As reported this week in the Times Argus, the ATF has withdrawn a controversial set of Frequently Asked Questions (FAQ), which states were using to regulate and tax--and essentially vitiate--inter-tribal tobacco commerce. While some speculate that ATF has in very recent times diverted federal attention away from tobacco-diversion investigations, Indian Country should remain vigilant in defense of state PACT Act, CCTA and other tobacco tax enforcement efforts.
According to the Times Argus:
ATF took down a frequently-asked-questions Web site posting attached to its explanation of the PACT Act. The FAQ stated that the law clearly applied to wholesalers and distributors on Indian reservations.
“We are concerned that the removal of the FAQs may evidence a determination by ATF to narrow its current interpretation of the PACT Act to exclude various tribal cigarette sales and shipments,” [Idaho AG Lawrence] Wasden wrote in the Feb. 21 letter to Holder. . . .
ATF took the FAQs down after meeting with tribal representatives because the answers were three years old and “it was time to review (them) based upon the passage of time and the experience gained in enforcing the PACT Act,” [ATF spokeswoman Ginger] Colbrun said in an email statement. “We’ve committed to reviewing the FAQs, but not to making any specific changes unless we conclude they are warranted by the law.” . . .
In recent years, ATF has backed off enforcement of laws governing “tobacco diversion” — underground smuggling of cigarettes from Indian reservations to urban markets or from low-tax states in the South to high-tax states like New York and Connecticut.
Last year, the Albany Times Union obtained an ATF memo that directed agents to downgrade tobacco-diversion investigations unless there is a “nexus” to violent crime.
Indian Country had openly questioned the ATF's written position regarding state enforcement of the PACT Act per the withdrawn or "taken down" FAQs, specifically:
- The scope of “lawfully operating” as that term is used in 15 U.S.C. § 375(4)((B);
- The scope of “Delivery sales” in regard to wholesale shipments made to reservation retailers intended for resale in a “face to face” transaction;
- The PACT Act “list;” and
- The PACT Act definition of “interstate commerce” and its relationship with commerce occurring between different Indian reservations.
Of particular concern was Issue No. 1, as ATF took the position in the FAQs that to be “lawfully operating,” a business must possess all state licenses regardless of whether that business is operating in Indian Country. The ATF's position, which represented a wholesale incorporation of state law into Indian Country, is specifically prohibited by the plain language of Section 5 of the PACT Act.
Still, Indian Country should not let its guard down against the states for an upstate New York minute.
Gabriel “Gabe” Galanda is the Managing Partner at Galanda Broadman. He is an enrolled member of the Round Valley Indian Tribes of Covelo, California. Gabe can be reached at 206.691.3631 or firstname.lastname@example.org.