A three-judge panel for the Arizona Court of Appeals, Division One released a decision in the case Ute Mountain Ute Tribe v. Arizona Department of Revenue, upholding a state court decision that Weeminuche Construction Authority is responsible for remitting tax on contracting proceeds done on tribal lands. Weeminuche Construction Authority is owned by the Ute Mountain Ute Tribe and had entered into the contested contracts with the US Bureau of Indian Affairs (US BIA) to perform work in 2014-2015 on reservations owned by the Hopi and the Navajo Nation.
The authority argued that their work should be exempt from Arizona tax due to Arizona state law, a letter ruling, and based on the 1980 US Supreme Court ruling in White Mountain Apache Tribe v. Bracker. The letter ruling, Weeminuche Construction Authority claimed, said that work performed on a reservation would be exempt from the transaction privilege tax, which is charged on vendors but functions as a sales tax. They also highlighted a state law that expressly provides an exemption for contracting on reservations by non-tribal contractors in their argument. They further asked for consideration set out in White Mountain Apache Tribe v. Bracker which requires authorities to consider the impact on the federal, state, and tribal interests when deciding to tax behavior on reservations of non-tribal people.
However, the court rejected those claims in a unanimous opinion, which pointed out first that the letter ruling was non- binding and only applicable when a tribe is performing work on its own reservation. The state law the authority had cited, the opinion by Judge Jennifer B. Campbell further noted, was not enacted until 2021, and had not been retroactively applied, thus it would have no effect on the 2014-2015 contracts at issue. Rather than look to the 1980 ruling in White Mountain Apache Tribe v. Bracker, the Arizona court pointed instead to the US Supreme Court’s decision in the 1999 case Arizona Department of Revenue v. Blaze Construction Co. Inc. as establishing a “bright line standard” which favored taxing exactly this type of federal contract. While the 1980 case may have asked for a balancing act, the 1999 case held that balancing should only apply when the proceeds are from a direct transaction with the tribe and would not apply due to the contract being between Weeminuche Construction and the US BIA instead of directly with the tribes on whose behalf the work was completed.
(Williams, P. (2023, January 11). Tribal Biz loses appeal of Ariz. sales tax on contract work. Law360. Retrieved January 16, 2023)