimous decision, the judges said the appeal was premature because a final judgment on the refund, and a possible class action applying to all Indian consumers in the state, has not been entered.

The decision does not mean the plaintiffs will prevail on either the refund or class action point. But in an important footnote, the judges noted that every state and federal court that has confronted the Hayden-Cartwright Act has rejected it as a basis for reservation taxation.

"The district court's ruling that the Hayden-Cartwright Act does not authorize imposition of the state motor vehicle fuels tax on Indian reservations is in accord with every federal and state court decision that has addressed the issue," they wrote.

That's how Indian consumers in nearby South Dakota were awarded refunds for an illegal gas tax. Courts in Idaho and Kansas also struck down taxes on tribal gasoline sales after states cited the Hayden-Cartwright Act.

In North Dakota, as many as 7,000 tribal members are affected, according to attorney Vance Gillette. He estimates they paid over $2 million a year to the state before the tax was shut down. The tax is 21 cents per gallon.

Members of the Three Affiliated Tribes (Mandan, Hidatsa, Arikara), the Turtle Mountain Chippewa and the Spirit Lake Nation should be eligible for refunds. Tribal members who buy fuel at the Sisseton-Wahpeton Tribe's casino on the North Dakota portion of its reservation are also impacted.

Gillette previously said members of the Standing Rock Sioux Tribe who buy fuel on the North Dakota portion of its reservation won't be included because the tribe has a tax agreement with the state.

The plaintiffs are Joan Mann and Ken Danks, Three Affiliated members who own businesses on their reservation, and Tracy Wilkie and Christa Monette, Turtle Mountain Chippewa tribal members. In his January 2004 ruling, Holum dismissed all but Danks from the suit on procedural grounds.

The plaintiffs asked the state Supreme Court to reconsider but the judges said the issue was premature.

Get the Decision:
Mann v. N.D. Tax Commissioner (February 16, 2005)