No. 00-454 

In the Supreme Court of the United States 

ATKINSON TRADING CO., INC., PETITIONER 

v. 

JOE SHIRLEY, JR., ET AL. 

ON WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE TENTH CIRCUIT 

BRIEF FOR THE UNITED STATES 
AS AMICUS CURIAE SUPPORTING RESPONDENTS 

BARBARA D. UNDERWOOD 

Acting Solicitor General 

Counsel of Record 
JOHN C. CRUDEN 

Acting Assistant Attorney 

General 
EDWIN S. KNEEDLER 

Deputy Solicitor General 
EDWARD C. DUMONT 

Assistant to the Solicitor 

General 
E. ANN PETERSON 
WILLIAM B. LAZARUS 
TODD S. KIM 

Attorneys 
Department of Justice 
Washington, D.C. 20530-0001 
(202) 514-2217 

QUESTION PRESENTED 

The United States will address the following question: 

Whether the Navajo Nation may impose a hotel occu- 
pancy tax on non-Indian overnight guests at the Trading 
Post operated by petitioner on land it owns in fee, when the 
Trading Post is subject to federal regulations under the 
Indian Trader Statutes, petitioner’s land is wholly sur- 
rounded by Indian lands on the Navajo Reservation, and 
petitioner and its guests receive necessary government 
services from the Navajo Nation. 

(I) 

TABLE OF CONTENTS 

Page 

Interest of the United States ...................................................... 
1 

Statement ........................................................................................ 1 

Summary of argument .................................................................. 

7 

Argument: 

Imposition of the Navajo Hotel Occupancy Tax on 
petitioner and its customers is a reasonable exer- 
cise of the tribe’s sovereign power ..................................... 

9 
A. Montana and Strate provide the proper frame- 
work for analysis ........................................................... 
9 

B. In the particular circumstances of this case, 
the Navajo tax is a proper exercise of tribal 
jurisdiction under both of the Montana excep- 
tions ................................................................................. 15 

1. In view of federal regulations that govern 
petitioner’s business, the tax is valid under 

Montana’s first exception as a condition 
on the privilege of engaging in commercial 
transactions at petitioner’s trading post ........... 
16 

2. The Navajo Hotel Occupancy Tax also is 
valid under the second Montana excep- 
tion based on the governing regulations 

and the direct effect of petitioner’s business 
on the Navajo Nation ............................................ 

21 
a. The Indian Trader regulations .................. 
22 

b. Character of the nonmember land ............ 
23 

c. Nature of nonmember conduct .................. 
25 

Conclusion .......................................................................... 29 

(III) 

IV 

TABLE OF AUTHORITIES 

Cases: Page 

Arizona v. California, 373 U.S. 546 (1963) ....................... 
28 

Ashcroft v. United States Dep’t of the Interior, 
679 F.2d 196 (9th Cir. 1982), cert. denied, 459 U.S. 
1201 (1983) ........................................................................... 
17, 18 

Brendale v. Confederated Tribes & Bands of the 

Yakima Indian Nation, 492 U.S. 408 (1989) ......... 
23, 24, 25 

Buster v. Wright, 135 F. 947 (8th Cir. 1905) ..................... 
5, 11, 

12, 16, 19 

Central Mach. Co. v. Arizona State Tax Comm’n, 
448 U.S. 160 (1980) ................................................................ 
17 
Commonwealth Edison Co. v. Montana, 453 U.S. 
609 (1981) ................................................................................. 
21 

Department of Taxation & Fin. v. Milhelm Attea 
& Bros., 512 U.S. 61 (1994) .................................................. 
17 

Exxon v. Wisconsin Dep’t of Revenue, 447 U.S. 207 
(1980) ........................................................................................ 21 

Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824) ................. 

11 

Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 
434 (1979) ................................................................................. 
21 

Kerr-McGee Corp. v. Navajo Tribe, 471 U.S. 195 
(1985) ........................................................................................ 10 

Manygoats v. Cameron Trading Post, No. SC-CV- 
50-98 (Navajo Sup. Ct. Jan. 14, 2000) ............................. 

25, 28 

Merrion v. Jicarilla Apache Tribe, 455 U.S. 130 
(1982) ................................................ 

3, 9, 10, 11, 12, 15, 16, 28 

Montana v. Blackfeet Tribe, 471 U.S. 759 (1985) ............. 

20 

Montana v. United States, 450 U.S. 544 (1981) .......... 
passim 

Morris v. Hitchcock, 194 U.S. 384 (1904) .......................... 
16 

New Mexico v. Mescalero Apache Tribe, 462 U.S. 
324 (1983) ................................................................................. 
15 

Oklahoma Tax Comm’n v. Chickasaw Nation, 
515 U.S. 450 (1995) ............................................................ 
20, 21 

Strate v. A-1 Contractors, 520 U.S. 438 (1997) ........... 
passim 

United States v. Mazurie, 419 U.S. 544 (1975) ................. 
18 

United States v. McBratney, 104 U.S. 621 (1881) ............ 14 

V 

Cases—Continued: Page 

Warren Trading Post Co. v. Arizona Tax Comm’n, 
380 U.S. 685 (1965) ............................................................ 
17, 18 

Washington v. Confederated Tribes of the Colville 

Indian Reservation, 447 U.S. 134 (1980) ...................... 

9, 10, 

12, 15, 19, 20 

Williams v. Lee, 358 U.S. 217 (1959) ........................ 
14, 16, 25 

Statutes and regulations: 

Act of June 14, 1934, ch. 521, 48 Stat. 960 ............................. 

2 

Indian Reorganization Act, ch. 578, 48 Stat. 984 (25 

U.S.C. 461 et seq.) ................................................................ 

10 

25 U.S.C. 476(e) (§ 16(e), 48 Stat. 987) .......................... 
10 

25 U.S.C. 476(f ) ................................................................. 
10 

25 U.S.C. 476(g) ................................................................. 
10 

Indian Trader Statutes, 25 U.S.C. 261-264 .................. 
1, 16, 17 

18 U.S.C. 1151 ............................................................................ 
27 

18 U.S.C. 1152 ............................................................................ 
27 

18 U.S.C. 1153 ............................................................................ 
27 

25 C.F.R.: 

Pt. 141 .................................................................................... 

1, 17 

Section 141.1 ...................................................................... 
17 

Section 141.2 ...................................................................... 
17 

Section 141.3(l) .................................................................. 
17 

Section 141.5(a) .................................................................. 
17 

Section 141.6(b) ................................................................. 
18 

Section 141.9(d) ................................................................. 
18 

Section 141.11 .................................................................... 
18 

Section 141.17 .................................................................... 
18 

Section 141.22 .................................................................... 
18 

Pt. 252: 

Section 252.27c (1964) ....................................................... 

18 

24 Navajo Tribal Code (1992): 
§ 102 .......................................................................................... 
2 

§ 102(A) .................................................................................... 
19 

§ 104 .......................................................................................... 
2, 19 

§ 142 .......................................................................................... 2 

VI 

Miscellaneous: Page 

F. Cohen, Handbook of Federal Indian Law (1942) .......... 
12 

Powers of Indian Tribes, 55 Interior Dec. 14 
(1934) ....................................................................... 
10, 12, 19, 20 

G. Richardson, Navajo Trader (1986) ................................... 
26 

www.camerontradingpost.com/history.htm ........................ 25 

In the Supreme Court of the United States 

No. 00-454 

ATKINSON TRADING CO., INC., PETITIONER 

v. 

JOE SHIRLEY, JR., ET AL. 

ON WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE TENTH CIRCUIT 

BRIEF FOR THE UNITED STATES 
AS AMICUS CURIAE SUPPORTING RESPONDENTS 

INTEREST OF THE UNITED STATES 

The United States’ interest in this case arises in part from 
the national government’s special relationship with the 
Indian Tribes. The United States also has a direct interest 
in regulation of the reservation activities of non-Indians like 
petitioner, who are federally licensed to conduct business on 
Indian reservations. See 25 U.S.C. 261-264 (Indian Trader 
Statutes); 25 C.F.R. Pt. 141 (regulations governing business 
practices on the Navajo, Hopi, and Zuni Reservations). 

STATEMENT 

1. Petitioner Atkinson Trading Company is a New 
Mexico corporation that owns and operates the Cameron 
Trading Post, a complex of businesses including a hotel, 
restaurant, cafeteria, gallery, curio shop, retail store, and 
recreational vehicle facility. Pet. App. 95a. The complex lies 
near Cameron, on the Navajo Indian Reservation within the 
borders of the State of Arizona, and it is used primarily by 

(1) 

2 

tourists on their way to or from the Grand Canyon. Id. at 
95a-96a. Atkinson owns the land underlying the complex in 
fee simple. Id. at 96a. 

Petitioner’s land has been within the boundaries of the 
Navajo Reservation at least since Congress confirmed those 
boundaries in 1934. See Act of June 14, 1934, ch. 521, 48 Stat. 
960. It is entirely surrounded by tribal land. Pet. App. 96a. 
All travelers to and from the Cameron Trading Post cross 
the Reservation on state and federal highways constructed 
pursuant to rights-of-way granted by the Navajo Nation. 
Ibid. The Nation also provides municipal services (such as 
police and fire protection) to petitioner and its customers. 
Id. at 96a-98a. In the high season, petitioner has approxi- 
mately 120 employees, about three-quarters of whom are 
members of the Nation. Id. at 96a. 

2. In 1992, the Navajo Nation Council enacted a hotel 
occupancy tax applicable to all persons who pay for hotel 
rooms within the Reservation costing $2 or more per day. 
24 Navajo Tribal Code § 102 (reprinted in Pet. App. 103a). 
The rate is eight percent of the price paid. Pet. App. 2a & 

n.1. Hotel operators must assess and collect the tax. Id. at 

103a (§ 104). The Code declares that the tax, which is 
administered by the Navajo Tax Commission, is “imposed 
for the purposes of promoting tourism and tourism 
development” and is to be “applied for the advancement of 
local tourism promotion, and to develop projects throughout 
the Navajo Nation.” Id. at 124a (§ 142). 

Petitioner challenged the Navajo Nation’s jurisdiction to 
enforce the hotel occupancy tax against petitioner and its 
guests. The Navajo Tax Commission received evidence, 
issued findings of fact and conclusions of law, and ruled 
against petitioner. Pet. App. 91a-101a. The Navajo Su- 
preme Court affirmed. Id. at 70a-90a. Petitioner then 
sought relief in federal district court. 

3 

3. The district court granted summary judgment in favor 
of respondents. Pet. App. 53a-69a. Accepting facts found by 
the Navajo Tax Commission and not disputed by petitioner, 
the court recognized that its legal analysis should be based 
on the test articulated by this Court in Montana v. United 
States, 450 U.S. 544 (1981), and Strate v. A-1 Contractors, 
520 U.S. 438 (1997). Those cases recognize a general rule 
that Indian Tribes lack inherent sovereign power over 
nonmember activities on reservation land owned in fee by 
nonmembers, subject to exceptions for “nonmembers who 
enter consensual relationships with the tribe or its mem- 
bers” and for nonmember conduct that “threatens or has 
some direct effect on the political integrity, the economic 
security, or the health or welfare of the tribe.” Montana, 
450 U.S. at 565-566; see Strate, 520 U.S. at 445-447. 

Because this case involves taxation, the district court also 
sought guidance from this Court’s decision in Merrion v. 
Jicarilla Apache Tribe, 455 U.S. 130 (1982), which discussed 
the scope of tribal taxing powers. The court stated: 

Where a tribe provides essential services within Indian 
Country, even to nonmembers and even on [nonmember- 
owned] fee land, and thus affords the “benefits of a 
civilized society” to those nonmembers, fairness indicates 
that it be allowed to impose taxes to help pay for those 
services. * * * The Merrion provision-of-services or 
benefits-of-a-civilized-society factors, thus, are relevant 
to the Montana test because they are indicators that the 
necessary consensual relationship is present to allow the 
tribe to impose a tax upon the fee-land activity. 

Pet. App. 63a-64a. Even if such a consensual relationship 
was found, however, the court indicated that there was a 
further balancing of interests to be performed: 

The real question with respect to tribal-taxation cases 
and the consensual relationships test is whether the non- 

4 

members’ consensual activity within Indian Country is 
significant enough to allow the tribe to tax that activity. 

* * * [T]he extent to which a tribe will be allowed to 
regulate or affect non-Indian activity is often determined 
on a sliding scale, balancing the impact of the activity on 
the tribe with the severity of the tribe’s proposed regu- 
lation, taxation, or other imposition of jurisdiction. 

Id. at 64a. 

Applying this analysis, the court first concluded that, 
despite the absence of any “explicit consensual relationship” 
between the Tribe and petitioner’s guests, such a relation- 
ship is established within the meaning of Montana when 
those guests “travel onto the reservation, stay overnight, 
and take advantage of the establishment of a civilized society 
there.” Pet. App. 65a. Second, the court concluded under its 
balancing test that “the presence of the guests creates a 
greater need, both actual and potential, for tribal services,” 
such as medical, police, and fire services, and that the burden 
imposed by the tax is minimal. Id. at 66a-67a. The court 
accordingly held that the Navajo had the authority to impose 
its tax on petitioner’s guests. 

4. The court of appeals affirmed. Pet. App. 1a-51a. The 
court accepted the district court’s application of the 
Montana test, which it concluded “appropriately appl[ied] 
and complement[ed] the Supreme Court’s Indian law juris- 
prudence.” Id. at 14a. It emphasized that the Montana 
analysis necessarily gives Tribes some regulatory power 
over nonmembers on their reservations, even on nomember- 
owned lands, and concluded that “the Supreme Court did not 
intend that fee status should become the determining factor 
in cases involving the assertions of tribal sovereign power 
over nonmembers on the reservation.” Id. at 11a. The court 
also agreed that Merrion was highly relevant to the analysis, 
even though it dealt with tribal lands, because Merrion 

5 

characterized the power to tax as “an essential attribute of 
sovereignty,” rather than simply “an extension of a tribe’s 
power to exclude.” Id. at 12a. The court also relied on 18 
U.S.C. 1151, which defines “Indian country” to include all 
lands within the borders of a reservation (without regard to 
title), and Buster v. Wright, 135 F. 947 (8th Cir. 1905), which 
upheld tribal taxation of a business on nonmember land. See 
Pet App. 14a-19a. 

Particularly in light of this Court’s citation of Buster in 
both Montana and Strate, the court of appeals concluded 
that this Court had not established “one rule for assertions 
of tribal jurisdiction on fee land (Montana, et al.) and 
another rule for tribal land (Merrion).” Pet. App. 15a. The 
court held instead that the fee status of land was only one 
factor in a case-by-case analysis “in which the Supreme 
Court weighed the impact of the nonmember conduct against 
the severity of tribal regulations,” as the district court had 
held. Id. at 15a-18a; see also id. at 20a n.11 (fee status is 
relevant but not determinative). The court summarized: 

The primary considerations that the Supreme Court has 
taken into account in cases involving tribal jurisdiction 
and nonmembers on the reservation are (1) the status 
and conduct of the nonmembers and (2) the nature of the 
inherent sovereign powers the tribe is attempting to 
exercise, its interests, and the impact that the exercise of 
the tribe’s powers has upon the nonmember interests 
involved. Any accounting of fee status either falls into 
the Court’s study of these factors or becomes secondary. 

Id. at 25a. 

Applying this analytic framework, the court of appeals 
sustained the district court’s judgment that the Navajo 
Nation could properly impose its occupancy tax on peti- 
tioner’s guests under Montana’s exception for consensual 
relationships. The court noted that the guests travel over 

6 

reservation lands to reach the complex, and that they 
receive the benefit of “police, fire, emergency medical, and 
tourist services provided by the tribe,” which constitute the 
“benefits of a civilized society” mentioned in Merrion. Pet. 
App. 26a-30a. It concluded that “[t]he consensual relation- 
ship between the guests and the tribe is one of implied 
consent, or privilege and tax, similar to that set forth in 
Buster: the consensual relationship exists in that the non- 
member guests could refrain from the privilege of lodging 
within the confines of the Navajo Reservation and therefore 
remain free from liability for the Navajo Hotel Occupancy 
Tax.” Id. at 29a. Having found such a consensual relation- 
ship, the court applied its balancing test and held that the 
tax burden on the guests was “not disproportionate to the 
benefits they receive by availing themselves of Navajo tribal 
services.” Id. at 30a-32a. It accordingly affirmed the district 
court’s judgment sustaining the tax. 

Judge Briscoe dissented. Pet. App. 33a-51a. She found 
the majority’s interpretation of Montana flawed, principally 
because it discounted the importance of fee ownership. See 
id. at 37a-42a. In her view, “Montana operates from a 
presumption that * * * a tribe lacks jurisdiction over non- 
members’ conduct on nonmember fee land,” while “Merrion 
operates from a presumption that a tribe retains inherent 
sovereign authority to regulate nonmembers’ conduct occur- 
ring on tribal land.” Id. at 41a-42a. Applying what she 
considered to be Montana’s analysis, without reference to 
factors from Merrion, she concluded that the Navajo Nation 
does not have inherent authority to impose its tax under the 
“consensual relationships” exception, because any consent by 
petitioner was irrelevant to a tax imposed on hotel guests, 
and because there was insufficient evidence in the record to 
show that petitioner’s guests entered into “a consensual 
relationship, either express or implied,” with the Tribe. Id. 
at 44a-48a. Judge Briscoe also rejected application of the 

7 

second Montana exception, because in her view there was no 
evidence “that the conduct, or even the mere presence, of 
[petitioner’s] non-Indian guests represents a threat to, or 
has a direct effect on, the Nation’s political integrity, eco- 
nomic security, or health and welfare.” Id. at 50a; see also id. 
at 48a-51a. 

SUMMARY OF ARGUMENT 

The tax at issue in this case is imposed on commercial 
transactions between nonmembers of the Navajo Nation, 
occurring on land that is located within the Navajo Reserva- 
tion, but that is held in fee by a nonmember of the Tribe. 
The Tribe’s power to impose such a tax must be evaluated in 
light of this Court’s decisions addressing both tribal taxing 
authority specifically and tribal civil authority over non- 
members more generally. 

The Court has made clear that Indian Tribes possess an 
inherent power to tax. Under the Court’s decisions and 
longstanding federal policy, that power extends to nonmem- 
bers of a Tribe, even on nonmember fee land within a reser- 
vation, to the extent they enjoy privileges of trade or other 
activity to which the Tribe can attach a tax. 

This Court’s decisions in Montana v. United States, 450 
U.S. 544, 565-566 (1981), and Strate v. A-1 Contractors, 520 
U.S. 438, 446 (1997), hold that a Tribe may tax or regulate 
the activities of nonmembers on nonmember fee land within 
a reservation if the nonmembers enter “consensual relation- 
ships with the tribe or its members,” or if their conduct 
“threatens or has some direct effect on the political integrity, 
the economic security, or the health or welfare of the tribe.” 
In the particular circumstances of this case, the Navajo 
Nation’s hotel occupancy tax is valid under both those tests. 

Petitioner itself has, for Montana purposes, entered into a 
“consensual relationship” with the Navajo Nation by con- 
ducting a substantial business within the boundaries of the 

8 

Tribe’s Reservation, under regulations issued by the Secre- 
tary of the Interior that afford the Tribe the opportunity to 
play a substantial role in regulating that business. By 
applying for and accepting a federal Indian Trader’s license 
under those regulations, petitioner has accepted privileges of 
trade to which the Tribe may attach a tax. That conclusion 
supports the tax here, even though the Navajo tax is 
formally assessed against petitioner’s customers, rather than 
against petitioner itself. 

The Tribe’s modest occupancy tax is also valid under 
Montana’s second test. Petitioner’s business is subject to 
comprehensive federal regulations, enforceable by the Tribe, 
that reflect a conclusion by the Secretary of the Interior that 
petitioner’s operations do have a direct effect on the Tribe 
and its members. The commercial transactions to which the 
Navajo tax applies take place on nonmember fee land that is 
completely surrounded by tribal lands, so that apparently all 
or almost all other commercial and residential property in 
the immediate community is subject to full tribal jurisdic- 
tion. And those nonmember transactions have, in the aggre- 
gate, foreseeable consequences that require attention and 
response from the Tribe’s government. Under those cir- 
cumstances, the Tribe’s tax “does not reach beyond what is 
necessary to protect tribal self-government,” Strate, 520 
U.S. at 459 (bracket and citations omitted), and it should be 
sustained as a reasonable exercise of the Tribe’s limited but 
important civil authority over the conduct of nonmembers on 
nonmember fee lands within its Reservation. 

9 

ARGUMENT 

IMPOSITION OF THE NAVAJO HOTEL OCCUPANCY 
TAX ON PETITIONER AND ITS CUSTOMERS IS A 

REASONABLE EXERCISE OF THE TRIBE’S 
SOVEREIGN POWER 

A. Montana And Strate Provide The Proper Framework 

For Analysis 

The occupancy tax at issue in this case is imposed on the 
purchase of overnight lodging at any hotel, including peti- 
tioner’s, that is located within the territorial boundaries of 
the Navajo Nation. Pet. App. 2a, 103a. Petitioner’s hotel is 
built on land located within the boundaries of the Nation 
(and the State of Arizona), but held in fee simple by peti- 
tioner, a New Mexico corporation that is owned and run by 
individuals who are not members of the Navajo Nation. See 
id. at 2a, 95a-96a. The validity of the hotel occupancy tax, as 
applied to petitioner’s business establishment, must be 
evaluated in light of this Court’s decisions specifically 
addressing the inherent powers of an Indian Tribe to tax— 
including a Tribe’s power to tax non-Indians within its 
reservation in appropriate circumstances—as well as the 
Court’s decisions addressing more generally a Tribe’s 
authority to exercise civil jurisdiction over the activities of 
nonmembers on nonmember fee land within the reservation. 

1. This Court has made clear that Indian Tribes possess 
an inherent power to tax that has not been divested by the 
United States. See Washington v. Confederated Tribes of 
the Colville Indian Reservation, 447 U.S. 134, 152 (1980). 
“The power to tax is an essential attribute of Indian sover- 
eignty because it is a necessary instrument of self-gov- 
ernment and territorial management. This power enables a 
tribal government to raise revenues for its essential 
services.” Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 
137 (1982). 

10 

In 1934, Congress enacted the Indian Reorganization Act 
(IRA), ch. 576, 48 Stat. 984, which, in Section 16, provides 
that an Indian Tribe may elect to organize under that Act 
and provide in its constitution for the exercise of “all powers 
vested in any Indian tribe or tribal council by existing law.” 
25 U.S.C. 476(e). Immediately after passage of the Act, the 
Solicitor of the Department of the Interior, in his seminal 
opinion entitled Powers of Indian Tribes, 55 Interior Dec. 14 
(1934), interpreted the quoted phrase in Section 16 of the 
IRA to confirm in Tribes “the whole body of tribal powers 
which courts and Congress alike have recognized as properly 
wielded by Indian tribes, whether by virtue of specific 
statutory grants of power or by virtue of the original 
sovereignty of the tribe insofar as such sovereignty has not 
been curtailed by restrictive legislation or surrendered by 
treaties.” Id. at 18.1 With respect to the power to tax, the 
Solicitor stated, in a paragraph this Court quoted with 
approval in Colville: 

Chief among the powers of sovereignty recognized as 
pertaining to an Indian tribe is the power of taxation. 
Except where Congress has provided otherwise, this 
power may be exercised over members of the tribe and 
over nonmembers, so far as such nonmembers may 
accept privileges of trade, residence, etc., to which taxes 
may be attached as conditions. 

447 U.S. at 153 (quoting 55 Interior Dec. at 46) (emphasis 
added by the Court); see also Merrion, 455 U.S. at 139 
(quoting from same passage in Solicitor’s opinion). 

1 Although the Navajo Nation is not organized under the IRA, it 
possesses the same inherent governmental powers—including the power 
to tax non-Indians—as Tribes that are organized under that Act. See 
Kerr-McGee Corp. v. Navajo Tribe, 471 U.S. 195 (1985); see also 25 U.S.C. 
476(f )-(g). 

11 

The Court explained in Merrion that a Tribe’s power to 
tax non-Indians on its reservation “derives from the tribe’s 
general authority, as sovereign, to control economic activity 
within its jurisdiction, and to defray the cost of providing 
governmental services by requiring contributions from 
persons or enterprises engaged in economic activities within 
that jurisdiction.” 455 U.S. at 137 (citing Gibbons v. Ogden, 
22 U.S. (9 Wheat.) 1, 199 (1824)). For Indian Tribes, as for 
States, “[t]he power of taxation is indispensable to their 
existence” as independent entities. Gibbons, 22 U.S. (9 
Wheat.) at 199. 

Although Merrion itself involved taxation of non-Indian 
activities on land held in trust for the Tribe, the Court, in 
rejecting the proposition that a Tribe’s power to tax derives 
solely from its power to exclude non-Indians,2 discussed at 
some length the decision in Buster v. Wright, 135 F. 947 (8th 
Cir. 1905), which involved a Tribe’s taxation of a non-Indian 
business on non-Indian fee land. The Court explained: 

[T]he decision in Buster v. Wright actually undermines 
the theory that the tribes’ taxing authority derives solely 
from the power to exclude non-Indians from tribal lands. 
Under this theory, a non-Indian who establishes lawful 
presence in Indian territory could avoid paying a tribal 
tax by claiming that no residual portion of the power to 
exclude supports the tax. This result was explicitly 
rejected in Buster v. Wright. In Buster, deeds to individ- 
ual lots in Indian territory had been granted to non- 
Indian residents, and cities and towns had been incorpo- 

2 The Court addressed the power to exclude as a basis for taxation 
because the non-Indian argued that the Tribe had relinquished any power 
to exclude it from tribal lands when the Tribe entered into a long-term 
lease of tribal lands with the non-Indian for production of oil and gas, and 
had relinquished its power to tax as a result. See 455 U.S. at 141-143, 144- 
145. 

12 

rated. As a result, Congress had expressly prohibited 
the Tribe from removing these non-Indian residents. 
Even though the ownership of land and the creation of 
local governments by non-Indians established their 
legitimate presence on Indian land, the court held that 
the Tribe retained the power to tax. The court concluded 
that “[n]either the United States, nor a state, nor any 
other sovereignty loses the power to govern the people 
within its borders by the existence of towns and cities 
therein endowed with the usual powers of municipalities, 
nor by the ownership nor occupancy of the land within 
its territorial jurisdiction by citizens or foreigners.” 135 
F. at 952 (emphasis added). 

455 U.S. at 143-144 (footnote omitted). See also Colville, 447 
U.S. at 153 (including Buster v. Wright among cases cited for 
the proposition that “[f]ederal courts also have acknowl- 
edged tribal power to tax non-Indians entering the reser- 
vation to engage in economic activity”); 55 Interior Dec. at 
46-48 (extensively discussing Buster in support of the state- 
ment, quoted at page 10 above, concerning a Tribe’s inherent 
power to tax); Merrion, 455 U.S. at 144 n.8 (citing F. Cohen, 
Handbook of Federal Indian Law 142 (1942), for its discus- 
sion of Buster). 

This is not to say, of course, that a Tribe has plenary 
power to tax non-Indians on its reservation, at least on lands 
owned in fee by non-Indians. Rather, as the Court explained 
in Merrion, echoing the opinion of the Solicitor of the 
Department of the Interior, cases such as Buster v. Wright 
“demonstrate that a tribe has the power to tax nonmembers 
only to the extent the nonmember enjoys the privilege of 
trade or other activity on the reservation to which the tribe 
can attach a tax.” 455 U.S. at 141-142. Accordingly, the 
circumstances in which a Tribe may assess a tax against non- 
Indians on a reservation must be evaluated under the 

13 

general framework established by this Court for the exercise 
of civil authority over non-Indians on a reservation, albeit 
with an appreciation of the requirements of an Indian Tribe, 
like any sovereign, to raise revenue to support essential 
services that are furnished to the reservation community— 
including, in some instances, to non-Indians who are in that 
community. 

2. Two of this Court’s cases set out the central principles 
relevant to determining more generally whether an Indian 
Tribe may exercise civil authority over the activities of non- 
members on nonmember fee land within the Tribe’s reser- 
vation. In Montana v. United States, 450 U.S. 544, 563-567 
(1981), the Court held that a Tribe did not have inherent 
sovereign authority to regulate hunting and fishing by 
nonmembers on nonmember fee land. Concluding that the 
regulation of such activities on nonmember land bore “no 
clear relationship to tribal self-government or internal rela- 
tions,” the Court endorsed “the general proposition that the 
inherent sovereign powers of an Indian tribe do not extend” 
that far. Id. at 564-565. The Court recognized, however, two 
exceptions to that general principle. First, a Tribe “may 
regulate, through taxation, licensing, or other means, the 
activities of nonmembers who enter consensual relationships 
with the tribe or its members, through commercial dealing, 
contracts, leases, or other arrangements.” Id. at 565. 
Second, a Tribe retains “inherent power to exercise civil 
authority over the conduct of non-Indians on fee lands within 
its reservation when that conduct threatens or has some 
direct effect on the political integrity, the economic security, 
or the health or welfare of the tribe.” Id. at 566. 

In Strate v. A-1 Contractors, 520 U.S. 438 (1997), the 
Court relied on Montana in holding that a Tribe had no 
inherent jurisdiction to adjudicate a civil claim brought by 
one nonmember against another nonmember arising out of 
an accident that occurred on a state highway right-of-way, 

14 

which the Court assimilated, for this purpose, to nonmember 
fee land. See id. at 442, 456. The Court concluded that, as to 
nonmembers, the Tribe’s adjudicative jurisdiction did not 
exceed its legislative jurisdiction, and it confirmed that, in 
the absence of a controlling treaty or federal law, Montana’s 
general rule and exceptions “delineate[] * * * the bounds 
of the power tribes retain” to exercise civil authority over 
nonmembers’ activities on nonmember fee lands within a 
reservation. Id. at 453. 

The Strate Court concluded that neither of the Montana 
exceptions applied to the situation at issue in Strate. As to 
the first exception, the Court held that a lawsuit between 
“two non-Indians involved in [a] run-of-the-mill [highway] 
accident” on a state right-of-way did not involve any “ ‘con- 
sensual relationship’ of the qualifying kind,” but was “dis- 
tinctly non-tribal in nature.” 520 U.S. at 457.3 As to the 
second exception, the Court interpreted Montana to hold 
that “a tribe’s inherent power does not reach beyond what is 
necessary to protect tribal self-government or to control 
internal relations.” Id. at 459 (brackets omitted) (quoting 
Montana, 450 U.S. at 564). A nonmember’s careless driving 
on the state highway, the Court reasoned, did not have such 
a “direct effect on the political integrity, the economic 
security, or the health or welfare of the tribe” that denial of 
jurisdiction over a resulting lawsuit would “trench unduly on 
tribal self-government” or interfere impermissibly with “the 
right of reservation Indians to make their own laws and be 
ruled by them.” Id. at 457-459 (in part quoting Montana, 450 
U.S. at 566, and Williams v. Lee, 358 U.S. 217, 220 (1959)). 

3 Compare United States v. McBratney, 104 U.S. 621 (1881) (State, 
rather than United States, has jurisdiction to prosecute criminal offense 
committed by one non-Indian against another non-Indian in Indian 
country). 

15 

In the present case, the court of appeals recognized the 
central relevance of Montana and Strate. See, e.g., Pet. App. 
24a. Its discussion, however, appears to blur the distinction 
this Court has consistently drawn, in cases involving the 
exercise of tribal jurisdiction over nonmembers, between 
nonmember fee land and other reservation lands. See, e.g., 
id. at 19a-20a & n.11. If petitioner’s hotel were not located 
on fee land, there would be no question that both petitioner 
and its guests were subject to taxation (and other regu- 
lation) by the Tribe. See, e.g., Strate, 520 U.S. at 454 & n.8; 
Montana, 450 U.S. at 557; Merrion, 455 U.S. at 136-148; 
Colville, 447 U.S. at 152-154; cf. New Mexico v. Mescalero 
Apache Tribe, 462 U.S. 324, 330-343 (1983). Accordingly, and 
contrary to the court of appeals’ view, the fact that 
petitioner holds its land in fee is not “largely inconsequential 
in this case.” Pet. App. 20a n.11. It is, instead, one of the 
two key factors—the other being that the Tribe’s tax falls on 
nonmembers—that make it necessary to assess the validity 
of the tax using the test set out in Montana and Strate. 

B. In The Particular Circumstances Of This Case, The 

Navajo Tax Is A Proper Exercise Of Tribal Juris- 
diction Under Both Of The Montana Exceptions 

The district court and the court of appeals sustained the 
Navajo Nation’s occupancy tax on the basis of Montana’s 
recognition of tribal authority over situations in which 
nonmembers have entered into some sort of consensual 
relationship with a Tribe or its members. See Pet. App. 11a 

n.8, 32a, 63a-68a & n.28. The Navajo Supreme Court upheld 
the tax both on that ground (id. at 83a-87a) and on the basis 
of Montana’s second exception, for nonmember conduct that 
threatens or has a “direct effect” on the political integrity, 
economic security, or health and welfare of the Tribe (see id. 
at 88a-89a). Under the circumstances presented by this case, 
including in particular the regulatory regime that governs 

16 

petitioner’s business, which was adopted by the Secretary of 
the Interior under the Indian Trader Statutes, we believe 
that the tax may be sustained under both of the Montana 
exceptions. 

1. In View Of Federal Regulations That Govern 
Petitioner’s Business, The Tax Is Valid Under 
Montana’s First Exception As A Condition On The 
Privilege Of Engaging In Commercial Transactions 
At Petitioner’s Trading Post 

a. Petitioner itself has, for Montana purposes, entered 
into a “consensual relationship” with the Navajo Nation by 
conducting a substantial business within the boundaries of 
the Navajo Reservation under regulations issued by the 
Secretary of the Interior that afford the Navajo Nation the 
opportunity for a substantial role in the regulation of 
petitioner’s business. 

In both Montana and Strate, this Court specifically cited 
Buster v. Wright as an example of situations that fall within 
the first Montana exception. See 450 U.S. at 566; 520 U.S. at 
457. As it had done in Merrion (see pp. 11-12, supra), the 
Court in Strate explained that Buster upheld a Tribe’s 
“permit tax on nonmembers for the privilege of conducting 
business within [the] Tribe’s borders,” and “characterized as 
‘inherent’ the Tribe’s ‘authority . . . to prescribe the terms 
upon which noncitizens may transact business within its 
borders.’ ” 520 U.S. at 457 (quoting Buster, 135 F. at 950); 
see also Williams, 358 U.S. at 223; Morris v. Hitchcock, 194 
U.S. 384, 391-393 (1904); compare Merrion, 455 U.S. at 145 

n.11 (quoting Buster, 135 F. at 958: “The ultimate conclusion 

* * * is that purchasers of lots * * * within the original 
limits of the Creek Nation * * * are still subject to the laws 
of that nation prescribing permit taxes for the exercise by 
noncitizens of the privilege of conducting business in those 
towns[.]”). 

17 

There is no occasion here to identify as a general matter 
the circumstances in which the ability of a non-Indian to 
engage in business on non-Indian fee land on a reservation 
may properly be regarded as the acceptance of a privilege to 
trade that triggers the Tribe’s inherent power to tax non- 
Indians under the first Montana exception. In this case, 
those circumstances are established by a special regulatory 
regime that has been established by the Secretary of the 
Interior for the Navajo, Hopi, and Zuni Reservations under 
the Indian Trader Statutes, 25 U.S.C. 261-264. See 
25 C.F.R. Pt. 141.4 As this Court pointed out in Department 
of Taxation & Fin. v. Milhelm Attea & Bros., 512 U.S. 61 
(1994), “[t]hroughout this Nation’s history, Congress has 
authorized ‘sweeping’ and ‘comprehensive federal regulation’ 
over persons who wish to trade with Indians and Indian 
tribes.” Id. at 70 (quoting Warren Trading Post Co. v. 
Arizona Tax Comm’n, 380 U.S. 685, 687-689 (1965)); accord 
Central Mach. Co. v. Arizona State Tax Comm’n, 448 U.S. 
160 (1980). Under that regulatory regime, petitioner (or any 
other nonmember-owned business) may offer goods and 
services for retail sale on the Navajo Reservation only if it 
has been licensed to do so. See 25 C.F.R. 141.1, 141.2, 
141.3(l), 141.5(a); Parties’ Joint Lodging Materials 163 (peti- 
tioner’s federal license). Application of those regulations to 
petitioner was upheld in Ashcroft v. United States Depart- 
ment of the Interior, 679 F.2d 196, 200 (9th Cir. 1982), cert. 
denied, 459 U.S. 1201 (1983), against a challenge by peti- 
tioner and other Indian Traders based on the nature and 
history of their land and the relative volume of their busi- 
ness with non-Indians. As interpreted in Ashcroft, the 

4 We also note that although petitioner’s customers are primarily 
tourists, petitioner engages in substantial direct consensual relationships 
with members of the Tribe in the form of employment. See Pet. App. 56a- 
57a, 72a; J.A. 52-53. 

18 

regulations reflect a determination that all nonmembers who 
engage in retail businesses on the Navajo Reservation, even 
on fee land and even predominantly with other nonmembers, 
have a sufficient nexus with the Tribe and its members in 
the conduct of their businesses to warrant comprehensive 
regulation under the Indian Trader statutes. See id. at 200 

n.3. 
Anyone seeking to obtain or renew a license under the 
regulations must first obtain “any clearance or tribal council 
approval required by tribal or Federal regulations.” 25 
C.F.R. 141.6(b), 141.9(d). The regulations require licensed 
businesses to comply with tribal health regulations and 
standards for weights and measures, and to make them- 
selves available semi-annually at meetings of the Tribe’s 
governing body. 25 C.F.R. 141.17, 141.22. They prohibit a 
licensee from selling or leasing a building without the 
consent of both the Bureau of Indian Affairs and the Tribe. 
25 C.F.R. 141.22. The regulations expressly contemplate 
direct “tribal enforcement of the[] regulations [themselves] 
or consistent tribal ordinances.” 25 C.F.R. 141.11; compare 
United States v. Mazurie, 419 U.S. 544, 553-559 (1975) (dis- 
cussing delegation to tribal government of federal power 
over fee land on reservation). And the regulations specifi- 
cally “do not preclude the Hopi, Navajo, or Zuni tribal 
councils from assessing and collecting such fees or taxes as 
they may deem appropriate from reservation businesses.” 
25 C.F.R. 141.11; compare Warren Trading Post, 380 U.S. at 
689-690 (describing a similar regulation as an order by the 
Secretary of the Interior that “the governing body of an 
Indian reservation may assess from a trader ‘such fees, etc., 
as it may deem appropriate’ ” (quoting 25 C.F.R. 252.27c 
(1964 ed.))). Moreover, in the federal license itself, the 
licensee “expressly warrants that all applicable Federal, 
State and Tribal laws and regulations will be fully complied 
with in all respects.” Parties’ Joint Lodging Materials 163. 

19 

By applying for and accepting an Indian Trader’s license 
under these regulations, with their provisions for the Tribe 
to have an extensive role, petitioner has “accept[ed] privi- 
leges of trade” on the Reservation “to which taxes may be 
attached as conditions” by the Tribe. Colville, 447 U.S. at 
153 (quoting Powers of Indian Tribes, 55 Interior Dec. at 46). 
Petitioner’s voluntary submission to this regulatory regime 
gives rise to a “consensual relationship” with the Navajo 
Nation within the meaning of the Montana test. Petitioner’s 
operations are accordingly subject to tribal regulation, 
including taxation, under the first Montana exception. 

b. We do not believe that the first Montana exception is 
rendered inapplicable here simply because the occupancy tax 
is assessed against customers who stay at petitioner’s 
Trading Post, rather than against petitioner itself. See Pet. 
App. 103a (§ 102(A)).5 
First, in Buster, the court referred to the power of the 
Tribe “to prescribe the terms upon which noncitizens may 
transact business within its borders,” 135 F. at 950, not 
merely to the power of the Tribe to tax the owner of the 
business itself. Because petitioner’s business establishment 
as a whole is brought within the first Montana exception 
under the special Indian Trader regulations discussed above, 
the Tribe’s authority to tax encompasses the power to tax 
the transactions that take place in the course of petitioner’s 
business. By the same token, because the presence and 
operation of petitioner’s business on the Reservation is 
contingent upon compliance with the governing regulations, 
including those providing a role for the Navajo Nation, 
petitioner’s customers, like petitioner itself, are properly 
regarded as having “accept[ed] privileges of trade” on the 

5 The Code requires petitioner to “collect for the [Navajo Tax] Com- 
mission the tax that is imposed” on its customers. Pet. App. 103a 
(§ 104). 

20 

Reservation “to which taxes may be attached as conditions” 
by the Navajo Nation. Colville, 447 U.S. at 153 (quoting 
Powers of Indian Tribes, 55 Interior Dec. at 46). 

Second, it is in any event clear that petitioner itself could 
be subjected to a tax by the Navajo Nation, in an amount 
equal to eight percent of the amount charged to each guest 
who stayed there.6 The tax at issue in this case—assessed 
against petitioner’s customers and collected by petitioner— 
is the functional equivalent of such a tax, and there is no rea- 
son why, for purposes of Montana’s first exception, it should 
be treated differently. To be sure, in other contexts this 
Court has given dispositive significance to the legal inci- 
dence of a tax. In particular, when the fundamental principle 
of immunity of Indians from state taxation is at stake, the 
Court has held that a State may not levy a tax directly on an 
Indian Tribe or its members inside Indian country, even 
though the State could achieve a functionally equivalent re- 
sult by amending its law to change the tax’s legal incidence. 
Oklahoma Tax Comm’n v. Chickasaw Nation, 515 U.S. 450, 
457-460 (1995). But there are special reasons for attending to 
form as well as substance where that immunity principle is 
concerned, because the Court’s cases have made clear that 
the historic doctrine of Indian tax immunity is absolute. See, 

e.g., Montana v. Blackfeet Tribe, 471 U.S. 759, 764-765 
(1985). As the existence of the Montana exceptions makes 
clear, the “general rule” (see Strate, 520 U.S. at 446) that 
nonmembers are not subject to tribal taxes is not similarly 
absolute. In applying those exceptions, therefore, a “cate- 

6 The court of appeals gave little consideration to whether the Tribe 
could tax petitioner itself under the first Montana exception. The court 
concluded that there was a sufficient consensual relationship between the 
guests and the Tribe to allow that tax. Pet. App. 26a-32a. The court 
simply noted that, to the extent it might be relevant, the existence of a 
consensual relationship with petitioner would follow a fortiori. Id. at 25a 

n.12. 

21 

gorical” approach to legal incidence is out of place. See 
Oklahoma Tax Comm’n, 515 U.S. at 458. 

2. The Navajo Hotel Occupancy Tax Also Is Valid 
Under The Second Montana Exception Based On 
The Governing Regulations And The Direct Effect 
Of Petitioner’s Business On The Navajo Nation 

Under the second Montana exception, a Tribe may 
“exercise civil authority over the conduct of non-Indians on 
fee lands within its reservation when that conduct threatens 
or has some direct effect on the political integrity, the 
economic security, or the health or welfare of the tribe.” 450 
U.S. at 566. Here, the particular “civil authority” the Navajo 
Nation exercises is the power to assess a tax, at the modest 
rate of eight percent of the room charge, on each guest who 
stays at petitioner’s Trading Post. That tax reflects a rea- 
sonable effort by the Navajo Nation to obtain support for the 
government that provides necessary services to petitioner’s 
Trading Post business and its customers who stay overnight 
on the Reservation. Because the tax is assessed on the 
amount paid for nights actually spent on the Reservation, it 
is reasonably calibrated to the impact that petitioner’s 
business has on the community and the responsibility that 
petitioner and its guests may reasonably be expected to bear 
for the support of the Navajo Nation, which provides not 
only tourist services and promotion (to which the proceeds of 
the hotel occupancy tax are devoted), but also “police and 
fire protection, the benefit of a trained work force, and ‘the 
advantages of a civilized society.’ ” 
Exxon Corp. v. Wiscon- 
sin Dep’t of Revenue, 447 U.S. 207, 228 (1980) (quoting 
Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434, 445 
(1979)); see Commonwealth Edison Co. v. Montana, 453 
U.S. 609, 626-627, 628-629 (1981). 

Although Montana and Strate provide the proper frame- 
work for analysis here, there are at least three material 

22 

differences between the hotel occupancy tax imposed on 
petitioner’s guests and the hunting regulations and tort suit 
that the Court considered in those cases. Those differences 
justify the exercise of tribal jurisdiction under Montana’s 
“direct effects” test. 

First, petitioner’s business is subject to comprehensive 
regulations issued by the Secretary of the Interior, and sub- 
ject to enforcement by the Tribe, based on petitioner’s 
commercial relationship with the Navajo Nation and its 
members. Second, the nonmember fee land at issue here is 
located in an area of the Reservation where both the land 
and the population are overwhelmingly Navajo, and is 
completely surrounded by tribal lands that are unques- 
tionably subject to the Navajo government’s civil jurisdic- 
tion. Third, the nonmember conduct that the Tribe seeks to 
tax involves commercial transactions routinely entered into 
at petitioner’s fixed place of business on the Tribe’s 
Reservation—transactions that, in the aggregate, have 
foreseeable consequences for the Tribe’s government, for 
other individuals and enterprises in the local area, and for 
the local environment. Denying the Navajo any authority to 
tax (or otherwise regulate) that sort of nonmember activity, 
on nonmember land that is situated like petitioner’s, would 
indeed leave the Tribe without even the residuum of sover- 
eign power that is “necessary to protect tribal self-govern- 
ment or to control internal relations,” and thereby “directly 
affect[] the tribe’s political integrity, economic security, 
health, or welfare.” Strate, 520 U.S. at 446, 459 (in part 
quoting Montana, 450 U.S. at 564). 

a. Indian Trader regulations. The second Montana ex- 
ception is designed to identify those situations in which there 
is a sufficient justification for the exercise of tribal civil 
authority over the conduct of non-Indians because of the 
“direct effect” that conduct may have on the political integ- 
rity, economic security, and health or welfare of the Tribe. 

23 

Here, the Secretary of the Interior, exercising authority 
conferred by Congress under the Indian Trader Statutes, 
has concluded that petitioner’s business operations do have a 
direct effect on the Navajo Nation and its members, and has 
issued regulations that govern that relationship and afford 
the Navajo Nation an opportunity for a significant role in the 
regulation of petitioner’s business. See pp. 17-18, supra. 
That conclusion is material to the Montana analysis, in light 
of the Secretary’s responsibility for the administration of the 
Indian Trader Statutes and for Indian affairs generally. 

b. Character of the nonmember land. Petitioner’s “non- 
member fee land,” on which its hotel and other Trading Post 
facilities are located, is completely surrounded by tribal trust 
lands. Pet. App. 96a. In 1990, all but 24 of the 1035 residents 
of the Reservation’s Cameron Chapter were Indians. Par- 
ties’ Joint Lodging Materials 181. Thus, although it is true 
that petitioner owns its land in fee simple, it is also 
apparently true that the Navajo Nation exercises essentially 
plenary civil jurisdiction over all or almost all other land, 
businesses, and residents in the area of the reservation 
surrounding petitioner’s enclave. Compare Montana, 450 
U.S. at 548 (28% of reservation in question was held in fee by 
non-Indians). 

That fact is significant in evaluating the “direct effect” 
that petitioner’s activities, and the visits of its thousands of 
overnight hotel guests, have on the Navajo Nation and its 
members. See Montana, 450 U.S. at 566. In Brendale v. 
Confederated Tribes & Bands of the Yakima Indian Nation, 
492 U.S. 408, 433-444 (1989) (opinion of Stevens, J., announc- 
ing the judgment of the Court in No. 87-1622), the Court 
upheld a Tribe’s power to apply its zoning regulations to 
nonmember fee land in an area of its reservation that was 
still overwhelmingly tribal in land status and character. 
Contrasting that area, “in which only a very small percent- 
age of the land [was] held in fee,” with another area “in 

24 

which approximately half of the land [was] held in fee,” 
Justices Stevens and O’Connor concluded that it was 
“inconceivable that Congress would have intended,” when it 
adopted policies that led to varied ownership, “that the sale 
of a few lots would divest the Tribe of the power to 
determine the character of the tribal community.” Id. at 437 
& n.2; see also id. at 442 (“[I]t is enough to recognize that 
notwithstanding the transfer of a small percentage of 
allotted land the Tribe retains its legitimate interest in the 
preservation of the character of the reservation.”).7 Because 
petitioner’s parcel is apparently the only nonmember fee 
land in the Cameron area, a similar analysis is appropriate 
here. 

The ability to regulate and tax all local businesses on a 
non-discriminatory basis is important if a local government 
is to operate effectively and fairly. Exempting one business 
in an area, or its patrons, from reasonable local taxes on 
commercial transactions, solely on the basis that it sits on an 
“island” of fee land within a reservation, makes no more 
sense than allowing the holders of a few scattered parcels to 
develop their land “without regard to an otherwise common 
scheme.” Brendale, 492 U.S. at 441 (opinion of Stevens, J.).8 

7 Justice Stevens’ opinion for himself and Justice O’Connor controlled 
the judgments of the Court in Brendale and the cases decided with it. 
Three other Justices would have held that the Tribe could enforce its 
zoning regulations throughout the reservation, while four would have held 
that the Tribe could not zone any nonmember fee land. Justices Stevens 
and O’Connor concluded that the Tribe had the power to zone in the area 
of the reservation that retained its tribal character, but not in an area 
where there was widespread nonmember ownership. See Strate, 520 U.S. 
at 447 n.6 (describing Brendale). 

8 Here, the Tribe seeks only to impose a nondiscriminatory tax, uni- 
form across its Reservation; as in Brendale, “[i]t is [petitioner] who seeks 
a special, privileged status.” 492 U.S. at 443. And here, as in Brendale, 
there is no allegation that collection of the Tribe’s modest tax “interfere[s] 
with any significant state or county interest.” Id. at 444. 

25 

Indeed, it would impose a direct disadvantage on tribal busi- 
nesses, or nonmember businesses operating on tribal land, 
within the Tribe’s own Reservation. Endorsing such an 
exemption would interfere materially with “the right of 
reservation Indians to make their own laws and be ruled by 
them.” Strate, 520 U.S. at 459 (quoting Williams, 358 U.S. at 
220); see Brendale, 492 U.S. at 443-444 (opinion of Stevens, 
J.) (concluding that recognition of tribal zoning authority in 
heavily Indian areas was consistent with Montana’s second 
test). 

c. Nature of the nonmember conduct. The nonmember 
activities at issue in this case are also distinctly different 
from those at issue in Montana and Strate. 

Montana 

invalidated tribal regulations that sought to ban or severely 
restrict nonmember hunting and fishing on private lands 
within a reservation. See 450 U.S. at 549-550. Strate held 
that tribal courts could not exercise jurisdiction over a claim 
against a nonmember defendant arising out of an accident 
between nonmembers on a state right-of-way. See 520 U.S. 
at 442. In this case, by contrast, the nonmember conduct 
that the Tribe seeks to tax is the routine commercial pur- 
chase of overnight lodging in a tourist hotel permanently 
situated at a strategic point on the Tribe’s Reservation. 

Petitioner’s hotel attracts a substantial number of tourist 
guests to the Navajo Reservation—in part by stressing the 
Cameron Trading Post’s long history as a point of contact 
with the Navajo Nation and its members. See, e.g., Pet. 
App. 72a-73a; Manygoats v. Cameron Trading Post, No. SC- 
CV-50-98 (Navajo Sup. Ct. Jan. 14, 2000), slip op. 2-3, 4-9.9 

9 We are informed that the volume of the Navajo Reporter that will 
contain this case has not yet been published. For the Court’s convenience, 
we have lodged a copy of the slip opinion with the Clerk. See also 
www.camerontradingpost.com/history.htm (visited Feb. 13, 2001) (italics 
omitted): 

26 

That is not a bad thing: Petitioner’s Trading Post is, for 
example, the Cameron area’s primary employer. See Pet. 
App. 96a (petitioner has approximately 120 employees, 75- 
80% of whom are tribal members); Manygoats, slip op. 3. 
Nevertheless, the comings, goings, and overnight stays of 
the thousands of guests petitioner hosts each year give rise 
to a foreseeable set of issues of legitimate concern to the 
tribal government. 

On one hand, precisely because petitioner’s tourist busi- 
ness is a valuable local economic resource, the Tribe has an 
interest in supporting and leveraging petitioner’s efforts. 
With appropriate resources, it could do so by, for example, 
providing clean, safe, and attractive rest stops at appropri- 
ate places on the Reservation; providing convenient facilities 
for local merchants to sell tribal crafts, souvenirs, or other 
items; or providing information about local attractions that 
might induce tourists to prolong or repeat their stays. See, 

e.g., Pet. App. 124a (provision of Navajo Code specifying that 
proceeds from hotel occupancy tax are to be “applied for the 
advancement of local tourism promotion”); J.A. 63-66, 70-75 
(testimony of Tribe’s Director of Tourism). 

On the other hand, petitioner’s hotel guests impose some 
actual or potential burdens on the local government. They 

Visitors see firsthand a way of life that has changed little over the 
years - locals hauling water, trading for goods, buying feed and 
visiting with friends from the far corners of the reservation. * * * 
“What makes Cameron special,” says Joe Atkinson [petitioner’s 
President, see J.A. 20], “is not only the fine weavings, baskets and 
beadwork—it’s the ambiance. Here you’re not just told about the 
people, their traditions and what trading post life is like. You 
experience it!” 

See also G. Richardson, Navajo Trader 142 (1986) (relating author’s expe- 
riences at petitioner’s Cameron Trading Post in earlier days) (“Tourists 
off the highway were over-filled with curiosity in those days, just as they 
are now - especially about Indians and anyone working stock.”). 

27 

demand part of the 22 million gallons of water that petitioner 
pumps each year from wells on its land (and therefore on the 
Reservation). J.A. 24-25, 39. They generate wastewater, 
which petitioner treats in a plant on its property and then 
discharges into the Little Colorado River, which flows 
through the Reservation. J.A. 25, 39-40, 49. They generate 
trash and garbage, which was disposed of on the Reservation 
until that landfill was closed, and petitioner began having it 
hauled away. J.A. 40-41. They incrementally increase the 
local demand for basic government services, such as police 
and fire protection, highway patrols, and emergency medical 
assistance. See, e.g., Pet. App. 57a-58a. 

10 Given the limited 
pool of resources available to all governments, including the 
Navajo Nation, providing those resources to petitioner and 
its guests necessarily requires the Nation either to develop 
additional resources, or to divert existing resources away 
from the provision of services directly to tribal members. 
Finally, petitioner’s guests support petitioner’s business, 
which in turn entails tribal government attention to matters 
such as employment, health, and environmental regulation. 

10 Because of the framework of criminal jurisdiction in “Indian 
country,” see 18 U.S.C. 1151, the Navajo Nation has exclusive jurisdiction 
to arrest and prosecute offenses between Indians and victimless offenses 
by Indians. See 18 U.S.C. 1152; see also 18 U.S.C. 1153 (federal juris- 
diction over all major crimes committed by Indians). The Nation’s govern- 
ment is thus the only one with authority to prosecute a host of offenses 
that may occur on petitioner’s premises, including minor crimes com- 
mitted by one of petitioner’s Indian employees against another, or by 
another Indian against an Indian employee, as well as disorderly conduct 
or other status-type offenses committed by Indians on petitioner’s land. 
In addition, the Navajo Nation necessarily acts as first responder for a 
host of offenses over which it may share jurisdiction with the United 
States, including crimes by Indians against non-Indians and serious crimes 
by Indians. Cf. Strate, 520 U.S. at 456 n.11 (noting authority of tribal 
police to patrol roads built on rights-of-way through a reservation). 

28 

See, e.g., Manygoats, supra (resolving claim brought against 
petitioner under tribal labor law); cf. J.A. 48, 53-54. 

Of course, all businesses, and all tourists, impose some 
local costs, as well as bringing many local benefits. The 
Navajo Nation, like all governments, seeks both to maximize 
the benefits and to manage the costs of local businesses, 
including tourism. The necessity for the Navajo Nation to 
exercise its “legislative jurisdiction,” Strate, 520 U.S. at 453, 
over nonmember transactions on petitioner’s land would, 
perhaps, be more obvious if petitioner were operating a gar- 
bage dump or a polluting factory. Cf. Arizona v. California, 
373 U.S. 546, 598-601 (1963) (holding that creation of reser- 
vation included water rights necessary to make land livable) 
(cited in Montana, 450 U.S. at 566 n.15). The Tribe’s power 
to exercise that jurisdiction should, however, be equally 
clear in the less dramatic context of this case.11 

Petitioner operates a successful business on the Navajo 
Reservation. Petitioner’s Trading Post, and the guests who 
come to and stay at it, make demands on, and present 
opportunities for, the local government. All governments 
need to fund their activities, including those directly affected 
by visiting tourists; and the imposition of a modest occu- 
pancy tax on hotel guests is one wholly conventional way of 
seeking the necessary revenue. Cf. Merrion, 455 U.S. at 137- 
138 (where petitioners engaged in business on reservation 
and benefitted from government services, there was 
“nothing exceptional in requiring [them] to contribute 
through taxes to the general cost of tribal government”). 
Montana and Strate, of course, underscore that the sover- 

11 The imposition such a tax places on such a business or its patrons is, 
moreover, considerably less onerous than many other forms of civil 
regulation, such as the prohibition or restraint on land development that 
was at issue in Brendale, or the requirement at issue in Strate that a 
nonmember defend litigation brought against it in an unfamiliar forum. 

29 

eign powers of Tribes are circumscribed when it comes to 
regulating nonmember activities on fee land. In this case, 
however, as we have discussed, federal regulations specifi- 
cally contemplate a role for the Tribe in regulating peti- 
tioner’s business; the tribal government has civil jurisdiction 
over the other lands and businesses in the relevant area of 
its Reservation; and the commercial transactions that the 
Tribe seeks to tax are ones that have foreseeable direct 
effects—both positive and negative—on the economic 
security, health, and welfare of the local Navajo. Under 
these circumstances, the Tribe’s occupancy tax does not rep- 
resent an extension of jurisdiction “beyond what is neces- 
sary to protect tribal self-government.” Strate, 520 U.S. at 
459 (quoting Montana, 450 U.S. at 564). The Tribe’s right to 
collect the tax should accordingly be sustained. 

CONCLUSION 

The judgment of the court of appeals should be affirmed. 

Respectfully submitted. 

BARBARA D. UNDERWOOD 

Acting Solicitor General 
JOHN C. CRUDEN 

Acting Assistant Attorney 

General 
EDWIN S. KNEEDLER 

Deputy Solicitor General 
EDWARD C. DUMONT 

Assistant to the Solicitor 

General 
E. ANN PETERSON 
WILLIAM B. LAZARUS 
TODD S. KIM 

Attorneys 

FEBRUARY 2001