In trying to determine where the modern Indian reservation ends and where old-fashioned tax laws begin, a Supreme Court (search) justice worried Tuesday that a ruling in favor of an upstate New York tribe would create governmental chaos.

The court heard arguments in the fight between the city of Sherrill, N.Y., over unpaid taxes on a gas station, convenience store and defunct T-shirt factory purchased by the New York Oneidas (search). The city foreclosed on the properties in 2000, and the tribe sued.

A Supreme Court ruling could have far-reaching implications for tribes in New York and other states. In New York, more than 330,000 acres are now subject to Indian land claims, and Oneida tribes in Wisconsin and Ontario are joined in that dispute.

The Oneidas claim that because the Sherrill properties were once part of a vast 300,000-acre swath of their land, the land is no longer taxable by state and local officials. The tribe reacquired the properties in 1997.

The 2nd U.S. Circuit Court of Appeals sided with the tribe, a ruling which the state claims will lead to "regulatory chaos" if allowed to stand.

Justice Antonin Scalia (search) voiced those concerns in questioning Oneidas lawyer Michael Smith.

"What you're asking the court to do is sanction a very odd checkerboard system of jurisdiction... It would just create a chaotic situation in New York state if we say you have jurisdiction over any piece of land you buy," said Scalia.

Sherrill's lawyer Ira Sacks said the tribe lost its claims to tribal land in the town through an 1838 treaty and 190 years of inattention.

But Justice Stephen Breyer said prior Indian case law suggested "the whole title doesn't just disappear simply with the passage of time."

The National Congress of American Indians (search), representing more than 250 tribes, says the law clearly bars state and local governments from taxing Indians without specific federal legislation passed by Congress.

The case is City of Sherrill v. Oneida Indian Nation of New York, 03-855.