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Tobacco tax bill still poses challenges for Indian Country
Tuesday, December 16, 2003

A bill that gives states greater powers to collect taxes on the sale of cigarettes cleared the U.S. Senate last week with little debate.

Before winning unanimous consent from the chamber, the Protect All Cigarette Trafficking (PACT) Act was stripped of its most damaging provision. Language in the original bill would have abrogated tribal sovereign immunity by allowing states to bring tax enforcement actions against tobacco businesses on Indian land.

Sens. Ben Nighthorse Campbell (R-Colo.) and Daniel Inouye (D-Hawaii), the chairman and vice-chairman of the Senate Indian Affairs Committee, objected to the provision. They worked with the National Congress of American Indians (NCAI) and other organizations to remove what tribal leaders said was a reversal of 200 years of Supreme Court precedent.

But tribal leaders and their advocates aren't entirely satisfied with the final product. They warn S.1177 could still lead to state intrusion on tribal rights.

Furthermore, the version that will be considered in the House next year includes language that waives tribal immunity. H.R.2824 authorizes states to sue tribes and individual Indians in federal court if they don't collect the state tax.

"It's merely a ploy to put Indian Country out of business," Joe Brooks, chief of the Delaware Tribe of Oklahoma, said at the annual NCAI convention last month. "It's a direct stab on Indian Country."

PACT supporters include the Campaign for Tobacco Free Kids, which believes imposing taxes discourages youth from smoking. American Indian and Alaska Native teens have the highest rate of tobacco use among all ethnic and racial groups.

But the biggest backers are state governments that claim they will lose up to $1.5 billion in tax revenues by the year 2005 through the sale of tobacco via the Internet and mail order businesses. The National Association of Attorneys General worked with lawmakers on the latest version of S.1177.

The sponsors of PACT include Sens. Orrin Hatch (R-Utah) and Patrick Leahy (D-Vt.), the leaders of the Senate Judiciary Committee, and Sen. Herb Kohl (D-Wis.), a member of the committee. Last week, Kohl said the bill "will achieve the goals we set out to attain -- to put an end to both cigarette trafficking and tobacco tax avoidance -- while leaving the important principles of Indian tribal sovereignty unaffected. "

"These moderate, but important, changes will further enable federal, state, local, and tribal officials to crack down on tobacco smugglers and ensure that Internet tobacco sellers pay applicable taxes," he said on Tuesday, when S.1177 was approved.

Tribal advocates are concerned the bill could be interpreted to apply not only to Internet businesses, which some tribes and tribal members operate, but to smokeshops on Indian land. They also believe a provision that allows states and local governments to create lists of "compliant" and "non-compliant" businesses intrudes on tribal sovereignty.

Additionally, tribes point out that they have already entered into compacts with some states regarding tobacco taxation. Tribes, like states, depend on tobacco revenues to keep their government running.

In pushing for the passage of PACT, Leahy said it would "crack down on the growing problem of cigarette smuggling, both interstate and international, as well as to address the connection between cigarette smuggling activities and terrorist funding." "Criminals are getting away with smuggling and not paying tobacco taxes because of weak punishments, products that are often poorly labeled, the lack of tax stamps and the inability of the current distribution system to track sales from state to state," he said on the Senate floor.

H.R.2824, the Internet Tobacco Sales Enforcement Act, will be considered by the House Judiciary Committee once the House reconvenes in January 2004. It was approved October 2 but a subcommittee of that panel. The definition of "person" is expanded to include tribal governments and Indian retailers.

Get the Bills:
PACT Act (S.1177) | Internet Tobacco Sales Enforcement Act (H.R.2824)

Relevant Links:
National Congress of American Indians - http://www.ncai.org
Campaign for Tobacco Free Kids - http://www.tobaccofreekids.org

Related Stories:
Tribes left out of Internet and cigarette tax bills (11/19)

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