In the case of Merrion et al., DBA Merrion & Bayless, et al. v. Jicarilla Apache Tribe et al., 1981, the U.S Supreme Court ruled in favor of the Jicarilla Apache Tribe's right to impose taxes on non-tribal businesses operating on their reservation land. The plaintiffs were oil and gas companies who had leases with the tribe but objected to a tribal ordinance that imposed severance tax on minerals extracted from tribal lands. They argued that such taxation was beyond the tribe’s authority and infringed upon state sovereignty rights as well as federal regulatory powers over Indian affairs. The court held that an Indian tribe has inherent sovereign power to tax non-member activities taking place within its jurisdiction unless specifically limited by Congress or superseded by treaty provisions. It further stated that this taxing power is part of a tribe's self-government abilities which includes regulating economic activity within its jurisdiction for raising revenue necessary for essential governmental functions.

In the dissenting opinion for Merrion et al., DBA Merrion & Bayless, et al. v. Jicarilla Apache Tribe et al., Justice Stewart, joined by Justices Brennan and Marshall, argued that while Indian tribes do possess certain inherent powers of self-government, these powers are not absolute or unlimited. They contended that a tribe's power to tax non-Indian entities operating on its reservation is subject to federal law and must be expressly granted by Congress. The dissenters disagreed with the majority's view that such taxing authority was an inherent aspect of tribal sovereignty; instead they believed it should be seen as a privilege extended by federal law which could also be withdrawn or modified at any time by Congress. Furthermore, they expressed concern over potential negative impacts on interstate commerce if every Indian tribe were allowed to impose taxes unilaterally without congressional approval.