Crackdown On Untaxed Cigarettes Liquor Control Board Soon Takes Over What Many Call An Impossible New Task

At the end of the month, the state Liquor Control Board gets new powers, additional staff members and what many say is an impossible job: cracking down on untaxed cigarettes.

Washington charges an 82-1/2-cent tax on every pack of cigarettes, which makes it tempting to buy cigarettes out of state or on Indian reservations and military bases.

Each year, Washington loses nearly $110 million in uncollected taxes on bootlegged smokes, mostly from tobacco sold at Indian smoke shops.

That irked the Legislature, which earlier this year took away tobacco tax enforcement power from the state Department of Revenue and gave it to the Liquor Control Board, whose agents have police powers and carry guns. The new law will take effect July 27.

Lawmakers came up with $2.8 million for about 21 new Liquor Control Board employees, including 14 “tobacco cops” who are supposed to end the illegal sales.

Critics say it’s a hopeless task and state enforcement efforts could make matters even worse by inviting a slew of lawsuits.

“We can’t enforce this,” said Rep. Patty Butler, D-Shoreline. “We’re in a Catch-22 situation. Tribes are sovereign nations within a nation. As sovereign nations, they don’t have to listen to anything we have to say. It has taken many, many legislators an awfully long time to realize it doesn’t do any good to fight this.”

Federal treaties insulate tribes from nearly all state laws and severely limit the state’s legal jurisdiction on reservations. No matter how much money and time the state spends, Butler said, there is little it can do to affect the smoke shop trade.

“There are some real limitations and prohibitions because of the tribes’ sovereign status,” agreed Carter Mitchell, who is in charge of the Liquor Control Board’s new enforcement effort.

Merely hiring and training officers will take months, predicted Mitchell, the board’s lobbyist and a man who has spent most of his career in public relations.

“Come the 28th of July, the world will not suddenly erupt,” he said. “This is a lot more complicated than just saying, ‘Snap your fingers and do it.’ You don’t just flip a switch and have 14 agents all ready to go.”

Indian smoke shops don’t have to collect the state’s tax on cigarettes they sell to tribal members for personal consumption. But they are supposed to charge the tax and send it on to the state when nonmembers buy cigarettes. Some tribal dealers do, but there’s virtually no way to force them to comply.

Because of the tribes’ sovereign status, state agents have no authority in most cases to enforce the law on tribal land. The Liquor Control Board is allowed to regulate alcohol sales on reservations, but there’s no similar provision for tobacco.

Agents could wait outside reservations and catch cigarette buyers as they leave. But they would have to apprehend people in the act of buying the cigarettes or see cigarettes without tax stamps in plain view.

Moreover, Puyallup Indian Tribe lobbyist Randy Scott has said the state could be setting itself up for lawsuits by tribal members who legally buy tobacco, only to be stopped outside a reservation and checked for possession.

“How will enforcement officers tell by the look of a car if it belongs to a non-Indian or an Indian?” Scott asked.

The state Revenue Department has tried seizing truckloads of unstamped cigarettes headed to reservations. But two of those seizures are the subject of federal lawsuits filed by the Yakama Indian Nation and the Chehalis Tribe.

While Indian smoke-shop sales account for an estimated 60 percent of the state’s tobacco tax loss, smokers also buy cigarettes in states with lower taxes, and some members of the military buy tax-free cigarettes on base and give or sell them to friends or relatives.

The new agents will attack all three aspects of the problem equally, Mitchell said. The Liquor Control Board also will try to educate citizens that they are breaking the law when they possess untaxed cigarettes.

From the tribes’ perspective, the state has no right to tell them what they may or may not sell on their reservations. They say the state brought the black-market problem upon itself by charging a high tax on tobacco.

“Washington state has virtually the highest rate of taxation on these products in the nation,” Ross Sockzehigh, Yakama Nation chairman, said after the state had seized a shipment of cigarettes on their way to Yakama smoke shops.

“The tax has made it too expensive for many distributors, wholesalers and retailers to sell these products in Washington state. The state is its own worst enemy on this issue - not the Indian tribes.”