Following a court trial in June 2020, a federal judge ruled that the State of South Dakota does not have the authority to impose contractors’ excise taxes on the companies that renovated the Royal River Casino. The casino is owned by the Flandreau Santee Sioux Tribe and is located on reservation land. The state appealed that opinion to the Eighth Circuit Court of Appeals, which heard arguments on Wednesday, Oct. 20.
The arguments before the Eighth Circuit focused on balancing the interests of the tribe against the interests of the state.
Assistant Attorney General Yvette Lafrentz told appellate judges that contractors working in South Dakota are licensed by the state, and whether they’re working on or off the reservation, paying excise tax is a condition of that license.
“The contractors’ excise tax is deposited into the general fund, which is then used to fund various services that benefit the tribe, tribal members, and the contractor,” Lafrentz said.
Lafrentz argued that the state has a legitimate right to tax even if the tribe’s revenue is reduced.
Rebecca Kidder represents the Flandreau Santee Sioux Tribe. She said the tax is assessed against the contractor, but under industry standards, the contractor passes that expense along to the tribe.
Kidder said the casino project was subject to tribal and federal regulations, not state. And she noted that the state excise tax on contractors for work done on the reservation does not go toward licensing the contracts for engineering and construction. She said that fact was brought out at the June 2020 trial.
“It was uncontroverted evidence that it goes directly into the general fund of the state,” Kidder said. “None of it is set aside specifically for this project or regulation of construction.”
Kidder said the National Indian Gaming Commission has the authority to regulate the casino, and not just the gambling portion of the business, but also the conditions of the facility and its construction. And she said if the casino fails to meet standards, the commission can shut it down.
Kidder said the value of the casino to the people of the Flandreau tribe outweighs the state’s general interest in raising revenues.
The Eighth Circuit three-judge panel will deliberate and release an opinion later.
