Indian country in cyber space: Bella Hess and commerce clause constraints on interstate, mail-order transactions.

• Author: Fenner, Benjamin

1. INTRODUCTION

   When political processes fail, the rule of law prevails or people rise to power. When the political process fails between tribes and the United States, defined as it is by federal statutes and case law, there is no rule of law and, therefore, leaders emerge. So it is that the panoply of tribal leaders is vast and ranges from ordinary men and women in seemingly mundane circumstances to warriors and negotiators who are household names.

   These leaders, varied in their roles and capacities, represent an area of law equally varied, a law that is at once hostile and reconciliatory. From the Marshall trilogy and the birth of the "domestic dependant nation[]" (1) to removal and assimilation, federal Indian law embodies the maxim that the road to hell is paved with good intentions. As Alexis De Tocqueville cynically wrote:

   The Spaniards pursued the Indians with bloodhounds, like wild beasts; they sacked the New World like a city taken by storm, with no discernment or compassion.... The Spaniards were unable to exterminate the Indian race by those unparalleled atrocities which brand them with indelible shame, nor did they succeed even in wholly depriving it of its rights; but the Americans of the United States have accomplished this twofold purpose with singular felicity, tranquilly, legally, philanthropically, without shedding blood, and without violating a single great principle of morality in the eyes of the world. It is impossible to destroy men with more respect for the laws of humanity. (2) The ability of the government to justify the annihilation of whole cultures was, and is today, driven by a perceived lack of resources (a euphemism for greed). And no resource is as scarce today, it seems, as money; few areas of federal Indian law are as contentious as states' ability to tax and regulate tribal activity. (3) While tribal immunity from state taxation is well-settled, what of state ability to tax Internet transactions originating on reservations? Part II of this Article is an overview of preemption in federal Indian law. Part III looks specifically to taxation and regulation of mail-order transactions. Part IV concludes that tribes may structure online transactions fulfilled on-reservation to preclude state taxation.

2. TAXATION AND REGULATION

   1. Tribal and State Authority to Tax and Regulate in Indian Country

      Merrion v. Jicarilla Apache Tribe (4) opens with a textualist argument drawing on sources from each branch of the federal government and on "general principles of taxation." (5) Explicitly drawing on Worcester v. Georgia, (6) Justice Thurgood Marshall speaks of taxation in terms of an "essential instrument of self-government and territorial management." (7) Relying on the executive branch, the Court refers to a 1934 opinion of the Solicitor for the Department of the Interior which stated that tribes can tax nonmembers of the tribe as an incident to their sovereign power "so far as such nonmembers may accept privileges of trade, residence, etc., to which taxes may be attached as conditions." (8) Furthermore, Congress affirmed the right to levy taxes as an important and essential component of tribal sovereignty in an 1879 statement by the Senate Judiciary Committee. (9) In drawing on the judiciary, Justice Marshall cited Washington v. Confederated Tribes of Colville Indian Reservation (10) to bolster his argument for expansive tribal powers. (11)

      After opening with this textual analysis, the Court turned to equitable principles of sovereignty as old as the common law. (12) To hold that an implicit power of the sovereign to tax is waived if not explicitly retained in a contract is to confuse the tribes' role as a sovereign with its role as a business partner and "denigrates Indian sovereignty." (13) Continuing to frame the discussion in terms of inherent power (not one conferred by the federal government), (14) the question, answered in the negative, becomes whether Congress divested the Colville Tribe of its inherent power to tax. (15)

      Not only may Congress divest the tribe of this inherent authority to tax, (16) it may also preempt state authority in Indian country. McClanahan v. Arizona State Tax Commission (17) was the first case in the modern arena of federal Indian law to interpose preemption onto a question of states' reach into reservation affairs. (18) An equally important development coming out of this decision, one linked to the rise of preemption analysis, (19) is the recognition of the evolution, yet continued relevance, of Indian sovereignty in federal Indian law. (20) Indian sovereignty, the Court found, was to provide the "backdrop against which ... federal statutes must be read." (21)

      In White Mountain Apache Tribe v. Bracker, (22) Marshall continued to adhere to a territorial-based sovereignty, holding the state without jurisdiction to tax private entities operating on reservation lands. (23) The Court in Bracker developed a balancing test, measuring the limits of state authority in Indian country against preemption of that authority by federal law or incompatibility with "the right of reservation Indians to make their own laws and be ruled by them." (24) The test is sui generis and, as such, it is dangerous to make generalizations about its application. (25) When courts do find preemption, however, the result is that state regulatory authority gives way to federal or tribal powers. (26)

   2. Preemption Analysis

      1. To Preempt or not to Preempt...

         When courts will find federal supremacy (i.e., preemption) to arise becomes a key inquiry requiring the weighing of various conflicting interests. Contrasting preemption analysis in tax cases not involving federal Indian law with those within federal Indian law can provide valuable insight into differences of judicial approach. 27

         In the general field of preemption analysis, the trend of the Court is to allow nondiscriminatory state taxes to befall, e.g., federal workers, when the "legal incidence" does not attach to "the federal government or on federal property." (28)

         In federal Indian law and by the Court's own admission, a different categorical approach exists. (29) Rarely does the inquiry over state taxation on reservations turn on whether such taxes are nondiscriminatory. (30) Rather, state taxes against reservation Indians and reservation land are deemed impermissible unless Congress speaks otherwise. (31) Defending this categorical approach in Oklahoma Tax Commission v. Chickasaw Nation, (32) the Court stressed the benefits of a bright-line rule exempting state taxing authority over Indians or Indian land as providing "certainty as to the permissible scope of state taxation authority." (33)

         Just as bright-line rules help those confronting the extent of state regulatory power over Indians or Indian land, if truly embraced, they would aid Congress in drafting legislation affecting Indians and the courts sitting over the interpretation of that legislation. This seems to be the essence of Justice Powell's decision in Montana v. Blackfeet Tribe of Indians. (34) Blackfeet Tribe, holding that Montana may not tax non-Indian lessees pursuant to the Indian Mineral Leasing Act of 1938, is a resounding affirmation of preemption analysis in federal Indian law, a recognition of the unique relationship between tribes and Congress where congressional inaction cannot be deemed a mere institutional shortcoming. (35)

         Arizona's argument in McClanahan relied on the fact that there were no governing acts of Congress addressing the issue before the court. (36) Arizona was unavailing on both this and their argument in the alternative, which distinguished between taxes on land and income, the latter at issue in its case and arguably open to state incursion. (37) The Court flatly rejected this distinction with the finding that when the State has neither jurisdiction over the person nor the land, "the State has no more jurisdiction to reach income generated on reservation lands than to tax the land itself." (38)

      2. Sufficient State Interest

         Contemporary preemption analysis inevitably weighs state, federal, and tribal interests in order to determine whether Congress intended, under the circumstances, to preempt state action. (39) Under traditional analysis, the easy cases occurred when Congress explicitly spoke to the issue and when it did not. When Congress had spoken, courts followed the express will of the legislature. When Congress was silent or ambiguous, under McClanahan's reliance on sovereignty and the canons of construction, and Blackfeet Tribe's look toward clear congressional intent, the tribes, without...