Ryan Dreveskracht's exposition in Native American Times about the Master Settlement Agreement, was quoted at length in a recent reason.com blog post, "Tax-Hungry State Officials Revive Indian Wars Over Cigarettes."
As part of an interesting analysis of the cigarette tax standoff, Ryan D. Dreveskracht summarizes a major tax collecting approach for Native American Times:
In 1998, the Attorneys General of 46 states, five U.S. territories, and the District of Columbia settled various legal actions involving antitrust, product liability, and consumer protection claims against the nation’s four largest tobacco companies. (In the early years of the Bush Administration, the Department of Justice decided not to pursue claims against tobacco manufacturers for harm caused in Indian country). The states wanted billions of dollars, and were likely right to demand it. The tobacco companies, however, anticipated that they would have to substantially raise cigarette prices to pay for their financial obligations to the states. They also knew that by raising their prices, other nonparticipating companies would have a competitive price advantage.
In settling the suits, the major tobacco companies got a sweetheart deal. As part of the settlement agreement, states agreed to enact and “diligently enforce” escrow statutes that “effectively and fully neutralize[d]” competition from nonparticipating companies. These statutes impose financial obligations on non-participating companies by requiring them to make escrow payments based on the number of tax-stamped cigarettes sold in a participating state. Participating tobacco companies are not subject to these payments. Nonparticipating companies, however – companies that have never been sued or found culpable for conduct giving rise to liability – are required to make the payments.
Ryan Dreveskracht is an Associate at Galanda Broadman, PLLC. His practice focuses on representing businesses and tribal governments in public affairs, energy, gaming, taxation, and general economic development. He can be reached at 206.909.3842 or ryan @galandabroadman.com.