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Idaho justices weigh reservation cigarette sales

BOISE - Idaho Supreme Court justices are pondering a case in which a Native American-owned wholesaler from a reservation in New York is selling millions of cigarettes to a Native American-owned retailer on the Coeur d’Alene Reservation, and the wholesaler says the state has no jurisdiction to regulate the smokes - including whether they comply with Idaho laws related to compliance with a national tobacco settlement.

The state disagrees, and won a lower-court injunction, but Native Wholesale Supply Co. appealed to the Idaho Supreme Court. The firm, which wholesales cigarettes made by a large native-owned manufacturer in Canada, has gotten into legal scrapes with other states in the past, including Washington.

NWS contends the state has no jurisdiction to regulate its sales, as they’re between tribal members on reservations, and there’s no evidence the cigarettes ever entered any part of Idaho outside the Coeur d’Alene Reservation - since the reservation touches the state of Washington.

“Native Wholesale Supply has never sold to any Idaho consumer,” attorney Samuel Diddle told the justices Monday. The wholesale sales to Warpath Inc. on the Coeur d’Alene Reservation “may not be regulated by the state because of tribal sovereignty,” he said.

Deputy Idaho Attorney General Brett DeLange told the justices, “Our Legislature has spent a lot of time adopting a very comprehensive set of statutes and rules to regulate cigarette sales in Idaho. One of them is before those cigarettes can be sold, they need to be approved for sale. The Attorney General needs to know who that manufacturer is. … Native Wholesale Supply just wants to ignore all that. They don’t want to comply with the state’s efforts of comprehensively regulating cigarette sales in our state.”

Retired Justice Linda Copple Trout, who is sitting in the case in place of Justice Warren Jones, said, “I know the cigarettes say that they are to be resold on the reservation, but that certainly is not a limitation against who may ultimately end up with the product.” She noted that the state’s interest in its laws regarding the tobacco settlement was to recover funds from those selling “a dangerous product” to cover the state’s costs for health care services related to its use.

DeLange said, “Native Wholesale Supply has introduced into Idaho over 100 million cigarettes that are not legal to be introduced and sold and imported into our state, and did all of it at wholesale.” He compared the case to an earlier one in which a Native American seller from New York sold cigarettes via the Internet to buyers in Caldwell, Boise and elsewhere in Idaho. But Diddle said this case is different, because the sales didn’t occur off the reservation.

Justice Joel Horton noted that the lower court decision enjoined the firm not only from selling cigarettes that don’t comply with the tobacco settlement-related laws in Idaho, but also from selling cigarettes without an Idaho wholesaler’s permit. However, he read from Idaho’s law regarding the tax stamps required under Idaho wholesaler permits; it doesn’t apply to reservation sales. “If they haven’t made any sales of cigarettes subject to tax, they can’t hold a permit,” Horton said.

NWS has tangled with multiple states over regulatory and tax issues. The firm also was a target of a criminal case in Seattle regarding the sale of contraband cigarettes by members of a Washington tribe without paying that state’s sales tax.

The Idaho case arose from a 2008 lawsuit the state filed against NWS, seeking to stop its sales in Idaho and seize profits from sales already made.

At the close of Monday’s arguments, the Idaho justices took the case under advisement, and will issue their written decision later.