Over the last couple of years, we have written about a federal case brought by the Twenty-Nine Palms Band of Mission Indians (the Tribe) (here, here, and here) involving key issues related to the Bureau of Alcohol, Tobacco, Firearms and Explosives’ (ATF) authority to enforce the Prevent All Cigarette Trafficking Act (PACT Act) against federally recognized Indian tribes and ATF’s interpretation of key sections of the PACT Act. The Ninth Circuit Court of Appeals recently upheld a federal district court’s decision ruling against the Tribe.

Located on a reservation in California, the Tribe operates a wholesale tobacco distribution business that purchases large quantities of untaxed, unstamped cigarettes, and smokeless tobacco from a wholesaler in New York. The Tribe sells those products to other tribal business entities — Native Nation Customers (NNCs) — operating smoke shops, markets, and gas stations on their own reservations in California. Those NNCs in turn sell the products at retail to individual consumers. Importantly, the Tribe does not hold a California tobacco product distributor license, and most of its NNCs are not licensed distributors or retailers under California law. No one in the distribution chain collects or remits California cigarette taxes.

California flagged potential violations of law and asked ATF to list the Tribe as noncompliant under the PACT Act. ATF decided to place the Tribe on the federal noncompliant list (NCL). That listing has serious consequences under the PACT Act: common carriers and others are barred from delivering cigarettes for sellers on the NCL, effectively cutting off lawful distribution channels.

The Tribe sued the U.S. government, arguing that ATF misapplied the PACT Act and unlawfully subjected on‑reservation tribal commerce to state law. The federal district court sided with ATF, and the Ninth Circuit affirmed.

In reaching its decision, the Ninth Circuit considered three key issues: (1) whether the Tribe’s intertribal sales are subject to California law; (2) whether the Tribe is subject to the PACT Act’s delivery seller requirements; and (3) whether the Tribe violated those requirements.

On the first issue, the court found that the Tribe sells cigarettes to retailers from other tribes. Those sales happen remotely and the Tribe ships cigarettes from its own reservation, through various parts of California, to other tribes’ reservations within California. Under these circumstances, the Ninth Circuit opined that the Tribe acts beyond its reservation’s borders for the purpose of carrying on a business enterprise. Thus, the Tribe’s remote cigarette sales to other tribes are off-reservation conduct to which California’s tobacco product licensing and tax laws apply.

On the second issue, the court interpreted the PACT Act’s definition of “consumer” in the delivery sale context to include remote sales to any person who is not lawfully operating as a manufacturer, distributor, wholesaler, or retailer. The court found that the Tribe is required to be licensed as a California tobacco product distributor under California law, as discussed above, the Tribe does not maintain such a license from California, the NNCs are retailers and distributors that purchase cigarettes from an unlicensed distributor in off-reservation transactions subject to California law, and, therefore, the NNCs violate California law. Because the NNCs violate California law, they are not “lawfully operating” and their failure to lawfully operate appropriately qualifies them as “consumers” under the PACT Act, subjecting the Tribe to the PACT Act’s extensive delivery sale requirements.

On the third issue, the court again ruled against the Tribe finding that it violated the PACT Act’s delivery sale requirements by selling unstamped cigarettes to unlicensed entities, which is prohibited by both California law and the PACT Act.

Why It Matters

The court’s decision has practical implications well beyond the parties to this litigation.

• Tribal status is not a blanket shield for remote sales. When a tribal enterprise sells cigarettes across reservation boundaries, especially through remote ordering and shipping, those transactions may be treated as off‑reservation sales subject to state licensing and tax laws.
• “Lawfully operating” is defined by state law compliance. Under the PACT Act, tribal retailers and distributors must comply with applicable state licensing and tax laws to avoid being treated as “consumers” when purchasing cigarettes in off-reservation sales for resale.
• Federal listing on the NCL can proceed without state sponsorship. Even if a state withdraws a complaint or alters its enforcement posture, ATF can still list a seller on the NCL if the record shows violations of the PACT Act.
• Documentation and licensing matter. Third‑party shipping records, PACT reports, and correspondence with state regulators can all be used to establish a pattern of noncompliance. Tribes and other remote sellers should expect regulators to piece together those sources.

For tribal governments, tribally owned enterprises, and other remote sellers of cigarettes and smokeless tobacco, the court’s decision conveys key items that must be a part of a regulatory compliance strategy.

• Map your business model against state law. Identify where products are sourced, where they move, and where title transfers. If any part of the transaction is off‑reservation, state licensing and tax rules may apply.
• Confirm licensing for every link in the chain. Ensure that any entity acting as a distributor or retailer under state law has the appropriate licenses — and confirm that your own role does not trigger distributor obligations.
• Review PACT Act registration and reporting. Verify that PACT Act registrations are current, that monthly reports are accurate and timely, and that they align with shipping records and tax filings.
• Assess risk of noncompliant listing. Consider how a listing on the NCL would affect your logistics network (e.g., availability of carriers) and plan mitigation strategies.