Philip Morris USA and other big tobacco companies are trying to reopen the 1998 Master Settlement Agreement and force states to go after tribal retailers.

According to a draft memorandum of understanding, states will be required to enact legislation to collect their sales tax in Indian Country. All sales to non-Indians will be subject to state taxation.

Sales to tribal members will remain tax exempt. However, the draft MOU restricts tax-free sales to "adult enrolled" tribal members who are "domiciled" on "Qualified Tribal Lands."

This language indicates that tribal members must live on a reservation in order to qualify for tax-free cigarettes.

The draft MOU also requires states to consult "in good faith" with big tobacco before developing their legislation. Consultation with tribes is not mentioned anywhere in the document.

The proposal leaves the door open for states to issue tax refunds to tribes for sales in Indian Country. But the amount appears to be tied to the number of "adult enrolled" tribal members who are "domiciled" on "Qualified Tribal Lands."

This language indicates that tribes and states won't be able to come up with their own revenue-sharing provisions.

The draft MOU further bars states from entering into "any future agreement, compact or treaty with any Indian tribe that is inconsistent with the provisions" of the law that states will be required to enact.

The "Tribal" section starts on page 37 of the PDF of the draft MOU.

Get the Story:
States Near Tobacco Deal (The Wall Street Journal 6/22)