State settles ‘cigarette war’ with tribes

OLYMPIA – The state could get $10 million a year in revenue under a cigarette taxation agreement reached with the Puyallup Indian Tribe, the governor’s office announced Wednesday.

Gov. Gary Locke, in what was likely his last news conference before leaving office, said the agreement ensures that “the cigarette wars between the state of Washington and the Native American tribes of our state are over.”

The agreement with the Puyallups differs from the legislatively approved agreements with 17 of the state’s 29 tribes. It still needs to be approved by the Legislature and ratified by the incoming governor, Christine Gregoire.

Instead of having to match the state’s tax of $14.25 per carton of cigarettes like the other tribes, the Puyallups will only have to impose a tax of $11.75 per carton. However, 30 percent of their profits will go to the state, whereas the other 17 tribes get to keep 100 percent of their profits.

Tribal Chairman Herman Dillon Sr. said the agreement was mutually beneficial.

“The state will have a new revenue source to help with the large budget deficit, and the tribe will be able to conduct business that is competitive in the marketplace,” he said.

When asked if the agreement with the Puyallups was unfair to the other tribes that have already signed agreements with the state, Locke said there are trade-offs, and “I think the other tribes will recognize that.”

He added that the other tribes could seek to renegotiate.

Under federal law, cigarettes sold to Indians on tribal land are not subject to the tax, but cigarettes sold to non-Indians are taxed fully.

Locke said that with Wednesday’s agreement, and current negotiations, 90 percent of the cigarettes sold on tribal lands will fall under a tax partnership with the state.

“We’ve been able to end that whole practice of raids and stopping people as they left the smoke shop to confiscate the cigarettes they purchased,” Locke said.

Locke said that four other tribes – the Quileute, Snoqualmie, Suquamish and Stillaguamish – have expressed interest in reaching agreements with the state under the existing tax structure of the 2001 law. Under that law, tribes start imposing taxes at 80 percent of the state’s tax rate, getting to 100 percent within three years. He said four additional tribes have asked to be added to the list of tribes eligible to negotiate.

The agreement with the Puyallups requires that the tribe’s 23 independent retailers buy their cigarettes through state-licensed wholesalers, and that the retail selling price of cigarettes be no lower than the wholesale price. It also requires that the tax be added onto the retail sales price and not absorbed by the seller.

Tribal agreements

A list of tribes that have signed cigarette tax agreements with the state, those who have expressed interest in negotiating with the state, and those who have not.

Have signed agreements

* Tulalip Tribes

* Puyallup Tribe

* Chehalis Tribe

* Jamestown S’Klallam Tribe

* Muckleshoot Tribe

* Nisqually Tribe

* Nooksack Tribe

* Port Gamble S’Klallam Tribe

* Quinault Nation

* Samish Nation

* Swinomish Tribe