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Washington State Department of Licensing v. Cougar Den, Inc.

United States Supreme Court

March 19, 2019

WASHINGTON STATE DEPARTMENT OF LICENSING, PETITIONER
v.
COUGAR DEN, INC. ON WRIT OF CERTIORARI TO THE SUPREME COURT OF WASHINGTON

          Argued October 30, 2018

          ON WRIT OF CERTIORARI TO THE SUPREME COURT OF WASHINGTON

         The State of Washington taxes "motor vehicle fuel importer[s]" who bring large quantities of fuel into the State by "ground transportation." Wash. Rev. Code §§82.36.010(4), (12), (16). Respondent Cougar Den, Inc., a wholesale fuel importer owned by a member of the Yakama Nation, imports fuel from Oregon over Washington's public highways to the Yakama Reservation to sell to Yakama-owned retail gas stations located within the reservation. In 2013, the Washington State Department of Licensing assessed Cougar Den $3.6 million in taxes, penalties, and licensing fees for importing motor vehicle fuel into the State. Cougar Den appealed, arguing that the Washington tax, as applied to its activities, is pre-empted by an 1855 treaty between the United States and the Yakama Nation that, among other things, reserves the Yakamas' "right, in common with citizens of the United States, to travel upon all public highways," 12 Stat. 953. A Washington Superior Court held that the tax was pre-empted, and the Washington Supreme Court affirmed.

         Held: The judgment is affirmed. 188 Wash.2d 55, 392 P.3d 1014, affirmed.

Justice Breyer, joined by Justice Sotomayor and Justice KAGAN, concluded that the 1855 treaty between the United States and the Yakama Nation pre-empts the State of Washington's fuel tax as applied to Cougar Den's importation of fuel by public highway. Pp. 4-18.
(a) The Washington statute at issue here taxes the importation of fuel by public highway. The Washington Supreme Court construed the statute that way in the decision below. That court wrote that the statute "taxes the importation of fuel, which is the transportation of fuel." 188 Wash.2d 55, 69, 392 P.3d 1014, 1020. It added that "travel on public highways is directly at issue because the tax [is] an importation tax." Id., at 67, 392 P.3d, at 1019. The incidence of a tax is a question of state law, Oklahoma Tax Comm'n v. Chickasaw Nation, 515 U.S. 450, 461, and this Court is bound by the Washington Supreme Court's interpretation of Washington law, Johnson v. United States, 559 U.S. 133, 138. Nor is there any reason to doubt that the Washington Supreme Court meant what it said when it interpreted the statute. In the statute's own words, Washington "impose[s] upon motor vehicle fuel licensees," including "licensed importer[s]," a tax for "each gallon of motor vehicle fuel" that "enters into this state," but only "if . . . entry is" by means of "a railcar, trailer, truck, or other equipment suitable for ground transportation." Wash. Rev. Code §§82.36.010(4), 82.36.020(1), (2), 82.36.026(3). Thus, Cougar Den owed the tax because Cougar Den traveled with fuel by public highway. See App. 10a-26a; App. to Pet. for Cert. 55a. Pp. 4-10.
(b) The State of Washington's application of the tax to Cougar Den's importation of fuel is pre-empted by the Yakama Nation's reservation of "the right, in common with citizens of the United States, to travel upon all public highways." This conclusion rests upon three considerations taken together. First, this Court has considered this treaty four times previously; each time it has considered language very similar to the language now before the Court; and each time it has stressed that the language of the treaty should be understood as bearing the meaning that the Yakamas understood it to have in 1855. See United States v. Winans, 198 U.S. 371, 380-381; Seufert Brothers Co. v. United States, 249 U.S. 194, 196-198; Tulee v. Washington, 315 U.S. 681, 683-685; Washington v. Washington State Commercial Passenger Fishing Vessel Assn., AA3 U.S. 658, 677-678. Thus, although the words "in common with" on their face could be read to permit application to the Yakamas of general legislation (like the legislation at issue here) that applies to all citizens, this Court has refused to read "in common with" in this way because that is not what the Yakamas understood the words to mean in 1855. See Winans, 198 U.S., at 379, 381; Seufert Brothers, 249 U.S., at 198-199; Tulee, 315 U.S., at 684; Fishing Vessel, AA3 U.S., at 679, 684-685. Second, the historical record adopted by the agency and the courts below indicates that the treaty negotiations and the United States' representatives' statements to the Yakamas would have led the Yakamas to understand that the treaty's protection of the right to travel on the public highways included the right to travel with goods for purposes of trade. Third, to impose a tax upon traveling with certain goods burdens that travel. And the right to travel on the public highways without such burdens is just what the treaty protects. Therefore, precedent tells the Court that the tax must be pre-empted. In Tulee, for example, the fishing right reserved by the Yakamas in the treaty was held to pre-empt the application to the Yakamas of a state law requiring fishermen to buy fishing licenses. 315 U.S., at 684. The Court concluded that "such exaction of fees as a prerequisite to the enjoyment of a right reserved in the treaty "cannot be reconciled with a fair construction of the treaty." Id., at 685. If the cost of a fishing license interferes with the right to fish, so must a tax imposed on travel with goods (here fuel) interfere with the right to travel. Pp. 10-18.
Justice Gorsuch, joined by Justice Ginsburg, concluded that the 1855 treaty guarantees tribal members the right to move their goods, including fuel, to and from market freely. When dealing with a tribal treaty, a court must "give effect to the terms as the Indians themselves would have understood them." Minnesota v. Mille Lacs Band of Chippewa Indians, 526 U.S. 172, 196. The Yakamas' understanding of the terms of the 1855 treaty can be found in a set of unchallenged factual findings in Yakama Indian Nation v. Flores, 955 F.Supp. 1229, which are binding here and sufficient to resolve this case. They provide "no evidence [suggesting] that the term 'in common with' placed Indians in the same category as non-Indians with respect to any tax or fee the latter must bear with respect to public roads." Id., at 1247. Instead, they suggest that the Yakamas understood the treaty's right-to-travel provision to provide them "with the right to travel on all public highways without being subject to any licensing and permitting fees related to the exercise of that right while engaged in the transportation of tribal goods." Id., at 1262. A wealth of historical evidence confirms this understanding. "Far-reaching travel was an intrinsic ingredient in virtually every aspect of Yakama culture," and travel for purposes of trade was so important to their "way of life that they could not have performed and functioned as a distinct culture" without it. Id., at 1238. Everyone then understood that the treaty would protect the Yakamas' preexisting right to take goods to and from market freely throughout its traditional trading area. The State reads the treaty only as a promise to tribal members of the right to venture out of their reservation and use the public highways like everyone else. But the record shows that the consideration the Yakamas supplied-millions of acres desperately wanted by the United States to settle the Washington Territory-was worth far more than an abject promise they would not be made prisoners on their reservation. This Court's cases interpreting the treaty's neighboring and parallel right-to-fish provision further confirm this understanding. See, e.g., United Statesv. Winans, 198 U.S. 371. Pp. 1-11.

          BREYER, J., announced the judgment of the Court and delivered an opinion, in which SOTOMAYOR and KAGAN, JJ., joined. GORSUCH, J., filed an opinion concurring in the judgment, in which GlNSBURG, J., joined. ROBERTS, C. J., filed a dissenting opinion, in which THOMAS, ALITO, and KAVANAUGH, JJ., joined. KAVANAUGH, J., filed a dissenting opinion, in which THOMAS, J., joined.

          JUSTICE BREYER announced the judgment of the Court, and delivered an opinion, in which JUSTICE SOTOMAYOR and Justice Kagan join.

          BREYER JUSTICE

         The State of Washington imposes a tax upon fuel importers who travel by public highway. The question before us is whether an 1855 treaty between the United States and the Yakama Nation forbids the State of Washington to impose that tax upon fuel importers who are members of the Yakama Nation. We conclude that it does, and we affirm the Washington Supreme Court's similar decision.

         I

         A

         A Washington statute applies to "motor vehicle fuel importer[s]" who bring large quantities of fuel into the State by "ground transportation" such as a "railcar, trailer, [or] truck." Wash. Rev. Code §§82.36.010(4), (12), (16) (2012). The statute requires each fuel importer to obtain a license, and it says that a fuel tax will be "levied and imposed upon motor vehicle fuel licensees" for "each gallon of motor vehicle fuel" that the licensee brings into the State. §§82.36.020(1), (2)(c). Licensed fuel importers who import fuel by ground transportation become liable to pay the tax as of the time the "fuel enters into this [S]tate." §82.36.020(2)(c); see also §§82.38.020(4), (12), (15), (26), 82.38.030(1), (7)(c)(ii) (equivalent regulation of diesel fuel importers).

         But only those licensed fuel importers who import fuel by ground transportation are liable to pay the tax. §§82.36.026(3), 82.36.020(2)(c). For example, if a licensed fuel importer brings fuel into the State by pipeline, that fuel importer need not pay the tax. §§82.36.026(3), 82.36.020(2)(c)(ii), 82.36.010(3). Similarly, if a licensed fuel importer brings fuel into the State by vessel, that fuel importer need not pay the tax. §§82.36.026(3), 82.36.020(2)(c)(ii), 82.36.010(3). Instead, in each of those instances, the next purchaser or possessor of the fuel will pay the tax. §§82.36.020(2)(a), (b), (d). The only licensed fuel importers who must pay this tax are the fuel importers who bring fuel into the State by means of ground transportation.

         B

         The relevant treaty provides for the purchase by the United States of Yakama land. See Treaty Between the United States and the Yakama Nation of Indians, June 9, 1855, 12 Stat. 951. Under the treaty, the Yakamas granted to the United States approximately 10 million acres of land in what is now the State of Washington, i.e., about one-fourth of the land that makes up the State today. Art. I, id., at 951-952; see also Brief for Respondent 4, 9. In return for this land, the United States paid the Yakamas $200, 000, made improvements to the remaining Yakama land, such as building a hospital and schools for the Yakamas to use, and agreed to respect the Yakamas' reservation of certain rights. Arts. Ill-V, 12 Stat. 952-953. Those reserved rights include "the right, in common with citizens of the United States, to travel upon all public highways," "the right of taking fish at all usual and accustomed places, in common with citizens of the Territory," and other rights, such as the right to hunt, to gather roots and berries, and to pasture cattle on open and unclaimed land. Art. Ill. id., at 953.

         C

         Cougar Den, Inc., the respondent, is a wholesale fuel importer owned by a member of the Yakama Nation, incorporated under Yakama law, and designated by the Yakama Nation as its agent to obtain fuel for members of the Tribe. App. to Pet. for Cert. 63a-64a; App. 99a. Cougar Den buys fuel in Oregon, trucks the fuel over public highways to the Yakama Reservation in Washington, and then sells the fuel to Yakama-owned retail gas stations located within the reservation. App. to Pet. for Cert. 50a, 55a. Cougar Den believes that Washington's fuel import tax, as applied to Cougar Den's activities, is pre-empted by the treaty. App. 15a. In particular, Cougar Den believes that requiring it to pay the tax would infringe the Yakamas' reserved "right, in common with citizens of the United States, to travel upon all public highways." Art. Ill. 12 Stat. 953.

         In December 2013, the Washington State Department of Licensing (Department), believing that the state tax was not pre-empted by the treaty, assessed Cougar Den $3.6 million in taxes, penalties, and licensing fees. App. to Pet. for Cert. 65a; App. 10a. Cougar Den appealed the assessment to higher authorities within the state agency. App. 15a. An Administrative Law Judge agreed with Cougar Den that the tax was pre-empted. App. to Brief in Opposition 14a. The Department's Director, however, disagreed and overturned the ALJ's order. App. to Pet. for Cert. 59a. A Washington Superior Court in turn disagreed with the director and held that the tax was pre-empted. Id., at 34a. The director appealed to the Washington Supreme Court. 188 Wash.2d 55, 58, 392 P.3d 1014, 1015 (2017). And that court, agreeing with Cougar Den, upheld the Superior Court's determination of pre-emption. Id., at 69, 392 P.3d, at 1020.

         The Department filed a petition for certiorari asking us to review the State Supreme Court's determination. And we agreed to do so.

         II

         A

         The Washington statute at issue here taxes the importation of fuel by public highway. The Washington Supreme Court construed the statute that way in the decision below. That court wrote that the statute "taxes the importation of fuel, which is the transportation of fuel." Ibid. It added that "travel on public highways is directly at issue because the tax [is] an importation tax." Id., at 67, 392 P.3d, at 1019.

         Nor is there any reason to doubt that the Washington Supreme Court means what it said when it interpreted the Washington statute. We read the statute the same way. In the statute's own words, Washington "impose[s] upon motor vehicle fuel licensees," including "licensed importer[]," a tax for "each gallon of motor vehicle fuel" that "enters into this state," but only "if . . . entry is" by means of "a railcar, trailer, truck, or other equipment suitable for ground transportation." Wash. Rev. Code §§82.36.010(4), 82.36.020(1), (2), 82.36.026(3). As is true of most tax laws, the statute is long and complex, and it is easy to stumble over this technical language. But if you are able to walk slowly through its provisions, the statute is easily followed. We need take only five steps.

         We start our journey at the beginning of the statute which first declares that "[t]here is hereby levied and imposed upon motor vehicle fuel licensees, other than motor vehicle fuel distributors, a tax at the rate . . . provided in [the statute] on each gallon of motor vehicle fuel." §82.36.020(1). That is simple enough. Washington imposes a tax on a group of persons called "motor vehicle fuel licensees" for "each gallon of motor vehicle fuel."

         Who are the "motor vehicle fuel licensees" that Washington taxes? We take a second step to find out. As the definitions section of the statute explains, the "motor vehicle fuel licensees" upon whom the tax is imposed are "person[s] holding a . . . motor vehicle fuel importer, motor vehicle fuel exporter, motor vehicle fuel blender, motor vehicle distributor, or international fuel tax agreement license." §82.36.010(12). This, too, is easy to grasp. Not everyone who possesses motor vehicle fuel owes the tax. Instead, only motor vehicle fuel importers (and other similar movers and shakers within the motor vehicle fuel industry) who are licensed by the State to deal in fuel, must pay the tax.

         But must each of these motor vehicle fuel licensees pay the tax, so that the fuel is taxed as it passes from blender, to importer, to exporter, and so on? We take a third step, and learn that the answer is "no." As the statute explains, "the tax shall be imposed at the time and place of the first taxable event and upon the first taxable person within this state." §82.36.022. Reading that, we understand that only the first licensee who can be taxed, will be taxed.

         So, we ask, who is the first taxable licensee? Who must actually pay this tax? We take a fourth step to find out. Logic tells us that the first licensee who can be taxed will likely be the licensee who brings fuel into the State. But, the statute tells us that a "licensed importer" is "liable for and [must] pay tax to the department" when "[m]otor vehicle fuel enters into this state if. . . [t]he entry is not by bulk transfer." §§82.36.020(2)(c), 82.36.026(3) (emphasis added). That is, a licensed importer can only be the first taxable licensee (and therefore the licensee that must pay the tax) if the importer brings fuel into the State by a method other than "bulk transfer."

         But what is "bulk transfer"? What does it mean to say that licensed fuel importers need only pay the tax if they do not bring in fuel by "bulk transfer"? We take a fifth, and final, step to find out. "[B]ulk transfer," the definitions section explains, "means a transfer of motor vehicle fuel by pipeline or vessel," as opposed to "railcar, trailer, truck, or other equipment suitable for ground transportation." §§82.36.010(3), (4). So, we learn that if the licensed fuel importer brings fuel into the State by ground transportation, then the fuel importer owes the tax. But if the licensed fuel importer brings fuel into the State by pipeline or vessel, then the importer will not be the first taxable person to possess the fuel, and he will not owe the tax.

         In sum, Washington taxes travel by ground transportation with fuel. That feature sets the Washington statute apart from other statutes with which we are more familiar. It is not a tax on possession or importation. A statute that taxes possession would ordinarily require all people who own a good to pay the tax. A good example of that would be a State's real estate property tax. That statute would require all homeowners to pay the tax, every year, regardless of the specifics of their situation. And a statute that taxes importation would ordinarily require all people who bring a good into the State to pay a tax. A good example of that would be a federal tax on newly manufactured cars. That statute would ordinarily require all people who bring a new car into the country to pay a tax. But Washington's statute is different because it singles out ground transportation. That is, Washington does not just tax possession of fuel, or even importation of fuel, but instead taxes importation by ground transportation.

         The facts of this case provide a good example of the tax in operation. Each of the assessment orders that the Department sent to Cougar Den explained that Cougar Den owed the tax because Cougar Den traveled by high- way. See App. 10a-26a; App. to Pet. for Cert. 55a. As the director explained, Cougar Den owed the tax because Cougar Den had caused fuel to enter "into this [S]tate at the Washington-Oregon boundary on the Highway 97 bridge" by means of a "tank truck" destined for "the Yakama Reservation." Ibid. The director offers this explanation in addition to quoting the quantity of fuel that Cougar Den possessed because the element of travel by ground transportation is a necessary prerequisite to the imposition of the tax. Put another way, the State must prove that Cougar Den traveled by highway in order to apply its tax.

         B

         We are not convinced by the arguments raised to the contrary. The Department claims, and THE CHIEF JUSTICE agrees, that the state tax has little or nothing to do with the treaty because it is not a tax on travel with fuel but rather a tax on the possession of fuel. See Brief for Petitioner 26-28; post, at 5 (dissenting opinion).

         We cannot accept that characterization of the tax, however, for the Washington Supreme Court has authoritatively held that the statute is a tax on travel. The Washington Supreme Court held that the Washington law at issue here "taxes the importation of fuel, which is the transportation of fuel." 188 Wash. 2d, at 69, 392 P.3d, at 1020. It added that "travel on public highways is directly at issue because the tax [is] an importation tax." Id., at 67, 392 P.3d, at 1019. In so doing, the State Supreme Court heard, considered, and rejected the construction of the fuel tax that the Department advances here. See ibid., 392 P.3d, at 1019 ("The Department argues, and the director agreed, that the taxes are assessed based on incidents of ownership or possession of fuel, and not incident to use of or travel on the roads or highways. . . . The Department's argument is unpersuasive. . . . Here, travel on public highways is directly at issue because the tax was an importation tax"). The incidence of a tax is a question of state law, Oklahoma Tax Comm'n v. Chickasaw Nation, 515 U.S. 450, 461 (1995), and this Court is bound by the Washington Supreme Court's interpretation of Washington law, Johnson v. United States, 559 U.S. 133, 138 (2010). We decline the Department's invitation to overstep the bounds of our authority and construe the tax to mean what the Washington Supreme Court has said it does not.

         Nor would it make sense to construe the tax's incidence differently. The Washington Supreme Court's conclusion follows directly from its (and our) interpretation of how the tax operates. See supra, at 4-7. To be sure, it is generally true that fuel imported into the State by trucks driving the public highways can also be described as fuel that is possessed for the first time in the State. But to call the Washington statute a tax on "first possession" would give the law an over-inclusive label. As explained at length above, there are several ways in which a company could be a "first possessor" of fuel without incurring the tax. See ibid. For example, Cougar Den would not owe the tax had Cougar Den "first possessed" fuel by piping fuel from out of State into a Washington refinery. First possession is not taxed if the fuel is brought into the State by pipeline and bound for a refinery. §§82.36.026(3), 82.36.020(2)(c)(ii), 82.36.010(3). Similarly, Cougar Den would not owe the tax had Cougar Den "first possessed" fuel by bringing fuel into Washington through its waterways rather than its highways. First possession is not taxed if the fuel is brought into the State by vessel. §§82.36.026(3), 82.36.020(2)(c)(ii), 82.36.010(3). Thus, it seems rather clear that the tax cannot accurately be described as a tax on the first possession of fuel.

         But even if the contrary were true, the tax would still have the practical effect of burdening the Yakamas' travel. Here, the Yakamas' lone off-reservation act within the State is traveling along a public highway with fuel. The tax thus operates on the Yakamas exactly like a tax on transportation would: It falls upon them only because they happened to transport goods on a highway while en route to their reservation. And it is the practical effect of the state law that we have said makes the difference. We held, for instance, that the fishing rights reserved in the treaty pre-empted the State's enforcement of a trespass law against Yakama fishermen crossing private land to access the river. See, e.g., United States v. Winans, 198 U.S. 371, 381 (1905). That was so even though the trespass law was not limited to those who trespass in order to fish but applied more broadly to any trespasser. Put another way, it mattered not that the tax was "on" trespassing rather than fishing because the tax operated upon the Yakamas when they were exercising their treaty-protected right. Ibid.; see also Tulee v. Washington, 315 U.S. 681, 685 (1942) (holding that the fishing rights reserved in the treaty pre-empted the State's application of a fishing licensing fee to a Yakama fisherman, even though the fee also applied to types of fishing not practiced by the Yakamas). And this approach makes sense. When the Yakamas bargained in the treaty to protect their right to travel, they could only have cared about preventing the State from burdening their exercise of that right. To the Yakamas, it is thus irrelevant whether the State's tax might apply to other activities beyond transportation. The only relevant question is whether the tax "act[ed] upon the Indians as a charge for exercising the very right their ancestors intended to reserve." Tulee, 315 U.S., at 685. And the State's tax here acted upon Cougar Den in exactly that way.

         For the same reason, we are unpersuaded by the Department's insistence that it adopted this tax after a District Court, applying this Court's decision in Chickasaw Nation, barred the State from taxing the sale of fuel products on tribal land. See Brief for Petitioner 6-7; Squaxin Island Tribe v. Stephens, 400 F.Supp.2d 1250, 1262 (WD Wash. 2005). Although a State "generally is free to amend its law to shift the tax's legal incidence," Chickasaw Nation, 515 U.S., at 460, it may not burden a treaty-protected right in the process, as the State has done here.

         Thus, we must turn to the question whether this fuel tax, falling as it does upon members of the Tribe who travel on the ...


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