The long-standing taxation issue between King Mountain Tobacco Co. Inc. and the federal government took a sudden turn late last week when the company filed for chapter 11 protection, the Yakima (Wash.) Herald reported. The Yakama cigarette maker said that it was forced to file after the federal Alcohol and Tobacco Tax and Trade Bureau sent a final notice to King Mountain on Aug. 25, demanding repayment of $75 million in outstanding excise taxes, interest and late fees. In that notice, the bureau threatened to levy against the company’s assets if payment was not made within 30 days. With the company unable to make the entire payment on short notice, filing bankruptcy was the only means to prevent closure and the loss of 66 jobs, King Mountain CEO Jay Thompson said yesterday. It would be devastating to the Yakama Nation, which has had to contend with poverty and high unemployment, he said. According to a declaration filed by Thompson in U.S. Bankruptcy Court, the company employs 63 full-time and three part-time employees. King Mountain has maintained that the tribal-owned enterprise should be exempt from federal excise taxes because it operates on tribal land held in federal trust, and taxation is barred under the 1855 Yakama Treaty. However, in 2014, the U.S. District Court ruled in favor of the federal government and said King Mountain must pay $58 million in federal excise taxes and fees dating back to 2009. The court ruled that cigarettes are a manufactured product, not derived directly from the land, and therefore subject to taxes. That ruling was upheld by the Ninth Circuit Court of Appeals. In 2019, the U.S. Supreme Court denied King Mountain’s request to review the case further.
