Judge: Yakama tobacco subject to federal taxes

SPOKANE, Wash. (AP) — A ruling by a federal judge in Spokane could open a Yakama Nation tobacco company to tens of millions of dollars in tax liability.

U.S. District Judge Rosanna Malouf Peterson held last week that King Mountain Tobacco Company is not exempt from paying a federal excise tax on cigarettes. In a case filed last year prosecutors claimed the company owes more than $23 million in taxes since 2009.

King Mountain argued that federal law bars taxes on income derived from trust land, such as from logging or tobacco growing. The company also cited the 1855 treaty between the Yakamas and the U.S. government.

But the judge held that only some of the tobacco sold by King Mountain is grown on the reservation. Much of the rest is imported from Virginia, and the judge said that therefore the company must pay the federal tax.