Arizona Department of Revenue v. Blaze Construction Co.

Background

Blaze Construction, a company incorporated under Blackfeet Tribe law but treated here as a non‑Indian firm, contracted with the Bureau of Indian Affairs to build and repair roads on several Arizona reservations under a federal highway program. The Arizona Department of Revenue assessed a transaction privilege (gross receipts) tax on Blaze’s federal contract proceeds. Blaze won at the agency level, the State prevailed in Arizona’s Tax Court, and the Arizona Court of Appeals later held federal law barred the tax; the Supreme Court agreed to review and now reversed the Court of Appeals.

Reasoning

The central question was whether the Court’s earlier rule—allowing States to tax private contractors who are not federal agencies—still applies when the contractor’s work occurs on Indian reservations. The Court said yes. It relied on the rule from United States v. New Mexico that tax immunity is narrow: it applies only when the United States itself or an entity so closely tied to the Government is taxed. Because the tax legally falls on Blaze, not the Federal Government, and Congress did not exempt these contracts, federal law does not bar Arizona’s tax. The Court declined to apply a special on‑reservation interest‑balancing test to federal contracts with non‑Indian contractors.

Real world impact

States may collect nondiscriminatory transaction taxes from private firms performing federal contracts on reservations unless Congress or the State provides otherwise. The decision leaves open whether different results would follow if a tribe took over federal program administration under self‑determination contracts, because the Tribes here did not assume that role.