In 1855, the Yakama Nation entered into a treaty with the federal government in which it gave up 10 million acres of land in Washington state in exchange for rights under the treaty, including the right (provided in Article III of the treaty) of the nation’s members “to travel upon all public highways.” That provision is now at the center of a legal dispute over fuel taxes that the Supreme Court could take up next fall.
Cougar Den is a fuel wholesaler owned by Kip Ramsey, a member of the Yakama Nation. The company hauls fuel to the Yakama Nation from Oregon, using public highways, and sells the fuel to gas stations owned by other members of the nation. The company levies federal and tribal taxes on the fuel that it sells, but not the state tax of roughly 50 cents per gallon – one of the highest in the nation. In 2013, the company got a bill for $3.6 million in unpaid state taxes and penalties, which it argued it did not have to pay because the tax violated its right under Article III of the treaty “to travel upon all public highways.”
The Washington Supreme Court agreed with the company, and the state asked the U.S. Supreme Court to review that ruling. It told the justices that the state court’s decision “will cost Washington (and likely other States) hundreds of millions of dollars,” while a separate group of Washington oil marketers added that, if the state supreme court’s ruling is allowed to stand, it “will effectively confer tax-exempt status on tribal businesses that will blow gaping holes in the state’s fuel tax revenues and budgets. The opinion’s analysis cannot simply be confined to fuel taxes and will also affect numerous other areas of taxation” – such as taxes on cigarettes. Moreover, the marketers continued, the ruling “will provide unfair advantage to tribal businesses over nontribal business entities who must comply with state tax imperatives.”
Cougar Den pushed back, depicting the case as simply “another chapter” in the state’s “long campaign to maximize revenue by infringing on treaty rights.” The company urged the justices to deny review, dismissing the case as “a local revenue dispute” that hinges on the “application of a statutory term in Washington’s fuel tax code and its conflict with a treaty provision found in only two other treaties” – hardly, the company concluded, “an issue of national importance.”
The Supreme Court asked the federal government to weigh in, which it did in a brief filed on May 15. U.S. solicitor general Noel Francisco told the justices that they should grant review because the Washington Supreme Court’s ruling is both wrong and at odds with decisions by the U.S. Court of Appeals for the 9th Circuit interpreting Article III of the treaty. The government’s recommendation is not dispositive, but it is likely to carry significant weight with the justices. The court will almost certainly announce whether it will review the case by the end of June.