US: Federal judge says tribal tobacco company owes up to $60M taxes

Source from:  Yakima Herald-Republic,January 29, 2014  01/30/2014

A U.S. District Court judge has ruled the Yakama Nation’s treaty rights don’t exempt a tribal cigarette manufacturer from having to pay federal tobacco excise taxes.

The U.S. Alcohol and Tobacco Tax and Trade Bureau last year asserted that King Mountain Tobacco owed $60 million in back taxes, but Judge Rosanna Peterson said the amount owed will be determined at a future date.

Delbert Wheeler, owner of King Mountain Tobacco and several other businesses based on the Yakama reservation, said he doesn’t believe he owes any taxes and plans to appeal.

“I think it’s a very prejudiced ruling and I think that Judge Peterson was totally disrespectful to our treaty and ignored what was promised and guaranteed to the Yakama people,” said Wheeler, an enrolled member of the Yakama Nation, in a Tuesday telephone interview.

Peterson’s decision Friday also dismissed a countersuit by the company seeking a declaration that it was exempt from federal excise taxes.

Peterson based her decision, in part, on the fact that the Yakamas’ treaty from 1855 contained no language that could be considered a tax exemption for cigarette manufacturing.

But Wheeler sees the same absence of specific language about taxes to mean that tribal members have the right to continue their commerce tax-free.

“When the treaty was made in 1855, I guarantee you that the Yakama people, when they caught fish, they didn’t think they were going to give a third of it to the U.S. government,” Wheeler said.

Under the treaty and the General Allotment Act of 1887, tribal land, which is held in trust by the federal government, and the products derived from the land, such as agricultural products, are exempt from taxes. Wheeler said he structured his company to be tax-free from the start by locating it on tribal land, where about 55 percent of the tobacco it uses is grown.

However, the judge ruled that finished tobacco products are not directly derived from the land, and therefore, not tax-exempt.

This case goes beyond tobacco taxes, Wheeler said, its another step in the Yakamas’ fight for their treaty rights.

“This is the most important thing in my life that I’m dealing with right now,” Wheeler said. “From my point of view, this jeopardizes our way of life. We have a right to take our goods to the market.”

The Yakama Nation brought the case on behalf of King Mountain, because as an individual, Wheeler didn’t have the standing to do so. But Wheeler said he’s paying all the legal expenses.

The legal issues for King Mountain started in 2011, when FBI agents raided his business and seized company records and computer equipment. When Wheeler first sought an order to block the federal government from assessing taxes on his tobacco products, the judge ruled against him last February. Wheeler said the Yakamas have always had to fight for their economic rights, from fishing to logging, and he plans to continue this fight with an appeal.

Wheeler Enterprises, which serves as an umbrella company for a variety of business, including a logging company and a gas station, employs between 250 to 500 people, depending on the season, with the vast majority of those working for King Mountain, a spokesman for the organization said.Enditem