It's High Time to Talk Tribal Marijuana Legalization, and Taxation

The Washington State Legislature is considering a bill that would legalize, regulate and tax marijuana:

House Bill 1550, filed Tuesday, would regulate marijuana much like alcohol. It proposes that pot be sold through state liquor stores to adults age 21 and older, that the sales be taxed and that the state Liquor Control Board issue licenses to commercial growers. Most of the revenue would go to health care, and substance-abuse treatment and prevention.

Washington State's House Bill 1550 follows California's Proposition 19, a failed ballot initiative that had enough voter momentum last fall to cause U.S. Attorney General Eric Holder to state that, if passed, the law would violate the federal ban on marijuana manufacture or possession. Even so, state (and in turn federal) legalization of marijuana is a matter of when, not if.

With that reality in mind, tribal governments should begin considering whether to also legalize and regulate marijuana. Any state regulation of marijuana would not extend to Indian Country, even in so-called P.L. 280 states. Instead, tribal laws could govern the production, distribution or sale of marijuana on tribal lands, by tribal entrepreneurs.

Better yet, if states legalize marijuana and attempt to tax it, state taxes would not apply to tribal marijuana business activity. States are limited, if not outright barred, from taxing even non-Indian purchases when value generated on the reservations by activities in which Indians have a significant interest are involved. Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134, 156-57 (1980).

Pursuant to the Colville case (an otherwise unmitigated catastrophe for tribal commerce), many tribes and tribal members are manufacturing tobacco products, and doing so free of ever-increasing state sales or business gross revenue taxes. The same legal rationale would apply to the tribal production, distribution and sale of marijuana from the reservation, so long as it is tribal members who are actively engaged in those commercial activities.

Independent of state tax exemption, tribal governments can impose their own excise taxes on tribal members' tobacco business activities. Many tribes do so, although at lower tax rates than imposed by state government. Likewise, tribes could tax tribal member marijuana commercial activities, perhaps at lower rates than states.

Tax abatement is of course how governments balance their goals of attracting and growing industry and jobs within their territory, with raising revenues for governmental programs and services. Tribal marijuana tax revenues could fund traditionally underfunded tribal governmental services and programs, including Indian health care, just as the proponents of House Bill 1550 intend any state marijuana excise taxes to fund state social services.

Indian Country has the sovereignty, tax status, land base, agricultural savvy and business intangibles to really make legalized marijuana happen. For some rural tribes, those attributes are all they have to leverage economically.

Best of all, any state-tax-exempt tribal purveyor of legalized marijuana would have a potentially significant competitive tax advantage over any non-Indian purveyor who would be subject to state marijuana excise taxation. In turn, the tribal private sector would grow.

This is not to say that legalizing tribal marijuana on the reservation will immunize tribal communities from the negative socio-economic effects of drug activity. Native Americans are afflicted with some of the highest rates of drug and alcohol abuse, most recently at the hands of methamphetamine. So great care must be taken to not exacerbate that epidemic. Even so, the business case for tribal marijuana legalization, as for tribal tobacco or Indian gaming commerce, is premised upon tax-exempt sales, from tribal lands, to non-Indians -- non-Indians who would take their purchased marijuana with them back to wherever it was they came from.

This is also not to say that there would not be collateral sovereign and self-governance challenges associated with tribal marijuana legalization. In states where medicinal marijuana has been legalized, tribal employers are already facing awkward requests from employees who claim the need to use marijuana to treat disabilities and thus, seek some form of "reasonable accommodation" to exempt them from anti-drug personnel policies. Such requests beg questions about the applicability of federal employment laws of general applicability, to tribal employers, and represent the perfect storm for the next legal challenge to sovereignty. Even more profound is the potential attraction of drug-related criminal or other undesirable activity on law enforcement-thin reservations.

[Update: An August 23, 2011 Seattle Times feature highlights the law enforcement dilemma yet implicitly underscores how the current federal prohibition on marijuana creates a black market, which a legalization, regulation and taxation regime would help eradicate both in and beyond Indian Country.]

This is also not to say that a tribal law that legalizes, regulates and taxes reservation-based marijuana commerce, even parallel with such state law, would be legally bullet-proof. Most notably, while the U.S., according to Attorney General Holder, currently turns a blind eye to medicinal marijuana activities that do not rise to the level of cartel-style drug trafficking, the Feds would most certainly give heightened legal scrutiny to tribally-legalized marijuana commercial activities. This is especially critical given the federal character of much of Indian Country, and the likelihood that the U.S. would invoke its federal trust responsibility in this regard (after centuries of conveniently ignoring that duty).

But Indian Country has faced such concerns and potential impediments before, with cigarettes, alcohol, fireworks, gaming, you name it. Yet Indian people have forged ahead. And notwithstanding the double standards that have emerged from tribal citizens pushing the legal and political envelope -- e.g., "value generated from the reservation" and "essential governmental function" -- the Tribes have prevailed, and Native American economies have resurged.

It is high time for Indian Country to begin seriously talking about legalizing marijuana as a means to diversify and sustain the tribal private sector and perhaps create a tribal excise tax base.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  He can be reached at 206.691.3631 or, or via This information is not intended to create an attorney/client relationship and shall not be construed as legal advice.