Amicus Curiae Brief — Wash. State Dep't of Licensing v. Cougar Den, Inc., 138 S. Ct. 294 (2017) (No. 16-1498)

No. 16-1498

IN THE

Supreme Court of the United States

WASHINGTON STATE DEPARTMENT

OF LICENSING,

Petitioner,

v.

COUGAR DEN INC., A YAKAMA

NATION CORPORATION,

Respondent.

On Wait or CERTIORARI TO THE WASHINGTON SUPREME CouRT

BRIEF OF AMICI CURIAE THE WASHINGTON OIL

MARKETERS ASSOCIATION AND WASHINGTON

ASSOCIATION OF NEIGHBORHOOD STORES

IN SUPPORT OF PETITIONER

Putuip A. TALMADGE

Counsel of Record

TALMADGE/F ITzPATRICK/TRIBE

2775 Harbor Avenue SW

3™ Floor, Suite C

Seattle, WA 98126

(206) 574-6661

phil@tal-fitzlaw.com

Counsel for Amici Curiae

COUNSEL PRESS

(800) 274-3421 + (800) 359-6859

i

TABLE OF CONTENTS

Page

CC EE i

TABLE OF CITED AUTHORITIES .............. iii

EE 1

B. INTEREST OF AMICI CURIAE ............... 1

C. SUMMARY OF ARGUMENT .................. 2

ei iicesebdecaeceareesodeccceesses 3

(1) Washington Fuel Taxes ..................... 3

(2) Neither Treaty Language Nor Federal

Precedent Interpreting Travel Rights

in Indian Treaties Creates a Right

to Trade for Tribal Members................ 10

(4) The Washington Court’s Treaty

Interpretation Will Have a Major

Impact on State Transportation

Revenues and an Anti-Competitive

Impact on Other Fuel Retailers ............. 15

Table of Contents

Page

(a) Effect on Washington State

Transportation Budget................. 15

(b) Effect on Cougar Den’s Nontribal

Washington State Competitors .......... 19

ni

TABLE OF CITED AUTHORITIES

Wash. State Dep't of Licensing,

Cree v. Flores,

157 F.3d 762 (9th Cir. 1998)...........2662000.

Cree v. Waterbury,

78 F.3d 1400 (9th Cir. 1996)... 2... 266. e eee.

King Mountain Tobacco Co., Inc. v.

Alcohol & Tobacco Taz & Trade Bureau,

996 F. Supp. 2d 1061 (E.D. Wash. 2014), rev'd,

King Mountain Tobacco Co., Inc. v. McKenna,

768 F.3d 989 (9th Cir. 2014), cert. denied,

SOS GB. Ch. MORB GIREB).... cc ccccccccccccces 11, 12, 22

Cited Authorities

Page

Matheson v. Wash. State Liquor Control Bd.,

130 P.3d 897 (Wash. App.), review denied,

158 Wn.2d 1023 (Wash. 2006).................. 22

McClanahan v. State Taz Comm'n of Ariz.,

Se ING bin 5n565066060s00606s0006004 4

Mescalero Apache Tribe v. Jones,

Se ncaseesecdecteecéceconced 4,13

Nw. Bands of Shoshone Indians v. U.S.,

EN ce cccuddaccceconeceeeenesé 11

Oklahoma Taz Comm'n v. Chickasaw Nation,

EE ddéededudeecesédéededuced 4, 5, 7,9

Ramsey v. US.,

302 F.3d 1074 (9th Cir. 2002). ..............0005. 12

Rogers v. Lane County,

ED icin od ncnwensseseceees 15

Squaztn Island Tribe v. Stephens,

400 F. Supp. 2d 1250 (W.D. Wash. 2005)... . . 3,4, 7,8

State ex rel. Bugge v. Martin,

ED Fae Ge CIM, BI ccc ccccccccccccccccees 17

State ex rel. Heavey v. Murphy,

982 P.2d 611 (Wash. 1999)... ... 2... cece cnes 18

Cited Authorities

Page

State ex rel. O'Connell v. Slavin,

452 P.2d 943 (Wash. 1969)... ... 2.6.0... cece eens 17

U.S. v. King Mountain Tobacco Co., Inc.,

2015 WL, 4523642 (E.D. Wash. 2015).......... 13, 22

U.S. v. Wilbur,

674 F.3d 1160 (9th Cir. 2012).................--. 13

United States v. Fiander,

547 F.3d 1036 (9th Cir. 2008) ................... 13

United States v. Smiskin,

487 F.3d 1260 (9th Cir. 2007)................... 12

Wagnon v. Prairie Band Potawatomi Nation,

TT cncdcdibudeusss eekeds coceed 5,8

Washington State Highway Commission v.

Pacific Northwest Bell Telephone Co.,

367 P.2d 605 (Wash. 1961)... ... 2.266666 6c ec eens 17

Washington v. Confederated Tribes of Colville

Indian Reservation,

dives cccussesveueeesces 13, 14

Yakama Nation v. Gregoire,

680 F. Supp. 2d 1258 (E.D. Wash. 2010), aff'd,

658 F.3d 1078 (9th Cir. 2011)................--. 22

Cited Authorities

Page

STATUTES AND OTHER AUTHORITIES

eS bbbceckebatcdcossevacccestosses 16

ED os ed bucnddcesdsessecsceuctecs 3,8

ED ocuccsessvesvcsncoccctecocsessi 3

ED Wenducvceveceseessecseseceneds 13

ED adc ndcccseteccecsescnsésaseoces 3

EE a6 50hecdccedporcccevecseoededasins 7

ES Canvesenbanteéccsésccndovesecnt 8

EE vc eseocesesccavevestervesedes 9, 13

ED dandcwatonseccossccascdcancesessed 9

Ee EE 6 S80 cdecccceecccessenicszecnaved 8

Se EE cccnncncedectaccvseesscencesusne 7

i cecestncsiscveueecdscesvecukas 13

SEE ED ov ccs cbbonceseccucsscéedcoececes 8

Cited Authorities

Page

Pe I Coc ehsdncccccicrbevevstovasenkt 1

ded kncvddsecesdvésncescbdncwsvese 1

Wash. Const. art. 11, § 40 ..........cccceccceess 15, 16

Wash. Laws of 1983, Ist Ex. Sess., ch. 49,§ 26........ 5

Wash. Laws of 1995, ch. 320,§2 ...............0005. 6

Wash. Laws of 1995, ch. 320,§3 .............000005. 6

Wash. Laws of 1998, ch. 176, § 103) .................. 7

Wash. Laws of 1998, ch. 176,§7 ..............00005- 5

Wash. Laws of 1998, ch. 176, § 48(1) ................. 7

Wash. Laws of 1998, ch. 176, § 48(2)................. 7

Wash. Laws of 1998, ch. 176,§ 81 ..............0005. 7

Wash. Laws of 2013, ch.3...........00cccccceeeee 22

Wash. Laws of 2013, ch. 225.............cccccceeees 9

Wash. Laws of 2015, ch. 228,§40................... 0]

Wash. Laws of 2017, Ch. 313...................0--. 16

viti

Cited Authorities

Pees MA GT re GI PE cccccccccccaccoccéocse

Yakama Treaty, art. III, 12 Stat. 951 (1855) .... .2, 3, 12

Melinda Smith, Native Americans and the

Legalization of Marijuana: Can the Tribes

Turn Another Addiction into Affluence?,

39 Am. Indian L. Rev. 507 (2014/15) ............. 22

A. INTRODUCTION

This brief is submitted on behalf of the Washington

Oil Marketers Association (“WOMA”) and the Washington

Association of Neighborhood Stores (“WANS”) in support

of Washington State’s position seeking reversal of the

decision of the Washington Supreme Court. This brief

is filed with the consent of all parties pursuant to Rule

37(3)(a).'

B. INTEREST OF AMICI CURIAE

WOM<A is a nonprofit trade association with individual

and corporate members that market petroleum products

in Washington State and associate members that sell

products and services that support the petroleum industry.

WOMA members account for nearly 80% of all petroleum

products sold in Washington State, including 68,000,000

gallons of heating oil to residential and industrial users.

WOMA is closely aligned with two regional trade

associations: The Pacific Oil Conference and the Western

Petroleum Marketers Association. WOMA is also a

member of the national Petroleum Marketers Associations

of America, which represents petroleum marketers on

national issues in Washington D.C.

1. In compliance with Supreme Court Rule 37(6), amici

curiae represent that no counsel for any party authorized this

brief in whole or in part, and that no person or entity, other than

amici curiae, their members, or their counsel, made a monetary

contribution to the preparation or submission of this brief. All

parties have consented to this filing.

2

WOMA is the only association in Washington State

that focuses on all aspects of the petroleum marketing

industry and monitors legislative and regulatory issues

involving fuel, energy, alcohol, tobacco, transportation,

the environment, and the state budget and taxes. WOMA

also lobbies on behalf of petroleum marketers and oil

heat dealers with state government agencies and the

legislature in Olympia, and stays engaged with the state

and national associations referenced above.

WANS is a business organization that provides

information and assistance to Washington State’s

convenience store industry on a wide variety of topics

including legal, legislative, and regulatory issues to enable

that industry to remain competitive in the marketplace.

C. SUMMARY OF ARGUMENT

The legal incidence of Washington State’s fuel tax

occurs off the Native American reservations in that state.

It applies to fuel suppliers such as Cougar Den.

Article III of the United States treaty with the

Yakama Nation states in pertinent part:

And provided, That, if necessary for the public

convenience, roads may be run through the

said reservation; and on the other hand, the

right of way, with free access from the same

to the nearest public highway, is secured to

them; as also the right, in common with citizens

of the United States, to travel upon all public

highways.

3

Yakama Treaty, art. III, 12 Stat. 951 (1855). While the

treaty gives Yakama tribal members a right to travel

without fees on public highways, the specific language of

the treaty does not confer upon those tribal members a

“right to trade” or a right to evade legitimate state fuel

taxation. In suggesting to the contrary, the Washington

Supreme Court opinion contravenes Ninth Circuit

precedent interpreting the same treaty language and

long-standing principles of this Court in interpreting

Native American treaties.

Further, the Washington court’s interpretation

will effectively confer tax-exempt status on tribal fuel

businesses, fundamentally damaging Washington’s

fuel tax revenues that are constitutionally dedicated to

transportation purposes. That interpretation will create

severe competitive disadvantages for businesses like the

amici’s members. The opinion’s analysis cannot simply be

confined to fuel taxes; it will also affect numerous other

areas of state taxation.

D. ARGUMENT

(1) Washington Fuel Taxes

Initially, critical to this Court’s decision is a clear

understanding of the nature of Washington’s fuel tax

and its legal incidence as to entities like Cougar Den.

See also, petitioner br. at 6-8. The motor vehicle fuel

market in Washington often involves a four-tiered

distribution chain. Squaxin Island Tribe v. Stephens, 400

F. Supp. 2d 1250, 1252 (W.D. Wash. 2005); see, e.g., RCW

82.36.010(12), (13), (17). Suppliers, also called licensees,

are the refineries, producers, or importers that produce,

4

blend or import fuel in Washington. Squazin, 400 F. Supp.

2d at 1252. Distributors transport fuel between suppliers

and retailers. /d. Retailers sell fuel to consumers. /d.

Consumers purchase fuel from the retailers for use in

their vehicles. /d.

Suppliers refine fuel or bring fuel into Washington

State by pipeline, cargo vessel, and ground transportation.

Squazin, 400 F. Supp. 2d at 1252. Distributors transport

the fuel between suppliers, usually by purchasing fuel

from suppliers at a “terminal rack,” which is the platform

or bay at which motor vehicle fuel from a refinery or

terminal is delivered into trucks, trailers, or rail cars. /d.

A State cannot impose a tax on tribal activities

occurring within a reservation. McClanahan v. State

Tax Comm'n of Ariz., 411 U.S. 164, 165-66, 171-73 (1973)

(invalidating state income tax imposed on tribal member's

income earned on reservation); Oklahoma Tax Comm'n

v. Chickasaw Nation, 515 U.S. 450, 455 (1995) (noting

the critical importance of the legal incidence of the tax,

this Court held that a state could not impose fuel taxes

on fuel sold by the tribe on the reservation, but it may

tax all persons, including Native Americans, residing off-

reservation). Activities outside the reservation are subject

to a state’s general tax laws. Mescalero Apache Tribe v.

Jones, 411 U.S. 145, 146-49 (1973) (upholding state gross

receipts tax imposed on tribe’s ski resort operated off-

reservation). The tax at issue here is subject to the latter

principle. Under these authorities, a fuel tax collected

from suppliers or distributors operating off-reservation

that is not required to be passed down the distribution

chain, as here, is a lawful tax. A tribe and its members

are not immune from the economic burden of such a tax,

5

as this Court has recognized in upholding state fuel tax

because legal incidence fell on distributors operating

off-reservation. Wagnon v. Prairie Band Potawatomi

Nation, 546 U.S. 95 (2005). In cases assessing whether a

tribe is immune from state taxation, this Court clarified

that the “legal incidence” of a tax — where and upon whom

the tax is being imposed — is often the determining factor.

Id. at 101, citing Oklahoma Tax Comm'n, 515 U.S. at

458-60, 462-64."

As the case law on tribal immunity and fuel taxation

evolved, the Washington Legislature shifted the incidence

of Washington's fuel tax. In 1994, the fuel tax was collected

from distributors, who were required to pass the tax down

the distribution chain, rather than having the option to

do so. Wash. Laws of 1983, Ist Ex. Sess., ch. 49, § 26; see

also, Wash. Laws of 1998, ch. 176, § 7. The Colville and

Yakama tribes sued the State, arguing that the fuel tax

was being imposed unlawfully on sales to tribal members

on reservation land because the law required the tax to

be passed forward and thus the real incidence of the tax

fell on tribal retailers on the reservation. These lawsuits

resulted in consent decrees between the State and the two

2. The concept of tax incidence is critical to understanding

the present case because the legal incidence of a tax determines

whether there is a valid claim for preemption or immunity. If a

tax is imposed on a distributor and is voluntarily passed through

the chain of distribution as part of the cost of doing business, the

incidence of the tax falls on the distributor, and not on any of those

subsequent purchasers such as retailers or consumers. Wagnon,

546 U.S. at 103. Thus, those subsequent retailers and consumers

are not entitled to exemption from those taxes simply because

they are doing their business on tribal land, because the tax is

not imposed for activities taking place on tribal land. /d.

6

tribes under which the tribes agreed to track fuel sales

to members versus nontribal members. In the consent

decrees, the State agreed to repay the tribes the amount

of fuel taxes paid on fuel purchased by tribal members

from on-reservation retailers.’ The tribes would tell the

State the number of gallons of fuel sold to tribal members,

and the State would calculate the tax refund based on

the total number of gallons. /d. Pursuant to legislative

direction, Wash. Laws of 1995, ch. 320, §§ 2, 3, the State

entered into agreements with other tribes on a basis akin

to the consent decrees.‘

3. The Yakamas, one of the tribes referenced above, refused

to remit to Washington State the fuel taxes they collected. News

accounts indicated that the amount withheld was as much as $25

million. http://seattletimes.com/State-Yakama-Nation-agree-on-

simpler-fuel-tax-system. The State sued the Yakamas to recover

the past due taxes. The State settled with the Yakamas for $9

million. Simultaneously, the State entered into an agreement with

the Yakamas in which the State collects the fuel tax and remits

75% of the collections to the tribe. The Yakamas agreed to pay the

State $9 million but that sum wi!l be paid from the tax revenue

the Yakamas will receive from Washington State. https://www.

seattletimes.com/seattle-news/state-yakama-nation-agree-on-

simpler-fuel-tax-system.

4. Shortly after the 1995 fuel tax amendments, the State

abandoned the “counting gallons” approach because it required

substantial record-keeping requirements and imposed an

administrative burden on the tribes, and instead entered into

agreements based upon a formula. Under these agreements, the

State agreed to disburse fuel tax revenues to the tribes based on the

number of enrolled local tribal members, multiplied by the average

per capita consumption of fuel statewide, disbursing to the tribes

100% of the fuel tax revenue applicable to this amount of fuel. The

State entered into such agreements with numerous tribes.

7

In 1999, the Washington Legislature changed the

point of collection for the fuel tax from distributors to

suppliers in order to increase administrative efficiency

and to provide greater revenues for the State. Wash. Laws

of 1998, ch. 176, § 1(3). With respect to the legal incidence

of the tax, however, the law still required that the tax to

be passed down the distribution chain to retailers and

consumers, instead of simply allowing the suppliers to

choose whether to pass on the tax. See, e¢.g., id., $§ 48(1),

81. The Legislature made no changes to the existing

tribal agreements, and the authorization to enter into

such agreements remained in place. See id., $§ 48(2), 81.

In the early 2000s, the Squaxin and Swinomish tribes

sued the State arguing that the tribes were completely

immune from Washington's fuel tax, not just for sales of

fuel to tribal members but for sales to all fuel purchasers

on tribal land. They asserted that under the then-existing

law,® the legal obligation to pay the tax fell on the retail

tier of the distribution chain, including tribal retailers.

Squazin, 400 F. Supp. 2d at 1251. The tribes argued

that because there was no consumer-level enforcement

mechanism, and because retailers were not entitled to

refunds if consumers failed to pay the tax, the legal!

incidence of the tax fell on retailers. /d. at 1255-57.

Relying on Chickasaw, a case in which the legal

incidence of a state fuel tax also fell on tribal retailers,

the district court in Squazin enjoined the State from

collecting fuel taxes on “the Tribes’ retail sales of fuel

5. See former RCW 82.36.020. However, the law also stated

that the ultimate incidence of the tax was intended to fal! on

consumers. See former RCW &82.36.407(1).

8

products on Tribal land.” /d. at 1262.° Because the State

was not permitted to tax tribes for transactions on tribal

land, the court concluded that Washington fuel taxes,

the legal incidence of which fell on tribal retailers, were

illegal. Id.

In December 2006, this Court issued its decision in

Wagnon, upholding Kansas’ fuel tax because the tax was

explicitly imposed on off-reservation sales to distributors

and did not require those distributors to pass the tax

forward in the distribution chain. Wagnon, 546 U.S. at 103.

Because the legal incidence of the tax fell off-reservation,

the tribes were not immune from the tax simply because

it was included by distributors in the price of the fuel they

sold on-reservation. /d.

In 2007, to remedy the issues raised in the Squazxin

ruling, Washington shifted the full burden of its fuel tax

to suppliers. RCW 82.36.020(1); RCW 82.38.030(1). Under

this statute, the legal incidence of Washington's fuel tax

now falls expressly on suppliers and is imposed on the

first taxable event in Washington. See RCW 82.36.010(12),

0201), 026(5), RCW 82.38.030(1), (7), 0356). None of the

activities constituting the first taxable event — removing

fuel from a refinery, removing fuel from the terminal rack,

importing fuel from another state, or blending fuel — is

6. In reaching its ruling, the Squazin court noted that

Washington's fuel tax (at that time) was legally required to be

passed down the distribution chain to retailers. See Squazin, 400

F. Supp. 2d at 1252-53. Suppliers and distributors would “simply

collect and remit the funds” and would be “reimbursed for any

deficiency.” Id. at 1252. In contrast, retailers were not legally

required to pass the fuel tax on to consumers, and were not entitled

to a refund if a consumer failed to pay the tax. /d. at 1252-53.

9

conducted on any tribal lands. There is no requirement

that the cost of the tax be passed down, but, as with the

Kansas tax this Court considered in Wagnon, suppliers

are permitted to include “as a part of the selling price an

amount equal to the tax.” RCW 82.36.026.’

This 2007 change in Washington law shifted

Washington’s fuel tax regime from one similar to

Oklahoma's in Chickasaw, where the legal incidence fel!

on tribal retailers, to one like Kansas’ regime in Wagnon,

where the legal incidence fell on entities like Cougar Den

and other suppliers and importers located off tribal lands.”

The Washington Legislature authorized the State

to enter into compacts with tribes in that state usually

refunding 25% of fuel taxes collected to the tribes to

ameliorate any lingering adverse effect of Washington's

fuel tax system on those tribes. Such fuel compacts were

upheld by Washington’s Supreme Court. Automotive

United Trades Org. v. State, 357 P.3d 615 (Wash. 2015).

7. The fuel tax is imposed at the first of the following

transactions: (1) when fuel is removed from the terminal rack by

a supplier and sold to a distributor; (2) when fuel is produced; (3)

imported; or (4) blended in the State. RCW &2.36.020(2), see also,

RCW 82.38.030(7). While the fuel tax is included in the price of

fuel sold and delivered to tribal fuel retailers, the legal incidence

of the tax is placed on suppliers (who are non-Indian) and the

taxable event arises off reservation.

8. Washington consolidated its treatment of gasoline and

diese! fuels into a single code chapter. Wash. Laws of 2013, ch. 225;

Wash. Laws of 2015, ch. 228, § 40. That statutory change, effective

in 2016, does not apply to the events in this case.

10

Cougar Den is subject to Washington's fuel tax in the

same way as any other fuel supplier, or as any importer

or distributor that buys fuel in another state and brings it

into Washington is subject to taxation. The legal incidence

of Washington's fuel tax as to Cougar Den unambiguously

occurs off-reservation.’

(2) Neither Treaty Language Nor Federal

Precedent Interpreting Travel Rights in Indian

Treaties Creates a Right to Trade for Tribal

Members

The Washington Supreme Court misconstrued the

plain language of the Yakama treaty to find a “right

9. At the time this litigation began, Cougar Den was a

private wholesale fuel company owned by Richard “Kip” Ramsey,

a Yakama tribal member. It never applied for or held any type of

fuel license from Washington State in order to acquire gasoline or

diesel fuel wholesale, although it obtained an Oregon fuel dealer’s

license in 2012, using that license to purchase gasoline and diese!

wholesale in Oregon. It avoids Oregon fuel taxes because it exports

that fuel. ORS 319.240. See petitioner br. at 9-10.

In March 2013, Cougar Den began exporting fuel from

Oregon into Washington. It contracted with a trucking company,

KAG Weat, to pick up its fuel in Oregon and transport it into

Washington. Cougar Den then imported millions of gallons of fue!

in 2013 without paying Washington taxes.

Cougar Den provided more than 90 percent of its fuel to

two gas stations called Wolf Den and Kiles Korner in Wapato,

Washington. Wolf Den and Kiles Korner sel! retail fuel to the

genera! public. Cougar Den provided the remainder of the fuel to

businesses owned by Ramsey in White Swan, Washington. Before

April 2013, those retailers purchased fuel from Washington-

licensed fuel suppliers who paid Washington fuel taxes.

to trade” that was nowhere to be found in the treaty

language. See, e.g., Cougar Den, Inc. v. Wash. State Dep't

of Licensing, 392 P.3d 1014, 1019 (Wash. 2017) (“We hold

that the right to travel provision in the treaty protects the

Tribe's historical practice of using the roads to engage

in trade and commerce.”). This construction contravenes

this Court’s long-standing emphasis in Chocktaw Nation

of Indians v. U.S., 318 U.S. 423, 432 (1943); Nw. Bands

of Shoshone Indians v. U.S., 324 U.S. 335, 353 (1945) on

the enforcement of plain treaty language as written. The

petitioner’s brief at 21-39 is entirely correct in arguing

that the treaty language does not support the Washington

court’s construction.

Amici are concerned not only because the Washington

court's opinion is inconsistent with controlling case law,

but, as shown in section (4), that legal error directly

harms the amici who must compete with fuel businesses

that can, through a Yakama distributor, deal in fuel with

the extraordinary competitive advantage of avoiding

Washington State’s fuel taxes.

For example, this Court’s case law was properly

applied by the Ninth Circuit, rejecting such a right in

interpreting the same provision of the identical treaty in

King Mountain Tobacco Co., Inc. v. McKenna, 768 F.3d

989 (9th Cir. 2014), cert. denied, 135 8. Ct. 1452 (2015).

10. Apart from a different product being at issue, the

facts in King Mountain and this case are essentially identical.

King Mountain Tobacco Co. was owned by an enrolled Yakama

tribal member. It initially bought tobacco in North Carolina and

processed it there. It then brought the processed product back to

Washington State where it was then sold on the reservation and

throughout the state and 16 others. King Mountain asserted it

12

In addressing article III of the treaty, the Ninth Circuit

stated: “As shown by the plain text of Article III, the

Treaty reserved to the Yakama the right ‘to travel upon

all public highways.’ Nowhere in Article III is the right to

trade discussed.” /d. at 996. That court further concluded

“the Treaty is not an express federal law that exempts

King Mountain from state economic regulations” and

“there is no right to trade in the Yakama Treaty.” /d. at

997, 998."

The Washington court also misread the Ninth Circuit

opinion in United States v. Smiskin, 487 ¥.3d 1260 (9th

Cir. 2007). Smiskin does not aid Cougar Den’s position. In

Smiskin, a criminal prosecution for trafficking in illegal

cigarettes, the Ninth Circuit held that a pre-transport

notice requirement for moving cigarettes was a condition

on travel that was inconsistent with article III of the

Yakama treaty, 487 F.3d at 1264-66, relying on its earlier

rulings in the Cree cases that the treaty preempted state

truck license fees. No such travel-related fee is at issue

here. Moreover, the Smiskin court nowhere recognized a

broad-based right to travel as did the Washington court.

was exempt from a Washington State health-related assessment

pursuant to a Master Settlement Agreement between the states

and tobacco manufacturers, or, alternatively, a tax in lieu of that

assessment. 768 F.3d at 991-92.

11. The King Mountain court's analysis flowed from a number

of prior Ninth Cireuit decisions analyzing the very same provision of

the very same treaty. See Cree v. Waterbury, 78 F.3d 1400 (9th Cir.

1996) (trucking license fees were subject to Yakama treaty), Cree

v. Flores, 157 ¥.3d 762 (9th Cir. 1998) (truck license and overweight

fees subject to Yakama treaty), Ramsey v. U_S., 302 F.3d 1074, 1080

(9th Cir. 2002) (upholding federal diesel fuel tax from Yakama treaty

challenge).

13

See also, United States v. Fiander, 547 ¥.3d 1036 (9th

Cir. 2008); U.S. v. Wilbur, 674 F.3d 1160, 1180-81 (9th Cir.

2012) (rejecting broad right to trade in Swinomish treaty).

Simply put, there is no right to trade in the treaty at

issue. The applicable treaty provided that Yakama tribal

members had the right to travel on public highways like

any other citizens, free of specific fees for such rights; no

such fee was imposed here.’*

(3) This Court’s Precedents on Taxation of Tribal

Activity Off-Reservation Permit the Imposition

of the Tax on Cougar Den

As noted in the petitioner’s brief at 18-21, a cardinal

principle of this Court’s Native American treaty

jurisprudence that tribal members acting outside of

the reservation are subject to the very same taxation

obligations as are nontribal citizens of a state. “Absent

express federal law to the contrary, Indians going beyond

reservation boundaries have generally been held subject

to nondiscriminatory state law otherwise applicable to all

citizens of the State.” Mescalero Apache Tribe, supra at

148-49. Again, the very same treaty has been interpreted

by this Court to support this analysis. In Washington

v. Confederated Tribes of Colville Indian Reservation,

447 U.S. 134 (1980), this Court also rejected the notion

12. As noted supra, Washington imposes a tax on wholesale

fuel when it enters the state or is removed from a bulk facility in the

state, and the person taxes is the fuel owner. RCW 82.36.010(16),

#2.38.020(26), 82.36.020(2), and 82.38.030(7). The agency’s fina!

order specifically found that the tax is “not a charge for Cougar

Den’s use of public highways. ... Cougar Den is being taxed for

importing fuel.” Final Order CL, 20.

14

that a Yakama tribal concern could sell cigarettes free

of Washington State taxation, stating that a “State may

sometimes impose a nondiscriminatory tax on non-Indian

customers of Indian retailers doing business on the

reservation.” /d. at 151."

It is no different here. The treaty at issue merely

secured for Yakama tribal members a right to “travel

upon all public highways” in common with all other

citizens of the United States. It did not forestall application

of a nondiscriminatory state tax law applicable to all

Washington citizens off-reservation. This is particularly

true where the incidence of the tax on Cougar Den is

plainly off-reservation.

13. In Colville, federally licensed Native American traders

engaged in on-reservation sales, predominantly to nontribal

members, of cigarettes supplied by several Washington tribes.

The tribes imposed a tax largely on cigarette purchasers.

Washington State also imposed a tax on cigarette purchasers.

The low sale price of untaxed cigarettes was the only reason

purchasers journeyed to the reservation. If the Washington tax

were collected, on-reservation cigarette purchases by nontribal

members would end. The tribes argued that while both the tribe

and Washington State had an interest in taxing to raise revenue,

federal law supporting tribal self-determination and economic

development preempted the State’s interest. This Court rejected

both arguments.

This Court held that the State could tax cigarette sales by a

tribe to non-Indians and nonmember Indians even though sales

to tribal members were not taxable by the State and the tribe

imposed its own tax. /d. at 155-56, 160-61. The state taxes were

not preempted by federal law and did not interfere with tribal

self-government. /d. at 155-56. The State could legitimately seize

cigarettes off-reservation that failed to meet Washington State

taxation requirements. /d. at 161-62.

15

(4) The Washington Court’s Treaty Interpretation

Will Have a Major Impact on State

Transportation Revenues and an Anti-

Competitive Impact on Other Fuel Retailers

A construction of the Yakama Treaty recognizing

a “right to trade” that forestalls imposition of a non-

discriminatory fuel tax whose legal incidence is off-

reservation will have a profound impact on a variety of

state taxes. The Washington court’s treaty construction

and Cougar Den’s position will provide a huge competitive

advantage to tribal businesses over nontribal competitors

who would not enjoy the same tax exempt status claimed

by such tribal businesses. While petitioner has explained

how this Yakama argument leads to tax avoidance from

coast to coast, amici explain infra how that tax immunity

will impose significant harm on competing nontribal

businesses.

(a) Effect on Washington State Transportation

Budget

In 1944, responding to concern that gasoline excise

tax revenues were being diverted from street and

highway improvement to non-highway uses, the citizens

of Washington enacted article II, § 40 of the Washington

Constitution.“ This amendment provides that motor vehicle

14. The historical impetus to prevent diversion of gas

tax revenue found its source in the terrible state of highway

transportation systems in the 1930's. Rogers v. Lane County, 771

P.2d 254, 256-58 (Or. 1989). To remedy the problem, a number

of states earmarked revenue from gasoline and motor vehicle-

related taxes to be used exclusively for highway purposes. /d.

at 540. Nevertheless, legislatures continued to divert the funds.

Washington voters enacted the 18th Amendment to keep motor

fuel taxes dedicated to their intended purpose.

16

license fees and excise taxes on the sale, distribution, or

use of motor vehicle fuel must be used “exclusively for

highway purposes.” Wash. Const. art. II, § 40. To that end,

such revenues are placed in a motor vehicle fund (““MVF”)

separate from the State’s General Fund, RCW 46.68.070.

The Washington Legislature appropriates from the MVF

to sustain the State’s biennial transportation budget that

funds both transportation operational needs and capital

projects. See, e.g., Wash. Laws of 2017, Ch. 313; Wash.

Laws of 2018, Ch. 297.

Article Il, § 40 is very prescriptive as to what

constitutes a “highway purpose.” Funds from motor

vehicle fuel excise taxes may only be spent on road-

related purposes and no others." As early as 1951, in

15. Washington Constitution article II, § 40 states:

All fees collected by the State of Washington as license

fees for motor vehicles and all excise taxes collected

by the State of Washington on the sale, distribution

or use of motor vehicle fuel and all other state revenue

intended to be used for highway purposes, shal! be

paid into the state treasury and placed in a special

fund to be used exclusively for highway purposes.

Such highway purposes shal! be construed to include

the following:

(a) The necessary operating, engineering and legal

expenses connected with the administration of public

highways, county roads and city streets;

(b) The construction, reconstruction maintenance,

repair, and betterment of public highways, county

roads, bridges and city streets; including the cost

and expense of (1) acquisition of rights-of-way, (2)

installing, maintaining and operating traffic signs

and signal lights, (3) policing by the state of public

17

State ex rel. Bugge v. Martin, 232 P.2d 833 (Wash. 1951),

the Washington Supreme Court held that the use of the

MVF monies was confined to highway purposes. See also,

Automobile Club of Washington v. City of Seattle, 346 P.2d

695 (Wash. 1959) (MVF could not be used to satisfy tort

judgments); Washington State Highway Commission v.

Pacific Northwest Bell Telephone Co., 367 P.2d 605 (Wash.

1961) (cost of relocating utility facilities on rights-of-way

not a highway purpose); see also, State ex rel. O’Connell v.

Slavin, 452 P.2d 943 (Wash. 1969) (maintenance of a public

transportation system not a highway purpose). Indeed,

consistent with that interpretation, the Washington

Attorney General has also formally opined that the 18th

Amendment requires an excise tax on gasoline to be

placed in the MVF. WA AGO 2001 No. 2.

highways, (4) operation of movable span bridges, (5)

operation of ferries which are a part of any public

highway, county road, or city street;

(ec) The payment or refunding of any obligation of

the State of Washington, or any political subdivision

thereof, for which any of the revenues described in

section 1 may have been legally pledged prior to the

effective date of this act;

(d) Refunds authorized by law for taxes paid on motor

vehicle fuels;

(e) The cost of collection of any revenues described in

this section:

Provided, That this section shal! not be construed

to include revenue from general or special taxes or

excises not levied primarily for highway purposes, or

apply to vehicle operator’s license fees or any excise

tax imposed on motor vehicles or the use thereof in

lieu of a property tax thereon, or fees for certificates

of ownership of motor vehicles.

18

The policy underpinning the 18th Amendment is

unambiguous: its framers wanted to ensure that that

motor vehicle license fees and fuel taxes were used to

construct and maintain highways, roads, and streets. State

ex rel. Heavey v. Murphy, 982 P.2d 611, 616 (Wash. 1999).

Cougar Den’s activities impact Washington State fuel

tax revenues, diminishing funds available for necessary

transportation operations and capital projects at a time

when Washington transportation needs are not being

met due to lagging revenues.” In fact, Cougar Den’s

circumvention of Washington fuel taxes is estimated

to have cost the MVF (and transportation projects in

Washington State) nearly $45 million in transportation

revenues between March 2013 and the present. It evaded

payment of Washington State fuel taxes on 99 million

gallons of fuel, representing $45 million in revenues lost

to the State.

Moreover, Cougar Den has actually expanded its

operations since the start of this action. It has rebuilt its

Wapato, Washington location, adding six more gasoline

dispensers. It has expanded its facility to accommodate

more trucks by providing a new truck stop building, a

new fuel canopy, and additional fuel tanks. Thus, Cougar

Den itself will expand the volume of fuel dispensed off-

reservation in Washington that evades Washington’s fuel

taxes.

16. Washington policymakers have even considered a tax

on the miles driven by vehicles as an alternative to excise taxes

on fuel, as MVF revenues chronically lag behind transportation

construction costs. https://www.seattletimes.com/seattle-news/

transportation/washington-state-to-test-pay-by-the-mile-as-a-

way-to-fund-highways/.

19

Additionally, if the Washington Supreme Court’s

opinion is affirmed, there is literally nothing to stop

other tribally affiliated suppliers from emulating Cougar

Den’s action, entering the market and circumventing

Washington fuel taxes. That construction will also cause

harm in other states where taxes are imposed on fuel or

other goods that enter into a state by roadway.”

The impact on Washington State transportation

revenues, and those of other states, will be nothing

short of catastrophic. Amici are concerned that as fuel

tax revenues decline with this virtual tax immunity for

Cougar Den and others similarly situated, Washington

policymakers will seek to remedy such revenue losses by

exotic tax schemes aimed at tax-paying businesses like

amici.

(b) Effect on Cougar Den’s Nontribal

Washington State Competitors

News accounts of this case indicated that tribal

fuel retailers (including Cougar Den itself) or retailers

purchasing from Cougar Den enjoyed a 20 cent per

17. The incentive for other tribal fuel importers and other

wholesalers to enter this market is patent. This is not a theoretical

concern. For example, First American Petroleum is engaging in

similar conduct in California. http-//www.firstamericanpetro.com/

about-us/. The Nez Perce tribe has a similar treaty provision. 392

P.3d at 1024 n.11. Indeed, as the Washington court dissent noted:

“A simple extension of the majority’s logic would allow nontribal

members to avoid the imposition of state use, excise, or sales tax

on goods they consume through a contrived transport by Yakama

Nation or Nez Perce tribal members.” /d. (emphasis in original)

(Fairhurst, J., dissenting).

20

gallon advantage over other retailers when Washington

State’s fuel tax was at 37.5 cents per gallon.” That tax

rate increased since the time of the proceedings below to

49.4 cents per gallon, making the pump price disparity

between retailers purchasing from entities paying the

Washington tax and those purchasing from Cougar Den

ever the greater, as recent news accounts documents.”

WOMA's members who purchase fuel in Oregon must

obtain a fuel importer license, and pay Washington’s fuel

tax. Cougar Den, and any other similarly situated tribal

fuel importer, do not. WOMA members are competitively

disadvantaged; they simply cannot compete with a

business like Cougar Den or its on-reservation retail

customers, who sell the identical fuel as amici, but can do

80 while evading Washington State’s fuel taxes.

Nontribal WOMA members have explained how this

harm occurs and its effect on disadvantaged businesses.

In testimony before the Washington State Senate

Transportation Committee on Senate Bill 6193, Rod

Smith, the vice president of RH Smith Distributing,

18. http://www.yakimaherald.com/ news/ local/ gas- tax- fuels-

debate- between-yakama-nation-state/article 8a9006b8-01 16-11e5-

b9b1-d75098f93ee7. htm]; http://www. yakimaherald.com/news/

business/local/does-state-gas-tax-apply-on-yakama-reservation-

judge-will/ article 425f31a2-2ddf-1le5-9941 -3fff12e36503. htm!;

http://www.yakima herald.com/news/crime and courts/judge-s-

ruling-expected-to-favor-treaty-rights-in-gas/ article 866c7922-

30c8-1 1le5-b81¢e-d7d4d901 3cea. html.

19. https://www.tri-cityherald.com/news/local/

article214070264.html (while gas prices in Washington were close

to $3.43 per gallon, Cougar Den was selling gas at its White Swan,

Washington outlet at $2.92 per gallon).

21

a family-owned fuel distribution company based in

Washington State’s Yakima Valley, and a WOMA member,

provided this written testimony:

Our company used to own a convenience store

which sold fuel in Toppenish. Today it is closed

and the fuel tanks are removed. We could

not compete against the local Yakama tribal!

stations who today have a 45 cent per gallon

buying under our cost!! Customers

will drive miles just to save a few pennies

per gallon when shopping for fuel. How do

businesses like ours, who are required to pay

all the state taxes and fees, complete with a 45

cent per gallon disadvantage’?

See www.tvw.org/watch/Tclient! D =9375922947&event

1D =2016010084& autostartstream=true. See also, http://

lawfilesext.leg.wa.gov/biennium/ 2015-16/Pdf/Bill#®20

Reports/Senate/6193%20SBR%20T RAN %2016.pdf

(official bill report).

Mr. Smith reports now that nontribal fuel outlets in

Yakima and Yakima Valley cannot compete with Cougar

Den given low posted retail fuel prices that draw in

customers who shop for the lowest fue! price for their cars

and trucks. The Yakama tribal-owned stations, all now

supplied by Cougar Den and their fleet of trucks, always

post the lowest prices in the area, according to Smith.

Cougar Den leveraged its advantage and expanded into

the fuel hauling business, owning its own trucks. The

severity of the competitive disadvantage for retailers not

purchasing fuel from Cougar Den is clear.

Similarly, WANS members are similarly disadvantaged

in fuel sales. But the Washington Supreme Court's treaty

interpretation will also impact other areas of commercial!

activities, particularly tobacco sales by WANS convenience

store members. Should that court’s treaty construction

hold, tribal businesses will circumvent Washington

State’s high tobacco taxes, running afoul of contrary

Ninth Cireuit precedent. The theory behind Cougar

Den’s activities may even extend into other unexpected

commercial activities. See, e.g., Melinda Smith, Native

Americans and the Legalization of Marijuana: Can the

Tribes Turn Another Addiction into Affluence?, 39 Am.

Indian L. Rev. 507 (2014/15). Washington State legalized

the recreational use of marijuana in 2012 by initiative.

Wash. Laws of 2013, ch. 3.

E. CONCLUSION

The Washington Supreme Court's interpretation of the

2011). See also, Matheson v. Wash. State Liquor Control Bd.,

American retailer selling cigarettes to other tribes).

nowhere in the treaty language. This misconstruction

defeats the legitimate application of a nondiscriminatory

state fuel tax whose incidence falls off reservation and wil!

effectively blow gaping holes in the fuel tax revenues and

transportation budgets of Washington and other states.

It will allow tribal fuel suppliers an unfair advantage

over nontribal business competitors. It will also create a

precedent for tribal retailers of other products that this

Court should not countenance.

This Court should reverse the decision of Washington's

Supreme Court.

DATED this 15” day of August, 2018.