Case No. 16-1498 | Wash.
Preview by Sean Lowry*
The Washington State Department of Licensing (the “Department”) asks the Court to determine whether “the right . . . to travel upon all public highways” pursuant to the Yakama Treaty of 1855 (the “Treaty”) allows tribal members to avoid state fuel taxes on off-reservation commercial activities that use public highways. Treaty with the Yakimas art. III, June 9, 1855, 12 Stat. 951, 953.
Cougar Den, a tribal corporation (organized under the Yakima Nation), sells motor fuel to other Yakima-owned gas stations, which then sell the fuel to the public. In 2013, Cougar Den hired a non-tribal contractor to transport fuel across the Oregon-Washington border and into the Yakima Indian Reservation. In December 2013, the Department issued $3.6 million in tax assessments, penalties, and fees against Cougar Den for transporting the fuel across state lines without paying the state’s wholesale excise tax on motor fuel.
The Washington Supreme Court, sitting en banc, ruled 7–2 in favor of Cougar Den, holding that, under the Treaty’s right to travel, tribal corporations are entitled to import fuel without holding an importer’s license and without paying state fuel taxes.
In its petition for certiorari, the Department makes three general arguments. First, it argues that Ninth Circuit precedent provides that the treaty’s “right to travel” clause exempts activity related to the use of public highways, but does not establish uninhibited trade among tribal entities. The Department relies on King Mountain Tobacco Co. v. McKenna, 768 F.3d 989 (9th Cir 2014), which upheld Washington’s requirement for tribal tobacco manufacturers to contribute escrow payments to reimburse the state for public health costs. Second, the Department argues that the Washington Supreme Court’s decision conflicts with Mescalero Apache Tribe v. Jones, 411 U.S. 145 (1973), which stated that tribal members going beyond reservation boundaries are subject to nondiscriminatory state taxes absent express federal law to the contrary. Third, the Department contends that such a tax exemption will cost Washington hundreds of millions of dollars in fuel tax revenue. The U.S. Solicitor General has filed an amicus brief in support of the Department and has asked to participate in oral arguments.
In its reply brief, Cougar Den makes two main arguments. First, it argues that the Washington Supreme Court’s interpretation of the Treaty’s specific “right to travel” clause is consistent with Ninth Circuit precedent. Cougar Den mostly relies on United States v. Smiskin, in which the Ninth Circuit held that a Washington regulation requiring unlicensed wholesalers to notify officials before transporting untaxed cigarettes into the state violated the Treaty’s “right to transport goods to market without restriction.” 487 F.3d 1260, 1266 (9th Cir. 2007). Cougar Den argues that the taxes and fees in the instant case are more like the notice requirement in Smiskin rather than the escrow payments in King Mountain because they were both triggered when tribal corporations traveled across the Washington border. Second, Cougar Den argues that Court precedent says that treaties should be interpreted in a historical context as the tribes viewed them because they had no choice but to consent to the terms. See Choctaw Nation v. Oklahoma, 397 U.S. 620, 630–31 (1970). Cougar Den cites district and appellate decisions within the Ninth Circuit that upheld a historical understanding of a broad “right to travel” based on government promises to Yakima members when the Treaty was signed.
Other states encompassing tribal reservations are eyeing Cougar Den. Associations representing state tax administrators and the attorneys general of several states have filed amicus briefs in support of the Department. In their brief, the states declare that “[t]his is not a parochial controversy affecting only one State and one tribe or its members.” Brief Amicus Curiae of the States of Idaho et al. at 2, Wash. State Department of Licensing v. Cougar Den, Inc., No. 16-1498 (U.S. filed July 17, 2017).
*Sean Lowry is a 2LE (Class of 2021) and Analyst in Public Finance at the Congressional Research Service (CRS). The views expressed are those of the author and are not necessarily those of the Library of Congress or CRS.