In July 2012, the United States filed a complaint against King Mountain Tobacco, a manufacturer of cigarettes and roll-your-own cigarette tobacco, in the United States District Court for the Eastern District of Washington for unpaid federal tobacco excise taxes. The United States alleged that King Mountain fell behind in paying its federal excise taxes in 2009 and owed in excess of $23 million in taxes from 2009 through 2011.
King Mountain raised various defenses in its answer based on the claim that the Yakama Treaty of 1855 and the General Allotment Act preclude the federal government from levying excise taxes against King Mountain, a Native American owned tobacco manufacturer located within the boundaries of the Yakama Nation.
In November 2012, the District Court entered an order staying the case until the court ruled on a Motion for Summary Judgment in a companion case. In the companion case, also filed in the Eastern District of Washington, King Mountain and other tobacco companies sued the Alcohol and Tobacco Tax and Trade Bureau as well as other federal agencies. Last month, in the companion case, the District Court entered an order denying the Motion for Partial Summary Judgment, holding that King Mountain is not exempt from paying federal excise taxes on the sale of its cigarettes.
As a result of the District Court’s order denying partial summary judgment in the companion case, proceedings in the case filed by the United States against King Mountain in July 2012 have resumed. A scheduling conference, which will outline the timeline for discovery, pre-trial motions and all other matters to be resolved prior to trial, is set for March 20, 2013.