American Indians are subject to US income taxes on gravel mined on the reservation, a US appeals court said in August.

The decision is the latest in a saga that has been playing out in both the US Tax Court and a federal district court and in which the two courts came to opposite conclusions.

The appeals court decision should now put the matter to rest.

Alicia Perkins, a Seneca Indian, got permission from the tribe to mine gravel on a Seneca reservation in upstate New York. She owned a trucking company. The company had income from gravel sales in 2008, 2009 and 2010.

She argued that two treaties that the US government signed with the Seneca Indians in 1794 and 1842 bar the US from taxing income that a member of the tribe earns from gravel sales.

The Tax Court concluded that neither treaty spares her from having to pay income taxes on the gravel sales. The district court said the treaties protect her from having to pay taxes on the income.

American Indians have been considered US citizens since 1924. The US tax code says that “every individual” is taxed on “all income from whatever source derived” unless the income is specially excluded. Indians are subject to US income taxes like everyone else.

However, the tribes are still considered sovereign nations.

Treaties with Indian tribes are interpreted liberally by the US courts. Courts act based on what they believe the tribe understood was the agreement when it signed the treaty.

The 1794 treaty with the Senecas promised that the government will not disturb “the free use and enjoyment” by the Senecas of their land. The 1842 treaty bars the government from taxing “real property” belonging to the tribe.

The Tax Court said gravel is no longer “real property” after it has been removed from the ground.

The district court looked at analogous situations where courts have said there was a strong enough connection between income and land for the US government not to be able to tax the tribe. It said gravel is not a retail product, like cigarettes or gasoline, that is brought on to the reservation, or a commercial improvement on land like an apartment complex. Gravel is a type of mineral that was extracted directly from land belonging to the Seneca Nation.

The case landed in both lower courts because Ms. Perkins challenged the taxes the IRS said she owed in 2008 and 2009 in the US Tax Court where taxes do not have to be paid before going to court. She then paid the 2010 taxes and sued for a refund of them in the federal district court.

After losing in the Tax Court, she appealed the decision to a US appeals court while still waiting for the case to play out fully in the district court. The appeals court said it would not comment on the district court case because that case is still headed to trial. The district gave its view of the law in response to pre-trial motions and said a trial is needed to establish the share of Ms. Perkins’ income in 2010 that is attributable to gravel sales.

The appeals court agreed with the government. It rejected the argument that any exemption available under the treaties to the Seneca Nation must also extend to individual members of the tribe. It said, “American Indian nations are treated differently from individual members.”

The case is Perkins v. Commissioner.