Lawrence R. Fry and Nellie R. Fry, Husband and Wife v. United States

Appellants, Lawrence and Nellie Fry, are members of the Confederated Tribes of the Colville Reservation (the Tribe). They appeal from a judgment of the district court holding that their income derived from logging operations on Reservation land is not exempt from federal income taxation. We affirm.

Kettle Falls Lumber Company, a non-Indian concern, contracted with the Tribe to cut timber from unallotted lands of the Reservation. Lawrence Fry, in turn, was hired by Kettle Falls as a logging subcontractor, but Fry himself had no direct contractual relationship with the Tribe. The majority of Fry’s employees were Indians. Fry and his wife paid income taxes on the income derived from this logging operation and then sued for a refund. The district court granted the Commissioner’s motion for summary judgment. This appeal followed.

At the outset, appellants concede that the general rule is that Indians, like other United States citizens, are subject to federal income taxation unless exempted by treaty or statute. Squire v. Capoeman, 351 U.S. 1, 6 , 76 S.Ct. 611 , 100 L.Ed. 883 (1956). In Squire , the Supreme Court found such an exemption in Sections 5 and 6 of the General…