Judge blocks cigarette tax on reservation

Business will remain as usual at Yakama tribal smoke shops for at least the next few months as a federal judge temporarily blocked the state from imposing its cigarette taxes on those shops.

After compliance issues led the state to scrap a cigarette tax agreement with the tribe in July, state officials sought to impose state cigarette taxes on tribal smoke shops on the 1.2 million-acre reservation.

They also told state cigarette wholesalers -- who largely supply tribal smoke shops -- not to accept the tribe's cigarette stamps, saying they were invalid.

The move has thwarted shipments to tribal smoke shops, said attorneys representing the tribe.

Now, the Yakama nation and several tribal business owners on the reservation are suing the state, seeking to free the tribe and tribal businesses from having to form a cigarette tax agreement with the state.

A sovereign nation, the tribe is exempt from state cigarette taxes.

State officials say their only interest in a tax agreement is to assure that non-Indian buyers on the reservation are paying state cigarette taxes. They don't wish to impose the tax on tribal members.

State officials have long argued that the tribe's immunity to state cigarette taxes gives tribal smoke shop owners an unfair price advantage over non-Indian retailers.

But during a teleconference Friday, U.S. District Judge Lonny Suko immediately granted the tribe a temporary restraining order allowing tribal smoke shops and cigarette wholesalers to continue doing business under the tribe's current tax scheme until a final ruling is made in the case.

Currently, the tribe assesses a tax of $16.20 per carton compared with the state's $20.25 per carton.

Under a proposed modified agreement, the tribe's tax was to increase to more than $17.75 per carton before talks broke down and enforcement problems led the state to drop the agreement altogether.

Suko based his decision on the fact that the tribe kept all revenue generated by the tax under the agreement and that the state's move had an adverse impact on the tribe.

He also wouldn't grant the state's request to put revenue generated from the tax into an escrow account, where it would eventually be disbursed to the winning party in the case.

"We're very pleased that the judge is taking a careful approach and wants us all to stop and really consider all the pieces," said Spokane attorney Theresa L. Keys, who is representing the tribe.

The state plans to comply with the temporary restraining order that blocks it from seeking criminal charges against tribal retailers or wholesalers over reservation cigarette sales lacking state taxation, said state Department of Revenue Deputy Director Leslie Cushman.

There are already U.S. Supreme Court rulings that give a state taxing authority over non-Indian buyers at tribal smoke shops, she said.

"We remain confident that we'll prevail (in the end)," she said.

But a recent U.S. 9th Circuit Court of Appeals ruling based on the 1855 Yakama treaty that ultimately freed tribal member Harry Smiskin from contraband cigarette charges has the tribe wondering if a compact is even needed.

While state officials say a compact levels the playing field between the two parties, Keys says the treaty was intended to give tribal members exclusive rights on their land.

"They are a treaty tribe and saying that they are to be treated like everyone else is against the treaty, their culture and way of life," she told the judge during the teleconference.

• The Classified Marketplace
• • Announcements
  • Public Notices
  • Legal Notices
  • Merchandise
  • Yard Sales
  • Animals
  • Finance

• Newspaper Ads
  View All