Confederated Tribes v. Gregoire

Indian tax immunity is not violated by the State of Washington’s cigarette excise tax RCW § 82.24, when tribal retailers are required to tax non-Indian purchasers of cigarettes, because “legal incidence,” the obligation to pay the tax, is intended to fall on the consumer. An absence of a statutory pass through provision is not outcome determinative to the inquiry.

The Tribes of the Yakama Nation (“the Tribes”) claimed that RCW § 82.24, Washington State’s current cigarette excise tax (“the Act”), violates Indian tax immunity because it leaves tribal retailers liable for payment of the tax for sales to non-Indians. The district court granted summary judgment to the State because, in accordance with Supreme Court precedent in Colville, the “legal incidence” of the Act did not fall on tribal retailers. The Ninth Circuit affirmed. Legal incidence classifies which entity will face legal consequences if the tax is not paid. The Court clarified that the cigarette tax is intended to apply only to the “first taxable event and upon the first taxable person,” in this case, the non-Indian purchaser. The Court further clarified that (1) where the Act precludes retailers from absorbing any portion of the cigarette tax, it implies they will pass on the tax to consumers, even absent an explicit “pass through” provision which would place the legal incidence of the tax on the purchaser; (2) pre-collection obligations establish retailers as transmittal agents but are not the functional equivalent of an explicit pass through because they do not resolve ultimate liability; (3) transmittal agents do not bear legal incidence; (4) retailer was not an “involuntary agent” because obligation to collect was only a “minimal burden” designed to prevent non-Indian avoidance of a lawful tax; (5) no evidence of a discriminatory compensation scheme where the Act does not compensate any party for serving as a collection agent for the State; (6) because retailers have other legal remedies for non-payment by third-parties it is immaterial that the state does not issue refunds for thefts; and (7) principle of tribal self-government is not offended by the requirement to tax non-constituents of the Tribe. AFFIRMED.