The Flandreau Santee Sioux Tribe filed a lawsuit against the state of South Dakota in federal court over contractors’ excise tax related to the expansion of the tribe’s Royal River Casino in Flandreau, South Dakota. The expansion began last December. The tribe claimed that the state is interfering with tribal sovereignty and that its gaming compact does not include a provision authorizing the state to collect the excise tax. The state argued it must be paid the contractors’ excise tax for the casino expansion.
The lawsuit said, “The economic burden and the intrusion into tribal sovereignty interfere and are incompatible with the federal and tribal interests in promoting tribal self-government, self-sufficiency and economic development.”
The Flandreau tribe and the state of South Dakota have a history of previous battles. Recently, the tribe announced plans to grow and sell recreational marijuana, but state officials mounted a campaign against the proposal and the tribe backed off.
In 2007, the tribe sued the state, claiming the state failed to negotiate in good faith over allowing the tribe to add more slot machines at the Royal River Casino. In 2011, Governor Dennis Daugaard agreed to allow the tribe to double the number of slots. In 2016, Daugaard once again agreed to allow the tribe to double the number of slots from 500 to 1,000. In return, the tribe increased payments to Moody County to cover law enforcement expenses.
Also, in a 2014 lawsuit against the state, the tribe claimed it should not have to collect sales or use tax on non-tribal members at the Royal River Casino and related businesses. A federal judge refused to dismiss that lawsuit in 2015. The tribe and the state filed for summary motion; the case could go to trial later this year. The state threatened to withhold a liquor license for the tribal casino but decided to await the outcome of the outcome of the lawsuit.
South Dakota has not yet filed a response to the excise tax lawsuit. But Daugaard’s Chief of Staff Tony Venhuizen said the tribe does not collect the contractors excise tax. “It is collected and remitted by the contractor,” he said. The lawsuit acknowledges that the contractor, Henry Carlson Company, did remit payments to the state in March and April, but with notices of protest. “In each notice, the contractor requested that the state refund the payment to the tribe, explaining that the tribe had reimbursed the contractor for the taxes paid, and that the contractor authorized the tribe to commence and pursue any refund action which may be necessary on the contractor’s behalf,” the lawsuit says.
South Dakota and the Flandreau tribe only have a tax agreement regarding cigarettes, signed in 1987, said Department of Revenue spokesman Wade LaRoche. The state has comprehensive tax collection agreements with Standing Rock, Cheyenne River, Crow Creek, Rosebud and Oglala Sioux Tribes, plus limited agreements with the Yankton Sioux Tribe and the Sisseton Wahpeton Oyate.
