SPOKANE — A federal judge has dismissed a lawsuit that challenged the Confederated Tribes of the Colville Reservation’s right to tax non-members who buy cigarettes at reservation smokeshops.

A lawyer for the Omak smokeshop owner says he plans to appeal the Nov. 10 decision by U.S. District Court Judge Lonny Suko of Spokane. The judge ruled sovereign immunity bars the tribe from being sued, and did not rule on issues raised in the challenge.

Spokane attorney Robert Kovacevich said the tribal government is fixing cigarette prices with Washington state by charging a new cigarette tax. The tribe then opened a nearby business that sells cigarettes, creating unfair competition for his client, Terry Tonasket — a tribal member and owner of the Stogie Shop in Omak. He said although the tribal business also adds the tax, the money is coming back to the tribal government.

Kovacevich predicted that tribal smokeshops across the Colville Indian Reservation will be forced out of business if the decision is upheld by the 9th U.S. Circuit Court of Appeals.

Under a 2009 cigarette compact with the state, the tribe now requires cigarette shops to charge a tax equal to state and local taxes — now about $30 per carton, he said. “That’s classic price-fixing, which is a federal violation,” Kovacevich said, adding, “Can an individual tribe fix prices on its own members when it competes in the same business?”

The lawsuit also asked the court to refund tribal taxes to Daniel Miller, a non-Indian smokeshop customer who had purchased cigarettes at Tonasket’s store.

Colville Tribal Chairman Michael Finley said the new Tribal Trails convenience store does sell cigarettes in Omak, but they’re not priced lower than those sold at tribal smokeshops. “It’s hard to believe he’s being forced out of business when we’re selling cigarettes at the same price,” he said.

Finley said this first test of the tribes’ cigarette compact both upholds the tribes’ right to sovereign immunity, and its right to tax non-members. “It was truly sad that we actually had a tribal member who attempted in court to take away our ability to tax. That’s a fundamental right we have as a sovereign nation,” he said.

Had Tonasket won, he said, “The negative impacts from that would have been astronomical,” he said. “It would have set precedents across the nation.”

Finley said the compact allows the tribe to sell an unlimited quantity of cigarettes, opening the market to other tribal vendors. Prior to the compact, only a set quantity of cigarettes could be sold on the reservation, he said.

Money from the tax supports a wide array of services on the Colville Indian Reservation, he said.

K.C. Mehaffey: 997-2512

mehaffey@wenatcheeworld.co