Washington Dept. of Licensing v. Cougar Den, Inc.

Whether the Yakama Treaty of 1855 creates a right for tribal members to avoid state taxes on off-reservation commercial activities that make use of public highways.

Petitioner, the Washington Department of Licensing, held an administrative hearing against Respondent, alleging that Respondent owed $3.6 million in taxes, penalties, and interest after failing to pay state taxes on wholesale fuel under Wash. Rev. Code §§ 82.36, 82.38. Respondent argued that under Article III of the 1855 Treaty between the Yakama Nation and the United States, it is exempt from state taxes on wholesale fuel distribution. The Director of Licensing issued a final order rejecting Respondent’s argument. On appeal the superior court held that the treaty exempted the Yakama Tribe from taxes on fuel transported through public highways. Petitioner appealed to the Washington Supreme Court, which affirmed the decision of the lower court, holding that at the time of signing, the Yakama Nation would have understood the treaty as exemption from taxation for use of public highways. Petitioner argues that under the decisions of the Ninth Circuit, the Washington Supreme Court has erred in deciding that the Treaty exempts the Yakama Nation from state taxes on wholesale fuel distribution and that Article III of the treaty does not create the right to trade off reservation free of state tax obligations. See United States v. King Mountain Tobacco Co., 131 F. Supp. 3d 1088 (E.D. Wash. 2015). Petitioner further argues that the taxation is a non-discriminatory tax on wholesale fuel and not on use of public highways, which does not qualify for exemption under Article III of the Yakama Treaty.