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Judge dismisses state tax agency from tribal suit

(MCT) – A federal judge has dismissed a lawsuit against the Oklahoma Tax Commission and tax commissioners filed by the Muscogee (Creek) Nation after the commission seized what it calls contraband cigarettes from tribal delivery trucks.

In his decision issued Aug. 10, U.S. District Judge Terence Kern of the Tulsa-based Northern District of Oklahoma granted the OTC’s motion to dismiss the seizure case because the commission’s “sovereign immunity” exempts it from suit.

He also granted the OTC commissioners’ motions to dismiss because, under the tribe’s arguments, the tribal entity does not constitute a “person” who can bring suit.

The tribe filed the suit in May after the Oklahoma Highway Patrol, working with the Oklahoma Tax Commission, stopped three tribal vehicles, and seized a total of about $100,000 worth of tobacco out of two of the vehicles. The third vehicle did not have any tobacco in it.

In its suit, the tribe was seeking to have the tobacco returned. The state maintained that the cigarettes are illegal to sell in the state, and thus did not have a tax stamp affixed to them, which would have resulted in the loss of around $42,000 in taxes, according to the OTC.

The Creek Nation is the largest tribe in the state to not sign a tobacco compact. Until recently, the tribe has been at odds with the state for selling cigarettes with low tax stamps reserved for border areas in Oklahoma and continuing to sell cigarette brands not on the Master Settlement Agreement roster and thus illegal.

The roster, which lists brands that can legally be sold in the state, was part of an agreement reached with cigarette makers in 1998.

A separate lawsuit by the state against several tribal business officials and smoke shop owners who sold non-MSA cigarettes is still in court.

A Tulsa World investigation conducted after the seizures and the lawsuit by the state showed that some Creek smoke shops continue to sell the non-MSA cigarettes.

Kern wrote in his decision that although the tribe was basing its argument on seeking to vindicate “personal rights” violated in the seizure, it repeatedly invoked its sovereign rights in its arguments.

“Despite MCN’s attempt to claim, in one portion of its briefing, that this suit does not concern its sovereign status, the remainder of MCN’s briefing demonstrates that MCN’s claim ultimately invokes MCN’s sovereign rights,” Kern wrote.

“The Court therefore looks beyond MCN’s assertion that it is merely seeking to vindicate ‘personal rights’ and finds that the interest asserted by MCN is one based on its sovereign status and one that a similarly situated private party would not enjoy.”

Kern had asked the Tax Commission in May to hold off on seizing any more Creek Nation cigarettes, but now, with the ruling in the state’s favor, the seizures might resume.

A spokeswoman for the Tax Commission, Paula Ross, declined to say whether the state had any immediate plans to intercept more tribal tobacco trucks.

“We’re pleased by the court’s decision, but we must decline comment on future enforcement actions,” she said.

Tribal officials did not return calls seeking comment on the ruling.

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