The Flandreau Santee Sioux Tribe of South Dakota won a partial victory in a tax case against the state, which had wanted to impose a use tax for purchases made by non-members of the tribe at the tribe’s casino.
In the case of Flandreau Santee Sioux Tribe v. Gerlach, the U.S. District Court for the District of South Dakota ruled
Significantly, the tribal state gaming compact did not address this issue. The state issued alcohol licenses to the tribe for operation of its casino and other tribal businesses, and the licenses were conditional on collecting the tax. The tribe did not collect the taxes and the state refused to renew the licenses. At which point the tribe sued in federal court.
The court ruled that the tax could not be imposed on nonmember purchases at the casino or “directly related to the operation of gaming activities,” citing the Indian Gaming Regulatory Act.
The tribe was unable to show that the purchases that occurred at the convenience store on the reservation was related to gaming. The court ruled that the state could not make its issuance of a liquor license conditional upon the collection of such taxes.
