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November 27, 1974

David MATHESON, Puyallup-Coeur d'Alene Indian, et al., Plaintiffs,
George KINNEAR, Director, Department of Revenue of the State of Washington and agents, servants, employees and persons acting under his authority or direction, et al., Defendants

Turrentine, District Judge.

The opinion of the court was delivered by: TURRENTINE


 This three judge court, convened pursuant to 28 U.S.C. § 2281, has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331(a), 2201 and 1343; 42 U.S.C. § 1983; and the Treaties of Medicine Creek, 10 Stat. 1132 (1854) and with the Quinault Indians, 12 Stat. 971 (1855). The matters in controversy exceed the sum or value of $10,000.

 Status of Plaintiffs

 Plaintiff Edward Comenout is a noncompetent Quinault Indian, enrolled with the Quinault Tribe of Indians, pursuant to 25 U.S.C. § 163, and is a ward of the United States. Plaintiff David Matheson is a Puyallup and Coeur d'Alene Indian and a ward of the United States, and is enrolled with the Coeur d'Alene Tribe of Indians of Idaho.

 Edward Comenout together with his mother Anna Jacks Comenout is the owner of a tract of land approximately 2 1/2 acres in area located at 908 River Road East, Puyallup, Pierce County, Washington. The property was purchased for the Comenout family in 1926 with funds held in trust by the United States for its benefit under authority of the treaty with the Quinaults, 12 Stat. 971 (1855) and the General Allotment Act of 1887 as amended. The land is not now and has never been a part of the Puyallup reservation and was at the time of purchase on the tax rolls of the State of Washington.

 From time to time with the approval of the Secretary of the Interior, the plaintiff Comenout has leased portions of his property and the improvements thereon for various business purposes. At one time the property was leased to a non-Indian for operation of a used car sales business. The lease income has been used for the support and maintenance of plaintiff Comenout and his family.

 In 1971 plaintiff Comenout, with the approval of the Secretary of the Interior, leased a portion of the property to other Indians for the express purpose of retailing untaxed cigarettes.

 At the time this action was filed plaintiffs David Matheson and Edward Comenout in partnership owned and operated a cigarette sales business upon the property. Plaintiffs regularly purchased cigarette products from wholesale distributors located outside the territorial boundaries of the State of Washington and arranged for their delivery to their place of business by means of interstate common carrier or transport by Indian persons. The cigarettes were sold commercially to Indians and non-Indians alike.

 For several years prior to the filing of this action, agents of the Washington Department of Revenue, pursuant to a search warrant, entered the premises at 908 River Road East and seized untaxed and unstamped cigarettes.

 The plaintiffs seek to enjoin the searches and seizures as illegal on the ground that the 2 1/2 acre tract in question, and the cigarette sales business conducted thereon, are exempt from a state excise tax as federal instrumentalities pursuant to 25 U.S.C. § 412a, which provides:

All homesteads, heretofore purchased out of the trust or restricted funds of individual Indians, are hereby declared to be instrumentalities of the Federal Government and shall be nontaxable until otherwise directed by Congress: Provided, That the title to such homesteads shall be held subject to restrictions against alienation or encumbrance except with the approval of the Secretary of the Interior: And provided further, That the Indian owner or owners shall select, with the approval of the Secretary of the Interior, either the agricultural and grazing lands, not exceeding a total of one hundred and sixty acres, or the village, town, or city property, not exceeding in cost $5,000, to be designated as a homestead. June 20, 1936, c. 622, § 2, 49 Stat. 1542; May 19, 1937, c. 227, 50 Stat. 188.

 The Comenout property comes within the definition of this statute in that it was purchased prior to May 19, 1937, out of trust or restricted funds; the land is owned subject to a restriction on alienation; the land has been selected as a homestead; the land does not exceed more than three acres and was purchased for less than $5,000.

 The issues raised by the pleadings may be simply stated. They are:

 (1) Does 25 U.S.C. § 412a, as amended, immunize the plaintiffs from the State of Washington's excise tax on cigarette and tobacco products?

 (2) Does the State of Washington's collection procedure violate the due process clause of the federal constitution?

 The key question for the Court, then, is whether the phrase in § 412a designating the Indian lands as tax exempt federal instrumentalities prevents the State of Washington from imposing sales tax on cigarettes sold on the Comenout land. This question also brings into play the statute's provision in connection with the existence of a valid federally approved lease on the premises. On February 8, 1971, under the supervision of the Washington Indian Agency, the Comenout property was leased to Jack Moses. The lease, approved February 8, 1971, by the U.S. Bureau of Indian Affairs, contained the following clause in part stating:

That for and in consideration of the rents, covenants, and agreements hereinafter provided, the lessor hereby lets and leases unto the lessee the land and premises described as follows, to whit: . . ., for the term of five years, beginning on the eighth day of February, 1971, to be used only for the following purposes:
Retail sale of tax-free cigarettes and tobacco products or other ...

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