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ARIZONA DEPARTMENT OF REVENUE v. BLAZE CONSTRUCTION CO., INC. 526 U.S. 32

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OCTOBER TERM, 1998

Syllabus

ARIZONA DEPARTMENT OF REVENUE v. BLAZE CONSTRUCTION CO., INC.

CERTIORARI TO THE COURT OF APPEALS OF ARIZONA

No. 97-1536. Argued December 8, 1998-Decided March 2,1999

Over several years, the Bureau of Indian Affairs contracted with respondent Blaze Construction Company to build, repair, and improve roads on several Indian reservations located in Arizona. At the end of the contracting period, petitioner Arizona Department of Revenue (Department) issued a tax deficiency assessment against Blaze for its failure to pay Arizona's transaction privilege tax on the proceeds from its contracts with the Bureau; that tax is levied on the gross receipts of companies doing business in the State. Blaze protested the assessment and prevailed in administrative proceedings, but the Arizona Tax Court granted the Department summary judgment. The Arizona Court of Appeals reversed, rejecting the Department's argument that United States v. New Mexico, 455 U. S. 720, controlled, and holding that federal law pre-empted the tax's application to Blaze.

Held: A State generally may impose a nondiscriminatory tax upon a private company's proceeds from contracts with the Federal Government, regardless of whether the federal contractor renders its services on an Indian reservation. In New Mexico, supra, the Court announced a clear rule that tax immunity is appropriate only when the levy falls on the United States itself, or on its agency or closely connected instrumentality. Id., at 733. To expand that immunity beyond these narrow constitutional limits, Congress must expressly so provide. Id., at 737. Thus, absent a constitutional immunity or congressional exemption, federallaw does not shield Blaze from Arizona's transaction privilege tax. The incidence of the tax falls on Blaze, not the Government; nor has Congress exempted these contracts from taxation. Nevertheless, the Arizona Court of Appeals employed a balancing test weighing state, federal, and tribal interests, and held that a congressional intent to preempt the tax could be inferred from federal laws regulating Indian welfare. In cases involving taxation of on-reservation activity, this Court has undertaken such a particularized examination where the tax's legal incidence fell on a nontribal entity engaged in a transaction with tribes or tribal members. See, e. g., Cotton Petroleum Corp. v. New Mexico, 490 U. S. 163. But the Court has never employed this balancing test where a State seeks to tax a transaction between the Government and a non-Indian private contractor, and declines to do so now. The needcralaw


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to avoid litigation and to ensure efficient tax administration counsels in favor of a bright-line standard for taxing federal contracts, regardless of whether the contracted-for activity takes place on Indian reservations. Moreover, the political process is uniquely adapted to accommodating the interests implicated by state taxation of federal contractors. New Mexico, supra, at 738. The decision whether to exempt Blaze from the tax rests with Arizona and Congress, not this Court. Pp. 35-39.

190 Ariz. 262, 947 P. 2d 836, reversed and remanded.

THOMAS, J., delivered the opinion for a unanimous Court.

Patrick Irvine, Assistant Attorney General of Arizona, argued the cause for petitioner. With him on the briefs were Grant Woods, Attorney General, C. Tim Delaney, Solicitor General, and Carter G. Phillips.

Beth S. Brinkmann argued the cause for the United States as amicus curiae urging reversal. With her on the brief were Solicitor General Waxman, Assistant Attorney General Schiffer, Deputy Solicitor General Kneedler, Roy W McLeese III, and Elizabeth Ann Peterson.

Bruce C. Smith argued the cause for respondent. With him on the brief was Lat J. Celmins. *

*Briefs of amici curiae urging reversal were filed for the State of California et al. by Daniel E. Lungren, Attorney General of California, and Thomas F. Gede, Special Assistant Attorney General, and by the Attorneys General for their respective States as follows: Gale A. Norton of Colorado, Robert A. Butterworth of Florida, Alan G. Lance of Idaho, Thomas J. Miller of Iowa, Frank J. Kelley of Michigan, Joseph P. Mazurek of Montana, Frankie Sue Del Papa of Nevada, Dennis C. Vacco of New York, Heidi Heitkamp of North Dakota, Mark Barnett of South Dakota, Jan Graham of Utah, and James E. Doyle of Wisconsin; and for the National Conference of State Legislatures et al. by Richard Ruda and James

Briefs of amici curiae urging affirmance were filed for the Gila River Indian Community by Rodney B. Lewis; for the Navajo Nation by Marcelino R. Gomez; for the San Carlos Apache Indian Tribe by Richard T. Treon; and for Frank Adson et al. by Tracy A. Labin and Melody L. McCoy.cralaw


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