In South Dakota, federal Judge Karen Schreier recently ruled in favor of the Flandreau Santee Sioux Tribe, agreeing it cannot be forced to pay state excise tax on its $24 million Royal River Casino & Hotel expansion. The tribe sued South Dakota last year after the state disagreed with the tribe’s claim that non-tribal contractors working on the casino renovation were not required to pay excise tax. Under state law, contractors must pay 2 percent of gross receipts on construction projects as excise tax. The tribe said South Dakota violated the Indian Gaming Regulatory Act, which allows tribes to establish casinos.
Schreier wrote the state’s compact with the tribe doesn’t permit collecting the excise tax. She said IGRA preempts the state’s excise tax. “The state’s excise tax undermines the objective of IGRA because the tax is passed from the contractor to the tribe which interferes with the tribe’s ability to make a profit from gaming activities. Thus, Congress intended for IGRA to completely regulate Indian gaming, and there is no room for the state’s imposition of an excise tax.”
FSST attorney Seth Pearman said, “This is a victory for tribal sovereignty and self-governance and proves that the tribe has the right to make its own laws and be ruled by them,’” he said. The casino renovation will continue and open next summer, Pearman said.
Governor Dennis Daugaard’s Chief of Staff Tony Venhuizen said state officials will review the judge’s ruling. Daugaard approved a new compact that doubled the number of slot machines from 500 to 1,000. The tribe has said its expansion project is necessary in order to make room for the new machines and to compete with other casinos in the area.
