U.S. District Judge Robert Scola Jr., last year ruled in favor of the Seminoles, which challenged the state’s collection of utility taxes on electricity used on tribal land. Also, the South Florida judge found that a state rental tax should not be imposed on space the tribe leases to non-Seminole businesses at casinos in Hollywood and Tampa.
During a hearing Wednesday in Jacksonville, the state will ask the 11th U.S. Circuit Court of Appeals to overturn the lower-court ruling. In court briefs, attorneys for Florida Department of Revenue Executive Director Marshall Stranburg argued that the state provides government services to the Seminoles and that the taxes are not barred by federal laws generally aimed at shielding tribes from state taxation.
“Each year, Florida and local government entities provide millions of dollars in services and benefits to the tribe and its members,” state attorneys wrote in a December brief. “The tribe’s casino operations benefit extensively from these government services.”
But in a brief filed in February, attorneys for the tribe wrote, for example, that Congress “has never authorized state taxation of utility services sold and delivered to an Indian tribe on its reservation.”
The dispute focuses on what is known as a “gross receipts tax” on utility services and a 6 percent rental tax that imposed on leased commercial property in Florida.
The state contends that it can impose the gross-receipts tax on electricity used on tribal lands because the tax is actually levied against utility companies. In the December brief, state attorneys wrote that the tax is “an item of cost to utility companies and, like ad valorem (property) taxes and personal property taxes, is recovered through companies’ rate structure.”
But the tribe countered in the February brief by arguing that the utility-tax money would come from the Seminoles for electricity used on their tribal land.
“The (district) court correctly held that the legal incidence of the tax rests with the tribe, and not the utility service provider, because the tax is necessarily passed through to, and collected from, the consumer,” the tribe brief said. “Even though the utility service provider is charged with the ministerial administrative duty of remitting the utilities tax it collects from the consumer, the legal incidence of the utilities tax rests with the consumer because the Florida Legislature intended that it be paid by the consumer.”
The rental-tax issue, meanwhile, focuses on leases that the tribe signed with two non-Seminole companies that operate at the Seminole Hard Rock Hotel & Casino facilities in Hollywood and Tampa. The state argues that it is proper to collect the taxes on the tenants and that the tribe had not shown that the taxes are prevented by federal law.
“The tribe introduced no record evidence whatsoever of the impact of the rental tax on the tribe’s business operations or its sovereignty,” the state’s December brief said. “The tribe put forth no studies or other evidence showing that it was less able to lease the property, had to engage in unique marketing efforts, or had to reduce the rent to accommodate the tax.”
But the Seminoles pointed to a U.S. Supreme Court decision that it said shields the “use” of tribal lands from state taxes.
“Since leasing is obviously a ‘use’ of the land, any state tax on rentals paid to the tribe under leases of reservation land is explicitly prohibited,” the tribe’s February brief said.
(The News Service of Florida’s Jim Saunders contributed to this report.)