## Facts

- Warren Trading Post Company, a non-Indian corporation, operated a federally licensed retail trading post on the Navajo Indian Reservation in Arizona.
- The company’s business was almost entirely sales to Navajo Indians on the reservation.
- Arizona imposed a 2% transaction privilege tax on the trading post’s gross proceeds or gross income from those on-reservation sales.
- The trading post was licensed under federal Indian trader statutes and subject to detailed federal rules governing trade with reservation Indians, including terms of operation and pricing oversight.
- The Arizona Supreme Court upheld the tax, rejecting the company’s federal preemption arguments.

## Issues

1. Whether federal statutes and regulations governing federally licensed Indian traders preempt Arizona’s transaction privilege (gross receipts) tax as applied to on-reservation sales to Navajo Indians.
2. Whether Arizona’s tax constitutes an impermissible additional burden on federally regulated trade with reservation Indians.

## Decision

- The Supreme Court reversed and remanded.
- The Court held Arizona could not impose the 2% gross receipts tax on income a federally licensed Indian trader derived from sales to reservation Indians on the Navajo Reservation.
- The Court resolved the case on federal statutory preemption grounds and did not reach the Indian Commerce Clause argument.

## Legal Principles

- When Congress establishes a comprehensive statutory and regulatory scheme governing trade with reservation Indians by federally licensed Indian traders, state laws that add burdens to that federally regulated trade are preempted.
- Field preemption may arise from the breadth and detail of federal regulation even without an express federal prohibition on state taxation.
- A state tax that falls directly on a trader’s on-reservation sales to Indians, where the trader operates under pervasive federal controls, is an additional burden inconsistent with the federal scheme absent clear congressional authorization.

## Conclusion

Because federal law comprehensively regulates on-reservation trading by licensed Indian traders, Arizona’s gross receipts tax on a trader’s on-reservation sales to Navajo Indians was preempted and therefore invalid as applied.


Warren Trading Post Co. v. Ariz. State Tax Comm’n, 380 U.S. 685 (1965)