April 23, 2019

Tenth Circuit: Tribe Failed to State a Claim that Oklahoma Cigarette Sale and Tax Laws Violate Federal Law or Tribal Sovereignty

The Tenth Circuit Court of Appeals published its opinion in Muscogee (Creek) Nation v. Henry on Tuesday, February 28, 2012.

The Tenth Circuit affirmed the district court’s decision. Petitioner Tribe sued the Oklahoma Tax Commission seeking declaratory and injunctive relief based on numerous claims challenging three Oklahoma statutes that tax and regulate the sale of cigarettes and other tobacco products. “In Oklahoma, cigarette and other tobacco product sales to tribal members in Indian country are exempt from state taxes. To prevent non-tribal members from avoiding taxes on their purchases of such products in Indian country, Oklahoma adopted a tax-stamp scheme to ensure that taxes are collected for those sales. Oklahoma also requires tobacco product manufacturers either to enter into and make payments under a Master Settlement Agreement with the State or to pay a certain percentage of each sale into an escrow fund. Any brand of cigarette produced by a manufacturer that does not comply with these requirements is deemed contraband.” Petitioners object to these requirements as violative of federal law and tribal sovereignty, claiming that they are preempted by the Indian Trader Statutes and violate violate their right to tribal self-government. The district court dismissed the claims “based on the State’s Eleventh Amendment immunity or, alternatively, for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).”

The Court held that, based on Supreme Court precedent, the Tribe “has failed to state a plausible claim that the Excise Tax Statute is not valid and enforceable based either on preemption or on infringement of [their] right of tribal self-government.” The Tribe similarly failed to state a plausible claim that the Escrow Statute and the Complementary Act are invalid and unenforceable. While the district court erred in finding that immunity under the State’s Eleventh Amendment, it properly dismissed the claims for failure to state a claim.

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