See, the State Tax Man Cometh

Last month, Indian Country Today Media Network has published a column by Gabe Galanda, "The State Taxman Cometh." Consider now this headline, "Tax man eyes Indian tobacco sales."

The state's top tax collector said the state is ready to quickly end tax-free cigarette sales by Indian retailers to non-Indian customers.

New York State is awaiting a ruling from a federal appeals court on the long-simmering tobacco tax issue, said Thomas Mattox, who was confirmed Tuesday by the State Senate to the tax commissioner's post.

"We're prepared to enforce immediately," Mattox said after being unanimously backed by the Senate Finance Committee for the tax post. . . .

Gov. Andrew M. Cuomo is counting on $130 million in revenue by ending the tax-free Indian tobacco sales. The state wants to collect the tax "upstream" at the tobacco wholesale level so that the taxes already would have been paid to Albany by the time cigarettes reach Indian retailers.

Expect to see many more news stories about state and local tax collectors seeking to balance state budgets on the backs of Indians.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  He can be reached at 206.691.3631 or gabe@galandabroadman.com, or via galandabroadman.com.

Economic Issues Affecting Indian Gaming

Gaming Law Review & Economics has published a note, "Economic Issues Affecting Native American Gaming," featuring Gabe Galanda's remarks during a roundtable discussion last fall regarding economic issuing impacting the $26.5 billion Indian gaming industry. On the state of Indian gaming markets vis-a-vis that of domestic commercial gaming meccas:

[T]he New York Times wrote about this phenomenon, indicating that Reno and Lake Tahoe are seeing their revenues erode by as much as 25%–40%. That is juxtaposed with places like the Pacific Northwest, which are seeing modest, perhaps even healthy, growth during the same time period.

On the state of tribal financing:

[Y]ou are seeing that gaming tribes can only take out bank debt based on 2 to 2.5 times historical EBITDA, meaning proven cash flow. You once were able to leverage, very favorably, relatively unproven cash flows. Now though, unless you have historical, proven cash flow, you are going to have a very difficult time obtaining any money, and what money you are going to be able to obtain is probably far less—and it will cost you far more— than in prior years.

On the state of Indian gaming contracting:

There are a number of contracts, both in form and substance, that pertain to Class II or Class III gaming—most notably, those for gaming machines. We are now seeing the same type of financial scrutiny of deal terms in these contracts that we are talking about in regard to significant financing or restructuring transactions. We are seeing that scrutiny of what historically have been almost boilerplate agreements between tribal casino operators and their business partners . . .

On the states' budget crises:

[T]here is an estimated $112 billion shortfall amongst the states collectively. I will tell you that on the ground, in the offices of state or local assessors, there are government officials who are looking perhaps beyond the casino itself, the monies flowing from that particular casino and the properties within that casino, but still towards the tribe, to figure out how they can get their hooks into gaming proceeds running to the tribal government.

On state Class III gaming "fees" in lieu of taxes:

[W]e will see state governments in particular trying to develop new ways of imposing fees on gaming activities in circumvention of the stated intent, purpose, and spirit of IGRA, in desperate attempt to balance hemorrhaging state budgets.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  He can be reached at 206.691.3631 or gabe@galandabroadman.com, or via galandabroadman.com.

Furthering the Case for Tribal Legalization of Marijuana

Two February 20, 2011 national news stories further suggest that it is time for Indian Country to begin seriously engaging in the state-federal debate about legalizing, regulating and taxing marijuana. From the Oklahoman, "How $31 of pot gave mom a 10-year-prison sentence":

Because of $31 in marijuana sales, Patricia Marilyn Spottedcrow is now serving 10 years in prison, has been taken away from her four young children and husband, and has ended her work in nursing homes.

Tragically, Patricia Marilyn Spottedcrow is not the only poor Native American who has had to resort to selling illegal contraband to support her family, and whose family was shattered by the failed effects of the war on drugs. Accordingly, some tribal governments have already taken the matter of marijuana legalization and regulation into their own hands. Other tribes have considered doing so but decided marijuana was and is not part of tribal ways.

From the notoriously conservative Seattle Times editorial board, "The Washington Legislature should legalize marijuana":

MARIJUANA should be legalized, regulated and taxed. The push to repeal federal prohibition should come from the states, and it should begin with the state of Washington. . . .

[I]n America, prohibition is the pursuit of the impossible. It does impose huge costs. There has been:

• A cost to the people arrested and stigmatized as criminals, particularly to students who lose university scholarships because of a single conviction;

• A cost in wasted police time, wasted court time and wasted public resources in the building of jails and prisons;

• A cost in disrespect for the law and, in some U.S. cities, the corruption of police departments;

• A cost in lost civil liberties and lost privacy by such measures as the tapping of private telephones and invasion of private homes;

• A cost in the encouragement of criminal lifestyle among youth, and the consequent rise in theft, assault, intimidation, injury and murder, including multinational criminal gangs; and

• A cost in tax revenues lost by federal, state and local governments — revenues that for this state might be on the order of $300 million a year.

Some drugs have such horrible effects on the human body that the costs of prohibition may be worth it. Not marijuana. This state's experience with medical marijuana and Seattle's tolerance policy suggest that with cannabis, legalization will work — and surprisingly well.

Not only will it work, but it is coming. You can feel it.

To the extent consistent with tribal ways, tribal governments should draft behind the states in the push to repeal federal prohibition, and stand ready to legalize, regulate and tax (or tax exempt) marijuana under tribal law when that day comes.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm. He is an enrolled member of the Round Valley Indian Tribes of Covelo, California. He can be reached at 206.691.3631 or gabe@galandabroadman.com, or via galandabroadman.com. This information is not intended to create an attorney/client relationship and shall not be construed as legal advice.