Governor Gary Locke’s Remarks
Puyallup Cigarette Taxation Agreement
January 5, 2005

Good morning. Thank you all for being here.

Joining me today are:
Herman Dillon, Sr., chair of the Puyallup Tribe
Larry La Pointe, vice chair of the tribe
Cathy Lopez, member of the Puyallup Tribal Council
Will Rice, director of our state Department of Revenue
Leslie Cushman with the Department of Revenue

Today we are proud to announce a cigarette taxation agreement between the State of Washington and the Puyallup Tribe that is a long time coming.

With this agreement, the cigarette wars between the state of Washington and the tribes are over.

The agreement with the Puyallup Tribe is the 18th agreement the state has reached with tribes since talks began in 2001. If the agreement is approved by the Legislature, that will mean that 90 percent of all tribal cigarette sales would be covered by compacts with the state.

In addition, four other tribes are eligible to negotiate compacts under existing law and four more have asked to be added to the list of eligible tribes in the 2005 Legislature. That means that a total of 26 out of the 29 tribes in Washington have, or are expected to soon have, cigarette tax agreements with the state.

Cigarette sales by Indian tribes and their members and disputes regarding taxation have long been a source of conflict between the Tribes and the State of Washington.

Since talks began in 2001, the state has entered into cigarette tax agreements with 17 other tribes, and the overall success of these compacts is a tremendous step forward.

The Puyallup cigarette tax agreement differs from the legislatively approved model that the state has relied on in reaching agreements with 17 other tribes. Therefore, it needs to go the Legislature.

The agreements with the 17 other tribes required the tribes to impose a tribal tax that began at 80 percent of the combined state cigarette and sales tax rate and ramped up to 100 percent within three years, which is $14.25 per carton. All of the proceeds went to the tribes for health care and education.

The Puyallup Tribe has 23 independent member stores and these stores provide jobs and support families. So, the current solution, imposing a tax at 100 percent of the state rate, was unacceptable to the Puyallup Tribe and its people. Taxing at that level would force stores to close and put people out of work.

This historic agreement with the Puyallup Tribe takes a new approach, and considers the long-term health care costs related to tobacco use, the tribal interests in employment stability, and the states interest in revenue.

The Puyallup Agreement uses a combination of tax and price controls to regulate cigarette sales and increase the overall prices of cigarettes being sold on the reservation

Like the other agreements it requires a full range of tools to ensure the agreement works and achieves its goal. These tools include inspection, monitoring, and auditing.

Unlike the other agreements, the Puyallup Agreement:
Requires revenue sharing of 30 percent to the state ($11.75 per carton versus $14.25 per carton);
It requires retail selling price not be set lower than the wholesale price;
It requires that tax be added on to the retail selling price, and not be absorbed by the seller; and
It requires retailers to obtain cigarettes through state-licensed wholesalers.

Id like to thank Will Rice, the director of the Department of Revenue, and Leslie Cushman for their hard work on this issue.

Id like to especially thank Tribal Chair Herman Dillon, Vice Chair Larry La Pointe and the members of the Tribal Council for their work on this agreement. And Id like to invite Chairman Dillon to say a few words.

Thank you Chairman Dillon.

This is a good agreement a win-win, for the Puyallup tribe and the state.

I urge the Legislature to adopt legislation to approve this agreement. It is a great example of what we can achieve through government-to-government negotiations in the spirit of the Centennial Accord.

Thank you.

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