Confederated Tribes of Colville v. State of Wash.

Decision Date22 February 1978
Docket NumberNo. 3868 and 3909.,3868 and 3909.
CourtU.S. District Court — District of Washington
PartiesCONFEDERATED TRIBES OF the COLVILLE INDIAN RESERVATION, Lummi Indian Tribe and Makah Indian Tribe, Plaintiffs, v. STATE OF WASHINGTON, Charles Hodde, Individually and as Director of the State of Washington Department of Revenue, Jack G. Nelson, Individually and as Director of the State of Washington Department of Motor Vehicles, and Robert S. O'Brien, Individually and as Washington State Treasurer, Defendants. UNITED STATES of America, Plaintiff, v. STATE OF WASHINGTON, Defendant, Confederated Bands & Tribes of the Yakima Indian Nation, Intervenor-Plaintiff.





Robert L. Pirtle, Ziontz, Pirtle, Morisset, Ernstoff & Chestnut, Seattle, Wash., for plaintiffs in No. 3868.

Slade Gorton, Atty. Gen. for the State of Washington, Matthew J. Coyle, Asst. Atty. Gen., Olympia, Wash., for defendants.

Dean C. Smith, U. S. Atty., Spokane, Wash., for plaintiff in No. 3909.

James B. Hovis, Hovis, Cockrill & Roy, Yakima, Wash., for intervenor-plaintiff.

Before KILKENNY, Circuit Judge, and EAST and TURRENTINE, District Judges.*


EAST, District Judge:

These causes, Nos. 3868 and 3909, were by stipulation of the parties consolidated for hearing and submitted to the Court on their respective merits following oral argument at Seattle, Washington on March 28, 1977.

CAUSE NO. 3868


The plaintiffs are Confederated Tribes of the Colville Indian Reservation, Lummi Indian Tribe, and Makah Indian Tribe (Tribes).

The defendants are the State of Washington; Charles Hodde, Director, Department of Revenue, State of Washington; Jack G. Nelson, Director, Department of Motor Vehicles, State of Washington; and Robert S. O'Brien, Treasurer, State of Washington (State).


We note jurisdiction of these causes pursuant to 28 U.S.C. ? 1362, 28 U.S.C. ?? 2201 and 2202, and 28 U.S.C. ? 2281.1


This action was commenced on May 17, 1973, and District Judge Powell on November 5, 1973, in conformity with 28 U.S.C. ? 2284, issued a temporary restraining order enjoining the State from enforcing its cigarette and tobacco products taxes against the Tribes. By stipulation, the parties agreed to the continuance of the restraining order pending review by the full three-judge District Court. On September 6, 1974, the full Court converted the temporary restraining order into a preliminary injunction. During the ensuing months, discovery proceeded until this Court stayed further proceedings pending the Supreme Court's decisions in Moe v. Confederated Salish & Kootenai Tribes of the Flathead Reservation, 425 U.S. 463, 96 S.Ct. 1634, 48 L.Ed.2d 96 (1976), and Bryan v. Itasca County, 426 U.S. 373, 96 S.Ct. 2102, 48 L.Ed.2d 710 (1976). Following the Supreme Court's disposition of those cases and after extensive discovery proceedings and briefing, the causes with the issues refined were submitted for decision upon stipulated facts as supplemented by deposition testimony and affidavits.


The Tribes now seek declaratory relief, with injunctive enforcement, from the State's statutes and administrative regulations imposing taxes and collection procedures upon on-reservation sales to nonmembers of the Tribes by tribally licensed retailers (Dealers) of cigarettes (R.C.W. 82.24) and tobacco products (R.C.W. 82.26), and from the State's statutes and administrative regulations imposing taxes upon motor vehicles (R.C.W. 82.44) and mobile homes, travel trailers and campers (R.C.W. 82.50) owned by the Tribes and/or their members residing within the reservations. In addition, the Tribes seek damages against the State arising out of actions taken to enforce assessments of the challenged cigarette taxes. The Tribes also seek declaratory relief, with injunctive enforcement, from the State's exercise of civil and criminal jurisdiction over the Tribes and their members residing on the reservations (R.C.W. 37.12).


The State generally contests the Tribe's claims and seeks declaratory relief of lawful enforcement of its challenged taxing schemes as presently administered.


A. Tribes:

Each of the Tribes is a United States Government recognized sovereign Indian tribe governed by a business or tribal council under a constitution and bylaws approved by the Secretary of Interior.2

The Colville Indian Reservation was established by Presidential Executive Order on July 2, 1872, 1 Kapler, Indian Affairs, Laws and Treaties, 916 (2d Ed. 1904), and encompasses 1.3 million acres in the northeastern section of the state. Approximately 3,200 of the Tribe's 5,800 enrolled members live on the reservation, constituting about 46 percent of the total population.

The Lummi Indian Reservation was established by the treaty of Point Elliot in 1855, 12 Stat. 927, and encompasses 7,319 acres primarily upon a peninsula near Bellingham, Washington. About 1,250 of the Tribe's 2,000 enrolled members live on the reservation.

The Makah Indian Reservation was established by treaty in 1855, 12 Stat. 939, and encompasses 28,000 acres at the northwestern tip of the Olympic Peninsula. Approximately 900 of the Tribe's 1,000 members live on the reservation, constituting about 63 percent of the total population of the reservation.

Each of the reservations is isolated and underdeveloped; most essential goods and services are located off the reservations.3 Most Indian households on the reservations own at least one automobile, and the Tribes own numerous motor vehicles. While some of the tribally and individually owned vehicles are operated exclusively on the reservation, others are operated on and off the reservation. Many Indian families reside in mobile homes on the reservations, and other Indian families are obligated for the purchase or have planned the future purchase of mobile homes for on-reservation location. The Colville and Makah Tribes are plagued by unemployment rates of 33 percent and 60 percent, respectively, and all of the Tribes are desirous of economically developing their reservations to stimulate employment and generate additional tax revenues to help fund programs run by the tribal governments. These programs are designed to improve the economic well-being, health, education and social welfare of the Tribes' members.

B. State's Enforcement of the Statutes:

The State has for a period of nine years attempted to tax cigarettes and tobacco products sold by Indians on the Tribes' reservations. Presently the cigarette tax amounts to $1.60 per carton. The tax is imposed by requiring Dealers to sell only cigarettes to which tax stamps have been affixed. Dealers are permitted to purchase either prestamped cigarettes or a supply of stamps from the State which are affixed to the cigarettes by the Dealer prior to sale, in which case the Dealer is entitled to a specified rate of reimbursement from the State. However, WAC 458-20-192 (Rule 192) and excise tax bulletin ETB 504.08.192, November 24, 1976, restrict the taxes on cigarettes and tobacco products to sales to non-Indians by Indian tribes and Indians, as defined therein. That is, the State construes the taxes as being inapplicable to sales to Indians for their own use or for on-reservation resale to other Indians.4

Under R.C.W. 82.24.090, 82.32.070, Rule 192 and the excise tax bulletin, Dealers are required to keep certain specified records related to taxable and nontaxable transactions. Neither the Tribes nor their Dealers have sought authorization from the State to possess unstamped cigarette products and each has professed that it will not comply with State's cigarette and tobacco product taxing scheme.

On December 19, 1972, in an effort to enforce the cigarette taxing scheme, the State issued orders to tribal outlets on each reservation assessing unpaid taxes alleged to be due under R.C.W. 82.24, and in April, 1973, resorted to seizures of unstamped cigarettes in the stream of interstate commerce and bound for the Tribes' reservations. Furthermore, the State declared its intention to continue such seizures in the future; however, such seizures were temporarily enjoined as above delineated.

C. Tribal Retailers' Taxing Schemes:

Each Tribe, during the pretrial development of the ultimate issues in these causes, enacted ordinances regulating the sale, distribution and taxation of cigarettes and tobacco products on its reservation. Each tribal ordinance was approved by the Secretary of Interior of the United States. Pursuant to the respective ordinances, the Tribes have established one or more tobacco outlets on their respective reservations.

The Dealer at each tribal tobacco outlet is a federally licensed Indian trader and a tribally licensed dealer who manages the tribally owned tobacco business outlet. Simultaneously, the Dealer at each tribal tobacco outlet, except at the Makah Resort, manages his own separate business of selling a variety of merchandise at retail. As remuneration for managing a tribal tobacco outlet, each Dealer is entitled to retain the gross revenue derived from sale of cigarettes and tobacco products in excess of the wholesale distribution price and excise tax levied by the respective Tribe.

All cigarettes and tobacco products are purchased with federally restricted tribal funds and from authorized wholesalers outside the state, which are shipped directly to the respective Tribes by sealed cargo trucks of Interstate Commerce licensed carriers. Distribution is made to the Dealers when tribal cigarette taxes fixed by the tribal or business council are collected.

The tribally levied cigarette tax ranges from forty to fifty cents per carton. Tribal ordinances read that the cigarette tax imposed by each Tribe is a tax upon distribution of cigarettes on the reservation by the respective...

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