BP BHEAD INT H

AN ACT Relating to negotiation of cooperative agreements between the governor of the state of Washington and federally recognized Indian tribes within the borders of the state of Washington concerning the sales of cigarettes; adding new sections to chapter 43.06 RCW; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; adding a new section to chapter 82.24 RCW; creating a new section; providing an effective date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. (1) The legislature intends to enhance the government-to-government relationship enjoyed by both the state of Washington and the federally recognized Indian tribes in the state of Washington by authorizing the governor to enter into cooperative agreements with federally recognized Indian tribes in the state of Washington concerning the sales of cigarettes.

(2) The United States Constitution provides that congress has the exclusive power to conduct affairs among the various Indian tribes, to the exclusion of the states where the power is exercised. In its interpretation of this constitutional provision, the supreme court of the United States has held that federally recognized Indian tribes and nations are free to engage in sales of cigarettes to their members free of state taxation when made within the borders of their own Indian reservation. The supreme court has further held that a state is prohibited from bringing a lawsuit against an Indian tribe or nation to compel the tribe or nation to collect state taxes on sales made in Indian country to either members or nonmembers of the tribe or nation without either a waiver of immunity by the tribe or nation or congressional action authorizing the state's lawsuit. Finally, the supreme court has suggested that a state may provide other methods of collection of state taxes on sales of cigarettes made by Indian tribes or nations to persons who are not members of the tribe or nation, such as entering into mutually satisfactory agreements with Indian tribes or nations.

(3) The legislature intends to follow a path of mutual cooperation with federally recognized Indian tribes in the state of Washington by authorizing the governor to negotiate revenue-sharing agreements with those tribes. While recognizing the individual sovereignty of both the tribes and the state, these agreements can provide for increased revenues for both the state and the tribes. In addition, by allowing for the possibility of simultaneously negotiating the removal of unstamped cigarettes from the reservations, enforcement of the state's cigarette tax laws can be greatly enhanced.

NEW SECTION. Sec. 2. A new section is added to chapter 43.06 RCW to read as follows:

(1) The governor may enter into the cooperative agreement concerning the sales of cigarettes negotiated by the governor and the department of revenue with the Puyallup Tribe of Indians entitled "Cigarette Tax Compact Between the Puyallup Tribe of Indians and the State of Washington" dated . . . . . for a term of eight years. In addition, the governor may enter into cooperative agreements with other federally recognized Indian tribes in the state of Washington concerning the sales of cigarettes. All cooperative agreements shall meet the requirements for cooperative agreements under this section and section 3 of this act.

(2) Cooperative agreements shall provide that the tribe or tribal licensed retailers shall only make sales of cigarettes in which delivery and physical transfer of possession of the cigarettes from the seller to the buyer occurs within the boundaries of the reservation, as recognized by the United States secretary of the interior. In addition, cooperative agreements shall provide that the tribe or tribal licensed retailers shall not sell or give, or permit to be sold or given, to any person under the age of eighteen years any cigar, cigarette, or tobacco in any form.

(3) Cooperative agreements shall provide for a tribal cigarette tax in lieu of all state cigarette and state and local retail sales and use taxes on sales of cigarettes on the reservation by a tribe or tribal licensed retailers. The tribal cigarette tax shall apply to all sales of cigarettes to Indian and non-Indian purchasers, but the tribe may allow an exemption for sales to tribal members if, on the effective date of this section, the tribal constitution prohibits imposition of a tax on tribal members.

(4) Cooperative agreements shall provide that all cigarettes possessed or sold by the tribe or tribal licensed retailers shall bear a tribal cigarette tax stamp purchased by wholesalers from a bank or other suitable stamp vendor and applied to the cigarettes to verify payment of the tribal cigarette tax.

(5) Cooperative agreements shall provide that the tribe and tribal licensed retailers shall purchase cigarettes only from:

(a) Wholesalers or manufacturers licensed to do business in the state of Washington;

(b) Out-of-state wholesalers or manufacturers who, although not licensed to do business in the state of Washington, agree to comply with the terms of the cooperative agreement, are certified by the tribe to the state as having so agreed, and who do in fact so comply. However, the state may in its sole discretion exercise its administrative and enforcement powers over such wholesalers or manufacturers to the extent permitted by law; and

(c) A tribal wholesaler that purchases only from a wholesaler or manufacturer described in (a) or (b) of this subsection.

(6) Cooperative agreements shall be for a term of no more than eight years.

(7) Cooperative agreements may provide that the tribe, at its option, may substitute the tribe's agreement with the state of Washington for a cooperative agreement concerning the sales of cigarettes subsequently negotiated between the state of Washington and a different tribe. This option is conditioned upon the tribe substituting the entire subsequent agreement for the tribe's agreement, except that the expiration date of the tribe's agreement shall remain unchanged.

(8) Cooperative agreements may provide for the payment by the tribe to the state of Washington of a portion of the tribal cigarette tax collected under the agreement. Any revenues received under this subsection shall be distributed in the same manner as cigarette tax revenues under chapter 82.24 RCW.

(9) Cooperative agreements may permit the submission of disputes regarding the interpretation and administration of their provisions for judicial resolution, but a waiver of sovereign immunity and consent by the state for the resolution shall be conditioned upon a similar waiver of sovereign immunity by the Indian tribe, which waiver shall be approved or otherwise confirmed by the United States as may be required by law.

(10) Cooperative agreements shall contain provisions for administration and enforcement substantially equivalent to those contained in the cigarette tax compact referred to in subsection (1) of this section.

(11) The governor may delegate the power to negotiate cooperative agreements to the department of revenue.

(12) For purposes of this section, "federally recognized Indian tribe or nation" means an Indian tribal entity that is recognized as an Indian tribe by the United States secretary of the interior.

NEW SECTION. Sec. 3. A new section is added to chapter 43.06 RCW to read as follows:

The tribal cigarette tax which is in lieu of all state cigarette and state and local retail sales and use taxes on sales of cigarettes on the reservation by a tribe or tribal licensed retailers as provided in section 2(3) of this act shall be no less than three dollars and fifty-four cents per carton of two hundred cigarettes. The minimum tribal tax shall be prorated for sales of less than a full carton and for sales of cartons containing fewer or more than two hundred cigarettes. The minimum tribal cigarette tax shall increase by no less than twenty-five percent of any future increase in the state cigarette tax rate. The minimum tribal cigarette tax shall be reduced by twenty-five percent of that portion of any future reduction in the state cigarette tax that leaves the total state cigarette tax at or above seven dollars and sixty-five cents per carton and by one hundred percent of that portion of any future reduction in the state cigarette tax that leaves the total state cigarette tax below seven dollars and sixty-five cents per carton but at or above five dollars and sixty-five cents per carton. If any future reduction in the state cigarette tax leaves the total state cigarette tax below five dollars and sixty-five cents per carton, the state and the Indian tribe or nation shall negotiate the minimum tribal cigarette tax.

As used in this section, any future increase or reduction in the state cigarette tax means any increase or reduction in the cigarette tax rate occurring after the effective date of this section.

NEW SECTION. Sec. 4. A new section is added to chapter 82.08 RCW to read as follows:

The tax levied by RCW 82.08.020 shall not apply to sales of cigarettes made by a federally recognized Indian tribe or nation or its licensees during the effective period of a cooperative agreement entered into between the state and the federally recognized Indian tribe or nation under section 2 of this act.

NEW SECTION. Sec. 5. A new section is added to chapter 82.12 RCW to read as follows:

The tax levied by RCW 82.12.020 shall not apply in respect to the use of cigarettes sold by a federally recognized Indian tribe or nation or its licensees during the effective period of a cooperative agreement entered into between the state and the federally recognized Indian tribe or nation under section 2 of this act.

NEW SECTION. Sec. 6. A new section is added to chapter 82.24 RCW to read as follows:

This chapter shall not apply to the sale, use, consumption, handling, possession, or distribution of cigarettes by a federally recognized Indian tribe or nation or its licensees during the effective period of a cooperative agreement entered into between the state and the federally recognized Indian tribe or nation under section 2 of this act.

NEW SECTION. Sec. 7. This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect April 1, 1996.