Tribe Takes Tobacco Tax Fight to 9th Cicuit

     SEATTLE (CN) — Facing a $23 million federal tax bill it doesn’t believe it should pay, a Native American-owned tobacco company urged the Ninth Circuit to keep its land safe from seizure by the U.S. government.
     King Mountain Tobacco initiated the challenge at hand five years ago, telling a federal judge that the Yakama Indian Nation’s 1855 treaty with the United States bars it from having to pay excise taxes on tobacco products.
     The company runs on 80 acres of Yakama land in White Swan, Washington, started in 2006 by Delbert Wheeler Sr., a member of the Yakama tribe who died this past July.
     U.S. District Judge Rosanna Peterson sided with the government at summary judgment, however, finding that finished tobacco products — unlike unprocessed tobacco grown on the reservation — are not exempt from taxation under the General Allotment Act.
     The Yakama Nation’s attorney Randolph Barnhouse told the Ninth Circuit on Tuesday that Peterson’s ruling gave Uncle Sam the green light to collect $23 million in taxes, penalties and interest from King Mountain.
     Pushing the federal appeals court to reverse, Barnhouse said excise taxes “cannot be applied on Yakama allotted lands.”
     Judge M. Margaret McKeown interrupted to ask Barnhouse about a taxpayer-refund suit.
     “Isn’t that a remedy?” McKeown asked.
     “It is a remedy, but it’s not a remedy available to my client,” Barnhouse said.
     Since the tax was assessed against King Mountain, not the Yakama Nation, Barnhouse said the tribe’s “main interest” is ensuring that tribal land is not seized or forfeited for payment of the taxes.
     Justice Department attorney Patrick Urda urged the court to affirm.
     “Treaty provisions can’t be stitched together to create an exemption that’s not clearly expressed,” Urda said.
     The attorney noted that a taxpayer-refund suit is the “course Congress has designed” for King Mountain to seek relief. Urda said that neither the 1855 Treaty nor the Allotment Act exempts King Mountain from the tax.
     Judge Mary Schroeder asked “what happens” if the tax isn’t paid.
     Urda said there wouldn’t be a lien or levy on any land held in trust for an Indian tribal member.
     “We don’t believe that forfeiture would apply either,” he said.
     King Mountain’s buildings and plant operation could, however, be forfeited, Urda said.
     The panel did not say when it will rule on the case.

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