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Tribes left out of Internet and cigarette tax bills
Wednesday, November 19, 2003

Two pieces of tax legislation making their way through the U.S. Congress would destroy Indian sovereignty, tribal leaders warned on Tuesday.

A meeting at the 60th annual National Congress of American Indians (NCAI) convention focused on the Prevent All Cigarette Trafficking (PACT) Act and the Streamlined Sales and Use Tax Act. Participants said the bills would overturn hundreds of years of Supreme Court precedent and undermine their rights by unilaterally imposing taxation systems on Indian Country.

"It is a challenge to our sovereignty," said Arlen Melendez, chairman of the Reno-Sparks Indian Colony in Nevada.

PACT, introduced in the Senate as S.1177, would allow states to impose taxes on the sale of cigarettes online. It is backed by the leaders of the Senate Judiciary Committee as a way to recover millions of dollars in "lost" revenue.

But tribal leaders said it would abrogate tribal sovereign immunity. Provisions in the bill allow state governments to bring lawsuits in federal court against retailers -- including Indian businesses -- that don't collect the sales tax. The language toughens civil fines and criminal penalties for alleged violators.

"It's scary for one reason," said Brian Cladoosby, chairman of the Swinomish Tribe of Washington. "For the first time in 200 years, it will make tribes subject to state enforcement."

Joe Brooks, chief of the Delaware Tribe of Oklahoma and an owner of a smokeshop, said imposition of the state sales tax would wreck Indian businesses. "It's merely a ploy to put Indian Country out of business," he told meeting participants. It's a direct stab on Indian Country."

The Streamlined Sales and Use Tax Act, introduced in the Senate as S.1736 and the House as H.R.3184, would set up a uniform system to handle taxation of goods sold online. State governments are pushing the bill because they say they are losing out on billions due to e-commerce.

"They haven't even thought of tribes," said John Dossett, NCAI's general counsel. A reservation resident who buys something online would have to pay tax to the state, he said. The tribe should be given a right to those revenues, he said.

"The state and federal government will implement a system that cuts out tribes, possibly for the next 100 years," he told meeting participants.

Eric Lindbloom, a representative of the Campaign for Tobacco Free Kids, drew negative reactions from the packed meeting room for supporting the goals of the PACT Act. From a public health standpoint, imposing higher taxes on cigarettes is beneficial because it keeps Indian kids from smoking, he said.

"Is the answer to that taxation, taxation, taxation?" Brooks responded. "No."

Lindbloom acknowledged that tribes haven't been considered by the drafters of the legislation, which include the Republican and Democrat leaders of the Senate Judiciary Committee. "We want a bill to pass," he said.

Sen. Ben Nighthorse Campbell (R-Colo.), with the support of Sen. Daniel Inouye (D-Hawaii), have placed a hold on PACT pending resolution of tribal issues, he added. There has been little public debate on the bill.

"We need to have a hearing on this bill," said Cladoosby. "Indian Country needs to be heard."

Get the Bills:
PACT Act (S.1177) | Streamlined Sales and Use Tax Act (S.1736)