Flandreau tribe, state, clash in court

The Flandreau Santee Sioux Tribe has opened yet another front against the state of South Dakota in its bid to exert more independence over state government.

The tribe filed a lawsuit against the state in federal court challenging the state’s interpretation that contractors working on an expansion of the Royal River Casino are required to pay contractors excise tax to the state. The lawsuit alleges that the state’s imposition of the tax “subjects the tribe to an intrusion into tribal sovereignty within its reservation.”

The lawsuit also argues that the state is conflicting with federal laws that regulate commerce on reservations.

“The economic burden and the intrusion into tribal sovereignty interfere and are incompatible with the federal and tribal interests in promoting tribal self-government, self-sufficiency and economic development,” the lawsuit says.

The lawsuit represents only the latest clash between the Flandreau tribe and the state of South Dakota. Relations between the two entities have been tense. Most recently, the tribe announced plans to grow and sell recreational marijuana, a decision that drew fierce resistance from state officials and an eventual retreat by the tribe.

The tribe’s Royal River Casino has often been a flashpoint for disputes. In 2007, the tribe filed suit against the state, accusing the state of failing to negotiate in good faith to allow the tribe to expand the number of slot machines at the casino. Six months into his term as governor, in 2011, Dennis Daugaard ended the stalemate by agreeing to allow the tribe to double the number of slots.

Last year, Daugaard again signed off on an agreement that allows the tribe to double the number of slots from 500 to 1,000. As part of the deal, the tribe agreed to increase payments to Moody County to offset law enforcement expenses.

In December, the tribe began expanding the casino in a multi-million project to accommodate the increased slots. The Royal River expansion is at the heart of the tribe’s latest lawsuit.

The tribe argues that the latest gaming compact – the same one authorizing up to 1,000 slots – did not include a provision authorizing the state to collect contractors excise tax on the Royal River expansion.

South Dakota has not yet filed a response to the lawsuit. But Tony Venhuizen, Daugaard’s chief of staff, said the tribe doesn’t collect the contractors excise tax. “It is collected and remitted by the contractor,” he said.

The lawsuit acknowledges that the contractor – Henry Carlson Co. – has remitted two payments to the state, one in March and one in April. With each payment the contractor filed notices of protest.

“In each notice, the contractor requested that the state refund the payment to the tribe, explaining that the tribe had reimbursed the contractor for the taxes paid, and that the contractor authorized the tribe to commence and pursue any refund action which may be necessary on the contractor’s behalf,” the lawsuit says.

Tony Reider, the tribe’s president, did not return a message seeking comment.

South Dakota does not have a tax collection agreement with the Flandreau tribe other than a cigarette agreement that was signed in 1987, according to Wade LaRoche, the spokesman for the Department of Revenue. The state has comprehensive tax collection agreements with Standing Rock, Cheyenne River, Crow Creek, Rosebud and Oglala Sioux Tribes, as well as limited agreements with the Yankton Sioux Tribe and the Sisseton Wahpeton Oyate.

The latest lawsuit joins another one that the tribe filed in 2014. In that suit, the tribe is arguing that it shouldn’t have to collect sales or use tax on non-tribal members at the Royal River Casino and related businesses. A federal judge refused to dismiss that lawsuit in 2015. Both sides have filed for summary motion, and if the lawsuit survives, it could go to trial later this year.

The state, meanwhile, has threatened to withhold a liquor license to the tribal casino – a threat that was put on hold pending the outcome of the lawsuit.