WASHINGTON – An Indian tribe cannot expand its tax-exempt holdings by buying up property that has been outside its reservation for generations, the Supreme Court ruled Tuesday.

In a near-unanimous decision, eight justices found the New York Oneidas cannot upend 190 years of local development and regulation. The decision reverses a lower appeals court ruling that the property in question could revert to Indian land.

The majority opinion, written by Supreme Court Justice Ruth Bader Ginsberg, sided with the small city of Sherrill, N.Y., which has been locked in a long-running fight with the Oneidas over unpaid taxes on a gas station, convenience store, and defunct T-shirt factory.

Todd Alhart, a spokesman for Gov. George Pataki, said lawyers for the state were reviewing the decision to see how it might affect ongoing efforts to build five Indian-run casinos in the Catskills.

“We’re very pleased by the court’s decision,” said Alhart.

The Oneida Indian Nation suggested the decision could hurt employment among its businesses, particularly the Turning Stone Casino.

“Certainly the nation wishes the court had ruled differently, but the nation will do everything it can to protect the over 4,200 jobs it has created,” the tribe said in a statement.

The Oneidas had claimed that because the Sherrill properties were once part of a sweeping 300,000-acre stretch of their land, those properties were no longer taxable by state and local officials after the tribe purchased the properties in 1997.

The Supreme Court disagreed, saying too much time had passed for the Oneidas to now claim tribal sovereignty on individual properties within the city, and that the Oneidas’ move would create a “disruptive” patchwork of local and Indian jurisdiction.

The justices also noted the “long-standing, distinctly non-Indian character of the area and its inhabitants,” and that most of the Oneidas left the area in the mid-1800’s.

“The tribe cannot unilaterally revive its ancient sovereignty, in whole or in part, over the parcels at issue. The Oneidas long ago relinquished the reins of government and cannot regain them through open-market purchases from current titleholders,” Ginsberg wrote.

The federal government sided with the Oneidas, but New York state stood with Sherrill, arguing a victory for the Oneidas would lead to a surge of expanding reservations and jurisdictional headaches.

Justice John Paul Stevens was the lone dissenting vote, arguing the decision “is at war with at least two bedrock principles of Indian law,” that only Congress can reduce a tribe’s reservation, and that only Congress can change a reservation’s tax status.

He also chided fellow jurists for worrying too much about the possible implications of allowing tribes like the Oneidas to expand reservations by reacquiring historic land.

“The majority’s fear of opening a Pandora’s box of tribal powers is greatly exaggerated,” Stevens wrote.

Ira Sacks, the lawyer who argued on Sherrill’s behalf, said the decision “has real consequences across all of upstate New York.” He also argued the case could have ramifications for the other 12 states that began as colonies, some of whom struck their own deals with Indian tribes before Congress asserted control over Indian issues.

Officials in nearby Madison County, where the Oneidas have also refused to pay property taxes on recently purchased property, were pleased by the court’s decision. John Campanie, a lawyer for the county, said while the ruling revolves around questions of property taxes and local authority, the court’s finding that there are limits to Indian sovereignty may have consequences for future disputes over sales tax or casinos.

Charles Curtis, a Wisconsin-based lawyer who filed a brief in the case on behalf of three upstate towns that supported Sherrill, said the decision puts new limits on the negotiating position of Indian tribes in disputes with local, state, and federal governments, and may eventually force more Indian-owned businesses to collect sales tax.

“The opinion seems very sweeping to me,” said Curtis.

“It shifts the balance of power significantly, and signals that a tribe cannot act unilaterally. The Oneida are going to have to look to Congress for a good part of any remedy, and state and county government have a right to be heard.”

Sen. Charles Schumer, D-N.Y., said the decision released taxpayers from a possible “stranglehold” that would have resulted from the court granting tax immunity.

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