Taxation Without Compensation as a Challenge for Tribal Sovereignty

36 Pages Posted: 24 Apr 2015 Last revised: 22 May 2015

See all articles by David Y Kwok

David Y Kwok

University of Houston Law Center

Date Written: November 1, 2014


For over 150 years federal courts have held that Indian tribes have immunity from state taxes based upon the sovereignty of tribal lands. The principle of land-based tax immunity, however, has proven difficult to apply in the context of commodity goods like gasoline and cigarettes, which can freely move across state and tribal borders. Should state residents be able to avoid state cigarette taxes by driving onto tribal lands to make purchases? The result has been decades of questionable yet high-stakes litigation between states and tribes over a tax’s “legal incidence,” a judicial fiction that ignores economic reality. I propose a two-part solution to the problem of commodity taxation that will reduce such litigation while also doing justice to both state and tribal interests. First, courts should employ a broad reading of the legal incidence test described in Wagnon v. Prairie Band Potawatomi Nation, 546 U.S. 95 (2005), so as to clearly establish a state’s right to apply nondiscriminatory commodity taxes to sales occurring on tribal lands. To offset the state’s broad taxation power, courts should expand tribal sovereignty beyond tax immunity to also include a tribe’s right to an equitable portion of those commodity tax revenues. The combination of these judicial choices will discourage ongoing litigation and promote equitable negotiated results between states and tribes regarding commodity taxes.

Keywords: tribal tax, cigarette tax, gasoline tax, legal incidence

JEL Classification: H21, H22

Suggested Citation

Kwok, David Y, Taxation Without Compensation as a Challenge for Tribal Sovereignty (November 1, 2014). Mississippi Law Journal, Vol. 84, No. 1, 2014; U of Houston Law Center No. 2015-A-10. Available at SSRN:

David Y Kwok (Contact Author)

University of Houston Law Center ( email )

4604 Calhoun Road
Houston, TX 77204-6060
United States
7137433850 (Phone)

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