FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CONFEDERATED TRIBES AND
BANDS OF THE YAKAMA INDIAN
NATION,
Plaintiff-Appellant,
v.
CHRISTINE O. GREGOIRE, Governor
of the State of Washington; CINDI
HOLMSTROM, Director of the No. 10-35776
Washington State Department of D.C. No.
Revenue; LESLIE CUSHMAN, Deputy 2:08-cv-03056-
Director of the Washington State RHW
Department of Revenue; STUART
OPINION
THRONSON, Assistant Director of
Special Programs of the
Washington State Department of
Revenue; PAT PARMER, Chief of
Enforcement and Education
Division of the Washington State
Liquor Control Board,
Defendants-Appellees.
Appeal from the United States District Court
for the Eastern District of Washington
Robert H. Whaley, Senior District Judge, Presiding
Argued and Submitted
August 3, 2011—Seattle, Washington
Filed September 23, 2011
18159
18160 CONFEDERATED TRIBES v. GREGOIRE
Before: John T. Noonan, Jr. and Milan D. Smith, Jr.,
Circuit Judges, and Andrew J. Guilford, District Judge.*
Opinion by Judge Milan D. Smith, Jr.;
Concurrence by Judge Guilford
*The Honorable Andrew J. Guilford, United States District Judge for
the Central District of California, sitting by designation.
18162 CONFEDERATED TRIBES v. GREGOIRE
COUNSEL
Phillip E. Katzen, Cory J. Albright, and Zach Welcker; Kanji
& Katzen, PLLC, Seattle, Washington, for the appellants
Robert M. McKenna, Attorney General of Washington, Heidi
A. Irvin, David M. Hankins, and Robert K. Costello, Office
of the Attorney General, Olympia Washington, for the appel-
lees.
OPINION
M. SMITH, Circuit Judge:
States lack authority to tax Indian tribes or registered mem-
bers of Indian tribal organizations absent a clear authorization
from Congress. Cnty. of Yakima v. Confederated Tribes &
Bands of the Yakima Indian Nation, 502 U.S. 251, 258
(1992). The Tribes of the Yakama Nation (the Yakama or
Tribes) claim that this principle of Indian tax immunity has
been violated by the State of Washington’s current cigarette
excise tax, which the Tribes argue leaves their retailers liable
CONFEDERATED TRIBES v. GREGOIRE 18163
for payment of the tax when retailers sell cigarettes to non-
Indians.
In 1978, a three-judge district court held that the legal inci-
dence of the Washington cigarette tax did not fall on the
Tribes. Confederated Tribes of Colville Indian Reservation v.
Washington, 446 F. Supp. 1339 (E.D. Wash. 1978). In 1980,
the Supreme Court agreed with the three-judge court and
upheld the validity of Washington’s cigarette tax and its
requirement that tribal retailers collect the tax from non-
Indian cigarette purchasers. Washington v. Confederated
Tribes of the Colville Indian Reservation, 447 U.S. 134,
159-61 (1980). Although some elements of Washington’s cig-
arette tax law have been modified over the past thirty years,
we conclude, as did the district court in awarding summary
judgment to the State, that none of those changes has materi-
ally altered the legal incidence of the cigarette tax approved
of in Colville, and we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Washington State Cigarette Tax
The State of Washington levies a general excise tax on all
cigarettes sold, used, consumed, handled, possessed or distrib-
uted within the State. See Revised Code of Washington
(RCW) §§ 82.24 et seq. (the Act or cigarette tax); see also id.
§§ 82.24.020, 82.24.026. This excise tax is levied “at the time
and place of the first taxable event and upon the first taxable
person within [the] [S]tate.” RCW § 82.24.080(2).
The cigarette tax primarily is collected from licensed ciga-
rette wholesalers, who purchase tax stamps from the Wash-
ington Department of Revenue (the Department), and then
affix the stamps on each package (or other unit) of cigarettes
they distribute to retailers. RCW § 82.24.030; see also Wash.
Admin. Code (WAC) § 458-20-186(101)(b). Wholesalers are
required to affix the stamps prior to their distribution of ciga-
18164 CONFEDERATED TRIBES v. GREGOIRE
rettes to retailers. RCW §§ 82.24.010(8), 82.24.030; WAC
§ 458-20-186(101)(b). Only licensed wholesalers may possess
unstamped cigarettes, and only then under certain conditions.
RCW §§ 82.24.040(2), 82.24.050.1 Moreover, only licensed
wholesalers may purchase or obtain cigarette stamps. RCW
§ 82.24.040(3). Transporting or selling unstamped cigarettes
may constitute a misdemeanor or a felony. RCW
§§ 82.24.110, 82.24.250, 82.24.260.
“Licensed wholesalers are compensated for affixing the
stamps at the rate of $6.00 per thousand stamps affixed.”
WAC § 458-20-186(201)(b). Wholesalers who affix cigarette
tax stamps “may, if they wish, absorb five one-hundredths
cents per cigarette of the tax and not pass it on to purchasers
without being in violation of th[e Act] or any other act relat-
ing to the sale or taxation of cigarettes.” RCW § 82.24.020(2).
If a wholesaler posts a bond with the State, it may defer pay-
ment of the tax for up to thirty days. See WAC § 458-20-
186(201)(b) (“Payment for stamps must be made at the time
of purchase unless the wholesaler has prior approval of the
[D]epartment to defer payment and furnishes a surety bond
equal to the proposed monthly credit limit.”). This arrange-
ment gives the wholesaler a grace period within which to col-
lect the amount of the cigarette tax from retailers prior to
paying it over to the Department.
The Act contains several provisions exempting certain enti-
ties and persons from its strictures. For example, RCW
§ 82.24.020 allows enrolled members of federally recognized
Indian tribes to “purchase cigarettes from an Indian tribal
1
Collection from wholesalers who affix stamps is not the exclusive
means of collecting the tax. The Department collects the tax by other
means with respect to cigarettes that are not sold by Washington retailers.
For example, when a manufacturer gives away cigarettes for advertising,
promotional, or other purposes, the manufacturer pays the tax directly to
the Department. WAC § 458-20-186(101)(d), (602)(f). When a Washing-
ton resident purchases cigarettes from an out-of-state retailer, the resident
pays the tax directly to the Department. Id. § 458-20-186(602)(g).
CONFEDERATED TRIBES v. GREGOIRE 18165
organization under the jurisdiction of the member’s tribe for
the member’s own use exempt from the applicable taxes
imposed by this chapter.” RCW § 82.24.020(4) (emphasis
added).2 Section 82.24.250 allows Indian tribal organizations
to possess unstamped cigarettes provided they “give[ ] notice
to the board in advance of receiving unstamped cigarettes and
. . . within a period of time after receipt of the cigarettes as
. . . the person . . . cause[s] stamps to be affixed in accordance
with RCW [§ ] 82.24.030 or otherwise ma[kes] payment of
the tax required.” RCW § 82.24.250(7)(c).
Also exempted from the notice, stamping, and cigarette tax
requirements of the Act are lawful transactions covered by
cigarette tax compacts between Indian tribes and the State
under RCW §§ 43.06.450 et seq., wherein an Indian tribe
imposes a tribal tax in lieu of the State tax. See also id.
§ 82.24.020(5) (terms of contract under compact statute con-
trol over conflicting provisions of chapter 82.24). This
exemption was added in 2001 “to promote economic develop-
ment, provide needed revenues for tribal governments and
Indian persons, and enhance enforcement of the state’s ciga-
rette tax law, ultimately saving the state money and reducing
conflict.” RCW §§ 43.06.450; 43.06.455(3), (8).
2
Another section of the Act, RCW § 82.24.260, provides similar lan-
guage clarifying the exemption:
(1) Other than:
(a) A wholesaler required to be licensed under this chapter;
(b) A federal instrumentality with respect to sales to autho-
rized military personnel; or
(c) An Indian tribal organization with respect to sales to
enrolled members of the tribe,
a person who is in lawful possession of unstamped cigarettes and
who intends to sell or otherwise dispose of the cigarettes shall
pay, or satisfy its precollection obligation that is imposed by this
chapter, the tax required by this chapter by remitting the tax or
causing stamps to be affixed in the manner provided in rules
adopted by the department.
18166 CONFEDERATED TRIBES v. GREGOIRE
Although the Act contains many provisions excluding reg-
istered tribes from its provisions, it does require them to col-
lect the cigarette tax from non-Indians who purchase
cigarettes from Indian retailers. For instance, the Act contains
a statement of legislative intent requiring Indian tribes to
serve as tax collectors and remitters:
It is the intent of the legislature that, in the absence
of a cigarette tax contract or agreement . . . applica-
ble taxes imposed by this [Act] be collected on ciga-
rettes sold by an Indian tribal organization to any
person who is not an enrolled member of the feder-
ally recognized Indian tribe within whose jurisdic-
tion the sale takes place consistent with collection of
these taxes generally within the state. The legislature
finds that applicable collection and enforcement
measures under this chapter are reasonably necessary
to prevent fraudulent transactions and place a mini-
mal burden on the Indian tribal organization, pursu-
ant to the United States supreme court’s [sic]
decision in Washington v. Confederated Tribes of the
Colville Indian Reservation, 447 U.S. 134 (1980).
RCW § 82.24.080(4) (emphasis added). However, the State
legislature has also instructed that the Act should be construed
to “not apply in any case in which the State of Washington is
prohibited from taxing under the Constitution of [Washing-
ton] or the Constitution or laws of the United States.” RCW
§ 82.24.900. This language is referred to by the State as the
“constitutional backstop.”
The Department has also adopted administrative rules con-
cerning the collection of cigarette taxes from Indian retailers.
See WAC § 458-20-186(102)(c).3 Indian retailers making on-
3
(c) Cigarettes purchased from Indian retailers. Special rules apply
to cigarettes purchased from Indian retailers.
CONFEDERATED TRIBES v. GREGOIRE 18167
reservation sales to nonmembers of the tribe must “collect and
remit” the State’s retail sales tax and cigarette tax. WAC
§ 458-20-192(5)(c). As the Department sees it, if a tribal
retailer sells cigarettes to nonmembers, the wholesaler is obli-
gated to pre-collect the tax, and the tribal retailer must pur-
chase a stock of cigarettes with tax stamps affixed to the
packages for such sales. The tribal retailer would then collect
the amount of the tax from nonmember customers. See WAC
§ 458-20-192(9)(a)(i). The Department refers to this as the
“pre-collection obligation.”
The Department is also authorized by the Act to promul-
gate rules allowing for a refund to “dealers for the cost of
stamps affixed to articles taxed . . . which by reason of dam-
age become unfit for sale and are destroyed by the dealer or
returned to the manufacturer.” RCW § 82.24.210. Under the
Department’s rules, “[a]ny person may request a refund of the
face value of the stamps when the tax is not applicable and the
stamps are returned to the department.” WAC § 458-20-
186(203).
(i) Indians purchasing cigarettes in Indian country are exempt
from the state cigarette tax; however, these sales must comply
with WAC 458-20-192. Other consumers may purchase ciga-
rettes for their personal consumption from ‘qualified Indian
retailers’ without incurring liability for state cigarette tax. A
‘qualified Indian retailer’ is one who is subject to the terms of a
valid cigarette tax contract with the state pursuant to RCW
§ 43.06.455.
(ii) Consumers who purchase cigarettes from Indian retailers who
are not subject to a cigarette tax contract with the state must com-
ply with the reporting requirements and remit the cigarette tax as
explained in subsection (602) of this rule. These consumers are
also liable for the use tax on their purchases.
(iii) It is the duty of the consumer in each instance to ascertain
his or her responsibilities with respect to such purchases.
18168 CONFEDERATED TRIBES v. GREGOIRE
B. Yakama Nation Retailers
The Yakama Nation is a federally-recognized Indian nation
with approximately 10,000 enrolled members. It is a party to
the Yakama Treaty of 1855 with the United States, 12 Stat.
951, and it exercises the sovereign right of self-government
over the 1.4 million-acre Yakama Indian Reservation, located
in central Washington. There are nine Yakama member-
owned businesses on the reservation engaged in the retail sale
of cigarettes and other tobacco products. Each of these busi-
nesses is organized, licensed, and operates under the laws of
the Yakama Nation. By affixing Yakama Nation tax stamps,
the Nation imposes a tax on tobacco products sold by Yakama
retailers. The revenues generated by this tax support essential
tribal government services, as well as fisheries, forestry, and
other programs.
In 2004, the Yakama entered into a cigarette tax compact
with the State (the 2004 Agreement). Under the 2004 Agree-
ment, the Tribes were required to impose and maintain a tribal
tax on the retail sales of cigarettes equal to the amount of
State and local sales taxes. Despite the compact, disputes
arose between the Yakama and the State, and in February
2007, the Department sent a notice to the Tribes indicating its
intent to terminate the 2004 Agreement. Following unsuccess-
ful dispute-resolution talks, the 2004 Agreement was termi-
nated in July 2008. The Department thereupon informed the
Yakama that it was reinstating the cigarette tax on sales of
cigarettes to nonmembers of the Tribes, and that it would
require cigarette tax stamps to be affixed for all such sales.
C. Procedural History
Before any cigarette taxes could be collected by the State
after the termination of the 2004 Agreement, the Yakama
commenced this action in September 2008, seeking declara-
tions (1) that it is unlawful for the State to tax Indian-to-
Indian sales; (2) that RCW §§ 82.24 et seq. is unenforceable
CONFEDERATED TRIBES v. GREGOIRE 18169
against the Yakama; (3) that acquiring and possessing
unstamped cigarettes is not prohibited by the Act; (4) that it
is unlawful for the State to prohibit the Yakama from issuing
cigarette stamps; and (5) that the State has violated the Ex
Post Facto Clause of the Constitution. Shortly after the suit
was filed, the district court entered a temporary restraining
order against the State. Thereafter, the parties cross-moved for
summary judgment. In January 2010, the district court denied
the Yakama’s motion for summary judgment and granted
summary judgment to the State on most of the Yakama’s
claims. See Confederated Tribes & Bands of the Yakama
Nation v. Gregoire, 680 F. Supp. 2d 1258 (E.D. Wash. 2010).
For purposes of this appeal, the relevant holding by the dis-
trict court was its conclusion that the “legal incidence” of the
cigarette tax does not fall on Yakama retailers. Id. at 1264
(“The Court finds that none of the differences between the
scheme examined in Colville and the current scheme are suffi-
cient to change the conclusion that the legal incidence of the
tax does not fall on Indian retailers.”). The district court dis-
solved the temporary restraining order and released the bond
posted to the State. In this appeal, the Yakama seek reversal
of the district court’s summary judgment ruling that the legal
incidence does not fall on Yakama retailers, but concede that
the answer to that question will be dispositive of the other
issues pressed in the their lawsuit.
JURISDICTION AND STANDARD OF REVIEW
We have jurisdiction under 28 U.S.C. § 1291.
We review the district court’s grant of summary judgment
de novo. Coeur d’Alene Tribe of Idaho v. Hammond, 384 F.3d
674, 681 n.2 (9th Cir. 2004).
18170 CONFEDERATED TRIBES v. GREGOIRE
DISCUSSION
I. Legal Incidence of the State Cigarette Tax
A. Indian Tax Immunity
[1] “The Constitution vests the Federal Government with
exclusive authority over relations with Indian tribes . . ., and
in recognition of the sovereignty retained by [the] tribes . . .,
Indian tribes and [registered] individuals generally are exempt
from state taxation within their own territory.’ ” Oklahoma
Tax Comm’n v. Chickasaw Nation, 515 U.S. 450, 455 (1995)
(quoting Montana v. Blackfeet Tribe, 471 U.S. 759, 764
(1985)). “The initial and frequently dispositive question in
Indian tax cases, therefore, is who bears the legal incidence of
a tax. If the legal incidence of an excise tax rests on a tribe
or on tribal members for sales made inside Indian country, the
tax cannot be enforced absent clear congressional authoriza-
tion.” Chickasaw Nation, 515 U.S. at 456-57. However,
where the legal incidence of tax does not rest on a tribe or its
members, a state may impose the tax so long as “the balance
of federal, state, and tribal interests favors the [s]tate, and fed-
eral law is not to the contrary,” and a state “may place on a
tribe or tribal members ‘minimal burdens’ in collecting the
toll.” Id. at 459 (citation omitted).
[2] The “legal incidence” of an excise tax refers to deter-
mining which entity or person bears the ultimate legal obliga-
tion to pay the tax to the taxing authority. See Colville, 447
U.S. at 150-51 (“We upheld the tax, insofar as sales to non-
Indians were concerned, because its legal incidence fell on the
non-Indian purchaser” as “the competitive advantage which
the Indian seller . . . enjoy[ed] . . . [was] dependent on the
extent to which the non-Indian purchaser is willing to flout his
legal obligation to pay the tax.” (emphasis added) (citing Moe
v. Confederated Salish & Kootenai Tribes of Flathead Reser-
vation, 425 U.S. 463, 482 (1976)). Identifying legal incidence
requires a court to analyze the taxing statute and its imple-
CONFEDERATED TRIBES v. GREGOIRE 18171
mentation to determine which entities or individuals will
likely face detrimental legal consequences if the tax is not
paid. See Moe, 425 U.S. at 482; Couer D’Alene Tribe of
Idaho v. Hammond, 384 F.3d 674, 681 (9th Cir. 2004) (“[T]o
discern where the legal incidence lies, we ‘ascertain [ ] the
legal obligations imposed upon the concerned parties[.]’ ”
(quoting Crow Tribe of Indians v. Montana, 650 F.2d 1104,
1111 (9th Cir. 1981))). “[A] party does not bear the legal inci-
dence of the tax if it is merely a transmittal agent for the state
tax collector[,]” because that party’s legal liability in event of
non-payment would depend either on another responsible
party’s failure to pay to the transmittal agent or on the trans-
mittal agent’s withholding collected taxes. Hammond, 384
F.3d at 681 (citing Chickasaw Nation, 515 U.S. at 461-62).
The person or entity bearing the legal incidence of an
excise tax is not necessarily the one bearing an economic bur-
den from the tax. Hammond, 384 F.3d at 681 (citing Chicka-
saw Nation, 515 U.S. at 460). While a party bearing an
economic burden, perhaps as the result of reduced sales, may
also bear the legal incidence of the tax, the Supreme Court has
clarified that an economic analysis of the “realities” of taxa-
tion should not be a substitute for legal-incidence analysis.
Chickasaw Nation, 515 U.S. at 459-60 (“If we were to make
‘economic reality’ our guide, we might be obliged to con-
sider, for example, how completely retailers can pass along
tax increases without sacrificing sales volume—a complicated
matter dependent on the characteristics of the market for the
relevant product.”). Legal incidence “accommodates the real-
ity that tax administration requires predictability,” id., and
while a state cannot fully control how the market will adjust
to a tax, a state can control tax enforcement and the determi-
nation of who is ultimately obligated to pay the tax. Id. at 460
(“[I]f a State is unable to enforce a tax because the legal inci-
dence of the impost is on Indians or Indian tribes, the State
generally is free to amend its law to shift the tax’s legal inci-
dence.”).
18172 CONFEDERATED TRIBES v. GREGOIRE
Because few statutes are identical, legal-incidence determi-
nations necessarily will depend on myriad, often situation-
specific factors. In Moe v. Confederated Salish & Kootenai
Tribes of Flathead Reservation, the Supreme Court upheld a
Montana cigarette tax because the legal incidence of the tax
was on the non-Indian purchaser, as the Court explained:
Since nonpayment of the tax is a misdemeanor as to
the retail purchaser, the competitive advantage
which the Indian seller doing business on tribal land
enjoys over all other cigarette retailers, within and
without the reservation, is dependent on the extent to
which the non-Indian purchaser is willing to flout his
legal obligation to pay the tax. Without the simple
expedient of having the retailer collect the sales tax
from non-Indian purchasers, it is clear that wholesale
violations of the law by the latter class will go virtu-
ally unchecked.
Id. at 482 (footnotes omitted). The Moe Court also rejected
the argument that collecting the tax from non-Indian custom-
ers rendered the retailer an “involuntary agent” for collection
because the obligation to collect was only “a minimal burden
designed to avoid the likelihood that in its absence non-
Indians purchasing from the tribal seller will avoid payment
of a concededly lawful tax.” Id. at 483.
[3] In Chickasaw Nation, the Court, in holding that the
legal incidence of an Oklahoma motor-fuel tax fell on Indian
retailers, gave special attention to two factors: whether the
legislature specifically identified who bore the tax’s legal
incidence and whether the tax statute contained an explicit
“pass through” provision requiring distributors and retailers to
pass the tax onto consumers. 515 U.S. at 461. The Court
stated that if the Oklahoma legislation “expressly identif[ied]
who bears the tax’s legal incidence,” the language would be
“dispositive.” Id. (“In the absence of such dispositive lan-
guage, the question is one of ‘fair interpretation of the taxing
CONFEDERATED TRIBES v. GREGOIRE 18173
statute as written and applied.’ ” (quoting Chemehuevi Tribe,
474 U.S. at 11)). The Court returned to this concept of dispo-
sitive legislative identification in Wagnon v. Prairie Band
Potawatomi Nation, 546 U.S. 95 (2005), by again referencing
Chickasaw Nation’s “suggest[ion] that [ ] ‘dispositive lan-
guage’ from the state legislature is determinative of who bears
the legal incidence of a state excise tax.” See Wagnon, 546
U.S. at 102.
In Hammond, we held that an Idaho motor-fuel tax fell on
Indian retailers in light of its “striking” similarity with the tax
voided in Chickasaw Nation, 515 U.S. at 450. Four key fac-
tors guided us: (1) the non-tribal distributors who received the
motor fuel and sold it to the Indian tribes were required to
pass on and to collect the tax from the retailer, and then to
remit the taxes to the State; (2) the statute provided a tax
credit to the distributor, but not a retailer, for “collecting and
remitting” the tax on behalf of the State; (3) the State gave tax
credits to the distributor for fuel taxes that the distributor has
paid but cannot then collect from the retailer; and (4) retailers
could not set off their tax liability when consumers failed to
pay, nor were they compensated for their tax collection
efforts. 384 F.3d at 685-88. In short, in addition to express
statements of legislative intent, legal incidence analysis
depends on whether a taxing statute contains an explicit “pass
through” which moves incidence down the distribution chain,
Hammond, 384 F.3d at 685-86, which individuals or entities
are compensated for “collecting and remitting” the tax on
behalf of the State, id. at 686, what invoices show regarding
payment of the tax, id., whether a retailer may recoup the tax
paid for unsold product, id. at 684, if the retailer is refunded
the tax when a consumer fails to pay, id. at 687-88, and ulti-
mately who is penalized by state authorities when the tax is
not paid, Wagnon, 546 U.S. at 103; Moe, 425 U.S. at 482.
18174 CONFEDERATED TRIBES v. GREGOIRE
B. The Washington Cigarette Tax
[4] We begin our analysis of the Act with the recognition
that the primary issue before us was litigated and decided
some three decades ago in Colville, 446 F. Supp. at 1339,
aff’d in part and rev’d in part, 447 U.S. 134 (1980). There,
a three-judge district court held that the legal incidence of the
Washington cigarette tax, as then written, fell on non-Indian
cigarette purchasers as opposed to Indian retailers. 446 F.
Supp. at 1355. Although the district court found the absence
of a pass through to be “of particular importance,” id. at 1353,
a broader consideration of the other statutory provisions and
Department publications led to the conclusion that “the statute
evidences the legislature’s intent to impose the legal incidence
of the tax at the earliest constitutional opportunity.” Id. at
1355. Thus, “where on-reservation tribal sales to non-Indians
[were] involved, the first taxable event [was] . . . the use or
consumption by the non-Indian purchaser.” Id. Colville
reached the Supreme Court on direct appeal, and the Court
“accept[ed]” the district court’s conclusion that the legal inci-
dence of the cigarette tax fell on the non-Indians purchasers.
447 U.S. at 142 n.9. The Court held, inter alia, that the collec-
tion burden imposed on Indian retailers was “legally indistin-
guishable from the collection burden upheld in Moe” and was
therefore “valid in toto.” Id. at 159-60.4
The Tribes claim that amendments to the Act since Colville
have changed the legal incidence calculus, and the State does
not argue that Colville precludes such a reexamination.5 Spe-
4
In Colville, the State required “smokeshop operators to keep detailed
records of both taxable and nontaxable transactions. The operator must
record the number and dollar volume of taxable sales to nonmembers of
the Tribe. With respect to nontaxable sales, the operator must record and
retain for State inspection the names of all Indian purchasers, their tribal
affiliations, the Indian reservations within which sales are made, and the
dollar amount and dates of sales.” 447 U.S. at 159.
5
The district court noted that “while Defendants argue the doctrine of
res judicata defeats other arguments Plaintiffs advance, they do not argue
that it applies to the issue of legal incidence.” 680 F. Supp. 2d at 1264 n.1.
CONFEDERATED TRIBES v. GREGOIRE 18175
cifically, the Tribes contend that the absence of an express
pass through, the inability of retailers to defer payment of the
cigarette tax, the absence of compensation for collecting the
cigarette tax, the liability Indian retailers face for unsold prod-
ucts, and the record keeping requirements of the amended Act
shift the legal incidence of the cigarette tax onto the Indian
retailers. We disagree.
We first consider the fact that the Act does not contain an
express pass through requirement. Such a pass through
requirement was also missing from the earlier version of the
Act considered in Colville. See 446 F. Supp. at 1353. The cur-
rent Act requires wholesalers to pass on all but a tiny fraction
of the cigarette tax to their purchasers, RCW § 82.24.020(2)
(allowing for wholesalers to absorb five one-hundredths cents
per cigarette), but contains no corresponding requirement that
retailers pass through the cigarette tax to the cigarette con-
sumer. The absence of a pass through to consumers is signifi-
cant and problematic, given the Supreme Court’s observation
in United States v. Mississippi Tax Commission, 421 U.S. 599
(1975), that “where a State requires that its sales tax be passed
on to the purchaser and be collected by the vendor from him,
this establishes as a matter of law that the legal incidence of
the tax falls upon the purchaser.” Id. at 608 (characterizing
test from First Agr. Nat. Bank of Berkshire Cnty. v. State Tax
Comm’n, 392 U.S. 339 (1968)).
In response, the State first contends that there is an implied
pass through in the Act’s pre-collection obligation. See RCW
§ 82.24.080. But a pre-collection obligation, even were we to
accept the State’s characterization, is not the functional equiv-
alent of an explicit pass through as it does not resolve to a
legal certainty who is obligated to pay the tax. While it would
be prudent for any Indian retailer to pass on and then collect
the tax from consumers, the Act does not require it; rather
that is an economic choice left to the Indian retailers. In gen-
eral, the Act is anchored by the principle that whoever can
pay the tax first will pay. See RCW 82.24.080(1) (“It is the
18176 CONFEDERATED TRIBES v. GREGOIRE
intent and purpose of this chapter . . . to collect the tax from
the person who first sells, uses, consumes, handles, possesses
. . . or distributes them in the state.”).
[5] Despite the absence of a pass through, we recognize
that the Act sustained in Colville also did not include a pass
through and that its absence was not outcome determinative.
Moreover, the pre-collection obligation, even if not equivalent
to a pass through, serves a purpose in setting forth the respon-
sibilities of the Indian retailers as transmittal agents. That
obligation to transmit the tax and the record keeping require-
ments it requires are the same as the obligations the Supreme
Court endorsed in Colville as “legally indistinguishable from
the collection burden upheld in Moe.” 447 U.S. at 159. Thus,
we will not treat the absence of a pass through as dispositive.
[6] Indeed, numerous provisions in the Act are written
with the purpose of excluding Indian tribes and their members
from compliance with the Act. After all, the cigarette tax
applies only to the “first taxable event and upon the first tax-
able person” under RCW § 82.24.080. There is no dispute
between the parties that as between an Indian retailer and a
non-Indian purchaser, the latter is the first taxable person.
Even if there were a dispute, § 82.24.900 provides that “[t]he
provisions of this chapter shall not apply where the state is
prohibited from taxing under the Constitution of this state or
the Constitution or the laws of the United States,” RCW
§ 82.24.900, a catch-all provision which includes the Tribes.
Moreover, Section 82.24.260 states that “[o]ther than . . . [a]n
Indian tribal organization with respect to sales to enrolled
members of the tribe, a person who is in lawful possession of
unstamped cigarettes and who intends to sell or otherwise dis-
pose of the cigarettes shall pay, or satisfy its pre-collection
obligation that is imposed by this chapter, the tax required by
this chapter by remitting the tax . . . .” RCW § 82.24.260(1).
A fair construction of these provisions leads to the conclusion
that an Indian retailer will be excluded from paying a tax for
sales to members. The language also indicates that if an
CONFEDERATED TRIBES v. GREGOIRE 18177
Indian retailer ever found itself facing a State collection effort
for the retailer’s non-payment of the tax, the retailer would be
shielded from civil or criminal liability, except in the instance
where the Indian retailer has failed to transmit the tax paid by
the consumer and collected by the retailer.
[7] Section 82.24.020 references the Colville decisions
upholding the tax and explicitly attempts to incorporate the
Supreme Court’s holding into the Act by providing the pre-
collection obligation is a “minimal burden on the Indian tribal
organization.” Colville sustained the ability of a state to
require Indian tribes to tax sales to nonmembers, observing
that this would not “contravene the principle of tribal self-
government, for the simple reason that nonmembers are not
constituents of the governing Tribe.” 447 U.S. at 160. By
attempting to comply with Colville, the legislature reveals its
intent to incorporate that holding which permits states to
require Indian retailers to collect and transmit the tax from
non-Indian, non-exempt purchasers. Finally, the Department’s
regulations speak of “collecting and remitting” the cigarette
tax, WAC § 458-20-192(5)(c), which implies that someone
other than the Indian retailer is ultimately responsible for pay-
ment of the cigarette tax.
These points of statutory construction are buttressed by the
Act’s legislative history; since Colville, there have been no
amendments to the Act which alter the legal obligations for
paying the tax. Rather, the key amendments have been admin-
istrative in nature—to preclude retailers from affixing stamps
and to prevent retailers from absorbing a small amount of a
stamp’s cost. See 1995 Wash. Sess. Laws, ch. 278, §§ 2-4;
2003 Wash. Sess. Laws, ch. 114, § 1(4). These amendments
affect, at most, the economic burden of the cigarette tax, pri-
marily by shifting to wholesalers the entire cost of affixing
stamps. Moreover, by precluding retailers from absorbing any
portion of the cigarette tax, it is implied that they will need
to pass on the entirety of the tax to consumers.
18178 CONFEDERATED TRIBES v. GREGOIRE
We also note that the Act does not compensate any party
(wholesaler or otherwise) for serving as a collection agent for
the State. Contra Hammond, 384 F.3d at 686. Although the
Tribes argue that the State’s failure to compensate them for
fulfilling the pre-collection obligation indicates the legal inci-
dence falls on the Indian retailers, non-Indian wholesalers and
retailers are also not compensated for collecting the tax.
Rather, the only compensation wholesalers receive is “for
their services in affixing the stamps required under this chap-
ter.” RCW § 82.24.295(2) (emphasis added). As discussed
supra, in Chickasaw Nation and Hammond, courts invalidated
tax schemes where non-Indian distributors were compensated
for their role as agents in collecting a tax while Indian retail-
ers were not compensated. See Chickasaw Nation, 515 U.S.
at 462 (“[F]or their services as agent of the state for [tax] col-
lection, distributors retain a small portion of the taxes they
collect.”); Hammond, 384 F.3d at 686-87. Those factors are
not present here as there is no discriminatory compensation
scheme vis-a-vis wholesalers and retailers. Washington’s cig-
arette tax ultimately makes consumers who possess unstam-
ped cigarettes liable for a misdemeanor or felony, regardless
of whether they purchased those cigarettes from Indians or
non-Indians, whereas the statutes in Chickasaw and Ham-
mond contained no downstream liability. See RCW
§§ 82.24.260(3), 82.24.020(4).
The Tribes also have not posited a foreseeable scenario
when an Indian retailer would have an obligation greater than
transmittal agent. Instead, the only counter-scenarios offered
by the Tribes involve situations where no sale is ever made
to a customer, such as when cigarettes become damaged, or
when a customer steals the cigarettes and does not tender the
tax payment. The Act provides an express remedy in the first
situation—RCW § 82.24.210 provides that the Department
shall “promulgate rules and regulations providing for the
refund to dealers for the cost of stamps affixed to articles
taxed herein,” where such products are damaged. That section
also allows the Department to refund unused stamps. RCW
CONFEDERATED TRIBES v. GREGOIRE 18179
§ 82.24.210. In its briefing, the State has represented that
“[r]efunds are available to anyone who is legally entitled to
one” and that the refund form from the Department may be
used by “any person,” Appellees’ Answering Brief at 48-50.
Indeed, the Department’s regulations provide that “any person
may request a refund of the face value of the stamps when the
tax is not applicable and the stamps are returned to the depart-
ment.” WAC § 458-20-186(203) (emphasis added). A reason-
able interpretation of “any person” would include retailers,
Indian or not, and there is no record evidence that the State
has implemented this regulation in a discriminatory manner.
Nor have the Tribes proffered any evidence that Indian retail-
ers who have applied for tax-stamp refunds in accordance
with the regulations have had their refund claims denied by
the Department. In response to the hypothetical situation of
non-payment of the tax by a customer who steals stamped cig-
arettes, the State concedes that the Department will not issue
refunds to retailers for the cost of cigarette stamps, but a third-
party breach of contract does not alter our interpretation of the
Act. As with the damaged goods hypothetical, non-payment
by a third-party would leave Indian retailers with other legal
remedies to collect the cigarette tax.
Finally, the ability of wholesalers to defer their payment for
thirty days by posting a bond does not impact our legal inci-
dence analysis. See WAC § 458-20-186(301)(b). Deferring
the payment of money due is a matter of timing and account-
ing, which does not change who is ultimately responsible for
the payment of the tax. After all, the particular point in time
when the retailers remit that tax from the consumer does not
change the underlying fact that the retailer was not legally
obligated to pay the tax. Timing is a matter of accounting;
even though the Tribes want the tax to be treated as an
account payable, instead of an immediate cash payment, the
legal obligations remain the same.
[8] To summarize, despite the absence of a statutory pass
through, we conclude that the overall intent of the Washing-
18180 CONFEDERATED TRIBES v. GREGOIRE
ton cigarette tax, with respect to on-reservation sales by
Indian retailers, is for consumers to be legally obligated to
pay the cigarette tax. The precollection obligation is a mini-
mal burden on the Tribes and their retailers and does not
change the legal incidence calculation. We therefore hold that
the provisions of the current Act are not materially different
from those upheld in Colville, and that they do not contravene
established principles of Indian tax immunity.
CONCLUSION
For the foregoing reasons, the district court’s grant of sum-
mary judgment and its dissolution of the temporary restrain-
ing order are AFFIRMED.
GUILFORD, District Judge, concurring in the judgment:
I concur in the result.
This case requires us to determine if a tax imposed on cer-
tain economic activity of the Tribes of the Yakama Nation
creates a “legal incidence” upon the Tribes. The impact of
various forms of taxation on a people has been apparent
throughout our country’s history, going back at least to when
American patriots—ironically dressed as Indians—threw tea
into Boston Harbor. The burden of taxation was the fuel in the
fire of freedom ignited by our country’s founders, and that
burden continues to be a powerful factor in today’s politics.
In this case, the tax burden must be analyzed through the
prism of the “legal incidence” test, which often focuses on the
issue of whether the tax can be passed through or passed
along to others. An economist reviewing this “pass through”
issue would analyze the demand elasticity for the product
being taxed. In further review of the burden of taxation, an
economist, aware of the negative slope of demand curves,
CONFEDERATED TRIBES v. GREGOIRE 18181
would conclude that increasing the price of a product through
a tax necessarily will decrease sales volume. And in compar-
ing the impact of immediate cash payments with deferred
payments, an economist would review interests rates and the
time value of money. But as the majority opinion recognizes,
economic analysis of the burdens of taxation has been forbid-
den in reviewing “legal incidence.” In Oklahoma Tax
Comm’n v. Chickasaw Nation, 515 U.S. 450, 459-60 (1995),
the Supreme Court analyzed “legal incidence” while rejecting
guidance from what it called the “more venturesome
approach” involving economic reality, stating:
If we were to make “economic reality” our guide, we
might be obliged to consider, for example, how com-
pletely retailers can pass along tax increases without
sacrificing sales volume—a complicated matter
dependent on the characteristics of the market for the
relevant product.
Indians in the Tribes of the Yakama Nation might well
wonder how the analysis of what courts call “legal incidence”
can be done without reviewing the economic reality of the tax
burden on them. And here, a review of these economic reali-
ties likely would reveal that the tax at issue imposes an eco-
nomic burden on Indians in the Yakama Nation. But the law
requires an analysis through a prism that blocks economic
reality. Thus, following Supreme Court authority, without the
guidance of economic reality, I must concur with the majori-
ty’s opinion. Apart from economic reality, the provisions of
the Revised Code of Washington §§ 82.24 et seq. are not
materially different from those upheld in Washington v. Con-
federated Tribes of the Colville Indian Reservation, 447 U.S.
134 (1980), and they follow established principles of Indian
tax immunity. Thus, I concur in the judgment.