72 N.Y.2d 720 (1988)
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Federal law preempts state efforts to impose taxes on transactions by licensed Indian traders with Native American retailers on reservations, as such taxes impermissibly burden trade with reservation Indians.
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Summary
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Herzog Brothers Trucking, Inc., a wholesale distributor of motor fuel, challenged New York State’s requirement that it prepay motor fuel taxes on deliveries to Seneca Indian retailers on reservations. The New York Court of Appeals initially ruled in favor of Herzog, holding that the federal Indian trader laws preempted the state’s tax regulations. The Supreme Court vacated and remanded the case for reconsideration in light of newly proposed state regulations. On reargument, the Court of Appeals adhered to its original decision, finding that the state’s tax scheme imposed an impermissible burden on trade with reservation Indians and was thus preempted by federal law.
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Facts
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Herzog Brothers Trucking, Inc. distributed motor fuels wholesale to authorized Seneca Indian retail establishments on the Allegany and Cattaraugus Reservations. These sales represented Herzog’s only business activity in New York State. New York State sought to collect motor fuel and sales taxes on these transactions, which the Indian retailers refused to pay, citing exemption from state taxation. To address tax avoidance by non-Indians purchasing fuel on the reservation, New York amended its tax law to impose taxes on the distributor at the time of import or first sale of the fuel. Although Indian consumers were exempt, the distributor was required to seek a refund for taxes paid on fuel sold to Indians.
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Procedural History
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The State imposed an assessment of approximately $480,000 against Herzog for unpaid taxes. Herzog challenged the assessment, arguing that its sales were exempt because they were made to Indians on reservations. Herzog then sought a declaration of unconstitutionality and a preliminary injunction to prevent the state from collecting the taxes. The Supreme Court granted the injunction, but the Appellate Division reversed. The Court of Appeals reversed the Appellate Division’s order. The Supreme Court granted certiorari, vacated the judgment, and remanded the case for reconsideration in light of new state regulations.
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Issue(s)
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Whether the State of New York could require a wholesale distributor of motor fuel to prepay taxes on fuel delivered to Indian retailers on Indian reservations for resale to both Indian and non-Indian consumers, without violating federal preemption principles governing trade with Native Americans.
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Holding
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Yes, because the state tax imposed an impermissible burden on trade with reservation Indians and was thus preempted by federal law. The Court adhered to its original decision.
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Court’s Reasoning
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The court reaffirmed its initial determination that Herzog was a