Cotton Petroleum Corp. v. New Mexico facts for kids
Quick facts for kids Cotton Petroleum Corp. v. New Mexico |
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| Argued November 30, 1988 Decided April 25, 1989 |
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| Full case name | Cotton Petroleum Corp. v. New Mexico |
| Citations | 490 U.S. 163 (more)
109 S. Ct. 1698; 104 L. Ed. 2d 209
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| Prior history | Cotton Petroleum v. State, 106 N.M. 517, 745 P.2d 1170 (N.M. Ct. App. 1987) |
| Holding | |
| There is no "proportionality requirement" that the amount collected from Tribes be equitable to the services rendered by the government. Further, current case law allows states can impose non-discriminatory taxes on non-Tribal entities that do business with Tribes, though Congress could offer immunity if it chose to do so. | |
| Court membership | |
| Case opinions | |
| Majority | Stevens, joined by Rehnquist, White, O'Connor, Scalia, Kennedy |
| Dissent | Blackmun, joined by Brennan, Marshall |
Cotton Petroleum Corp. v. New Mexico was an important case decided by the Supreme Court of the United States in 1989. The Court ruled that states can collect taxes from companies that are not owned by Native American tribes, even when these companies do business on tribal land.
Contents
What Was This Case About?
This case was about taxes on oil. It followed an earlier Supreme Court decision from 1982, called Merrion v. Jicarilla Apache Tribe. In that case, the Supreme Court said that the Jicarilla Apache Tribe could charge a special tax. This tax, called a severance tax, was for oil taken from their land. A severance tax is a fee paid for removing natural resources like oil or gas from the ground.
The Company and the Taxes
A company named Cotton Petroleum, which was not owned by the tribe, was taking oil from the Jicarilla Apache Tribe's land. Cotton Petroleum agreed to pay the tribe a 6% severance tax.
However, the State of New Mexico also wanted to collect a tax. New Mexico charged an extra 8% severance tax on all oil producers in the state. Cotton Petroleum paid this state tax but disagreed with it. They believed that federal law should prevent the state from collecting this tax. So, they filed a lawsuit to challenge New Mexico's tax.
The Supreme Court's Decision
The Supreme Court had to decide if New Mexico could tax Cotton Petroleum. The Court used a method called "Bracker balancing." This means they weighed the interests of the state, the tribe, and the federal government.
Why the State Could Tax
The Court found that New Mexico provided services to Cotton Petroleum. These services were worth about $89,384. Because the state provided these services, the Court felt New Mexico had a good reason to charge its tax.
The state collected a lot more in taxes from Cotton Petroleum, about $2,293,953, than the value of the services it provided. But the Court said there's no rule that the amount of tax collected must be exactly equal to the services given. This is called a "proportionality requirement," and the Court said it doesn't apply here.
The Court also explained that states are allowed to charge fair taxes to companies not owned by tribes. This is true even if these companies are doing business with tribes. However, the Court noted that the United States Congress could choose to make these companies tax-free if it wanted to.
