State can seize Creek cigarettes for now, judge says

by: CLIFTON ADCOCK World Staff Writer
Wednesday, March 24, 2010
3/24/2010 4:20:14 AM

The state of Oklahoma can continue to seize what it deems to be contraband cigarettes sold by the Muscogee (Creek) Nation, a federal judge has ordered.

The order, handed down late last week, denied the tribe's request for a preliminary injunction to bar the state from enforcing parts of the tax code that allow it to seize nontaxed cigarettes sold at some of its smoke shops.

A final ruling in the case, filed in January by the tribe in federal court in Muskogee, has yet to be made.

The Creek Nation and the state have battled for some time over tobacco sales, and the tribe is one of the last in the state not to have an agreement with the state.

The Creek Nation smoke shops have sold cigarettes such as Seneca, Skydancer and King Mountain brands that officials said are manufactured by other Indian tribes.

Those cigarettes aren't taxed by the state and aren't on a list of tobacco products approved to be sold here. The state has seized tribal shipments of the unapproved cigarettes en route to retailers.

According to state filings in the case, the tribe evaded paying nearly $13 million in state tobacco excise taxes last year, or about $1.5 million per month.

Last year, Gov. Brad Henry signed into law Senate Bill 608, which states that all tobacco products sold in Indian Country are subject to state excise taxes; all cigarettes must bear a tax or tax-free stamp issued by the state; all tribally licensed retailers must purchase cigarettes and tobacco products only from state-licensedwholesalers; and that buying, selling, distributing or transporting tobacco without a state tax stamp or tax-free stamp is a misdemeanor as a first offense and a felony as a second offense.

In its lawsuit, the tribe asked that the court rule that the state cannot regulate or enforce laws interfering with Indian-to-Indian commerce; declare that the state tax code revisions "constitute an attempt by the state to dictate the kind, quantity and price of cigarettes sold in Indian Country"; and grant a permanent injunction prohibiting the state from enforcing Master Settlement Agreement tobacco regulations on the tribe or its manufacturers.

However, last week's ruling states that at least one of the companies making the cigarettes is not controlled by another Indian tribe — and thus is not immune from state regulation — and that the state's efforts to collect taxes from nontribal members do not impede the tribe's sovereignty.

"(P)laintiffs are seeking 'supersovereignstatus' — the ability to avoid state taxation and regulation of their commerce with non-Indians and members of other tribes even where that commerce travels outside of Indian Country," the order states.

The ruling also states that the state showed that it would be harmed by a preliminary injunction and that an injunction would be against the public interest.