Page:United States Reports 546.pdf/331

 546US1

120

Unit: $U11

[08-22-08 15:19:53] PAGES PGT: OPIN

WAGNON v. PRAIRIE BAND POTAWATOMI NATION Ginsburg, J., dissenting

80,000 to in-state nonexempt purchasers and 20,000 to ex­ empt purchasers, for example, the United States or a U. S. contractor. The distributor would compute its tax liability by “deducting” the 20,000 gallons, see ante, at 108, n. 3, but would remit tax only on the 80,000 gallons bought by in-state nonexempt retailers.3 If the distributor elected to build in­ ventory in January by holding an additional 10,000 gallons for resale in February, Kansas would tax in January, but the distributor would effectively offset in February the tax paid in January on the inventory buildup. Again, in the end, only fuel actually sold to in-state nonexempt buyers would be bur­ dened by Kansas’ fuel tax.4 Kansas’ attribution of controlling effect to the formal legal incidence of the tax rests in part on the State’s misreading of Oklahoma Tax Comm’n v. Chickasaw Nation, 515 U. S. 450 (1995). See Brief for Petitioner 8, 16–20. The Court in that case distinguished instances in which the legal incidence of a State’s excise tax rests on a tribe or tribal members, from instances in which the legal incidence rests on nonIndians. When “the legal incidence. . . rests on a tribe or on tribal members for sales made inside Indian country,” the Court said, “the tax cannot be enforced absent clear congres­ 3 The Court analogizes the fuel excise tax “deduction” of exempt sales to the federal income tax deduction for home mortgage interest. Ante, at 109. The analogy is misconceived. An excise tax “deduction” bears no realistic resemblance to a personal income tax deduction provided by Congress for a nonbusiness personal expense. An excise tax “deduction,” however, may fairly be compared to the standard income tax treatment of merchandise returns. In any period, goods returned and held for resale offset goods sold, so that only net sales yield gross proﬁts for taxation purposes. See 26 CFR § 1.446–1(a)(4)(i) (2005); cf. § 1.458–1(g) (adjust­ ments under elective treatment of certain post-year-end returns of maga­ zines, paperback books, and recordings). 4 If in February, the 10,000 gallons were destroyed and thus not sold, Kansas would nonetheless offset the fuel tax burden as Kan. Stat. Ann. § 79–3417 (1997) provides, because these gallons would never be sold to in-state nonexempt buyers.