MEMORANDUM

TO: General Council and Members of the Swinomish Indian Tribal Community

FROM: Brian Cladoosby, Chairman All Senators

DATE: May 21, 1999

SUBJECT: Proposed Plan To Resolve Tribal Tobacco Tax Issues

The Senate was directed by the General Council to address and resolve all outstanding
issues regarding the status and enforcement of the Tribe's Tobacco Ordinance No.29,
as amended on October 3, 1978. After several meetings with representatives of the Trading
Post at Marches Point and after considering the matter at several Senate meetings, the
Senate has adopted the following plan to resolve these issues.

1. Immediately adopt a new Tobacco Ordinance in a form similar to the ordinance attached
to this memorandum, and begin enforcement and collection of future taxes from the
effective date of the new ordinance.

2. For taxes due under the terms of current Ordinance 29, as amended, prior to the
adoption of a new tobacco tax ordinance, schedule one or more mediation sessions with
representatives of the Tribe and representatives of the Trading Post at Marches Point during
June of 1999. If mediation is successful, reduce the agreement reached by the mediating
parties to writing so that it is fully enforceable in Tribal Court. For purposes of mediation,
the Tribe will retain an independent Tribal Attorney to advise the Tribe during the actual
mediation, and to draft any agreements that are reached.

3. If mediation is unsuccessful, the Tribe will retain an independent Tribal Attorney to
file an action in Tribal Court to resolve all outstanding issues regarding Ordinance 29,
including the collection of past taxes that the court determines are due under
Ordinance 29.

(This proposed revision to Ordinance 29 was attched to the above memorandum)

***DRAFT***

ORDINANCE NO.

Repealing Amended Ordinance 29
And Adopting A New Swinomish Tobacco Ordinance

WHEREAS, the Swinomish Indian Tribal Community ("Tribe") is a federally recognized
Indian Tribe organized pursuant to Section Sixteen of the Indian
Reorganization Act of 1934; and

WHEREAS, the Swinomish Indian Senate ("Senate") is the duly constituted
governing body of the Swinomish Indian Reservation ("Reservation") established in
Article III of the Treaty of Point Elliott (12 Stat. 928) on
January 22, 1855; and

WHEREAS, the Senate finds that tobacco products have the potential of causing
personal injury and harm to human health; that tobacco products are particularly
injurious and hazardous to the health of youth and minors; and that
revenues from the enforcement of this ordinance are needed by the Tribe
to protect the health and welfare of Tribal members and the
general public; and

WHEREAS, the Senate further finds that the Tribe provides numerous services to
cigarette and tobacco sellers within the Reservation, including but not limited to
protection by Tribal law enforcement, the availability of a Tribal Court,
Tribal land use programs and controls, Tribal environmental protection programs and
regulations, access to Tribally owned property such as tidelands, beaches and parks that
are open to the general public (including the John K. Bobb playfield and Widab Public
park), Tribal utilities (such as sewer, water and solid waste), Tribal housing and a
variety of Tribal social service programs including medical and dental services through
the Tribe's dental clinic and soon to be opening medical clinic and employment
and job retraining programs for displaced workers, and

WHEREAS, under the Constitution and Bylaws of the Tribe, the Senate
is charged with the duty of protecting the health, security and general welfare
of the Swinomish Tribal Community, and

WHEREAS, the Senate deems it essential to the health, security and general welfare
of the Swinomish Indian Tribal Community to enact a comprehensive tobacco ordinance
regulating the sale of cigarettes and other tobacco products and levying an excise tax
upon their sale on the Swinomish reservation: NOW THEREFORE,

***DRAFT***

BE IT ENACTED by the Swinomish Indian Senate that the following
Ordinance is adopted as a law of the Swinomish Indian Tribal Community:

Section 1. Title

This Ordinance shall be known and referred to as
the Swinomish Tobacco Ordinance.

Section 2. Constitutional Authority

This Ordinance is adopted pursuant to authority provided by the
following provisions of the Swinomish Constitution and Bylaws, as amended
on October 22, 1985:

Article VI, Sections 1.(h), 1(k), and 1(l), of the
Swinomish Constitution.

Section 3. Purpose

The purpose of this Ordinance is regulate the sale of cigarettes and tobacco
products within the Swinomish Reservation and to impose an excise tax
on the gross sales of such items. This ordinance also eliminates prior
provisions in Amended Ordinance 29 which authorized Tribal Agents to purchase,
distribute and sell cigarettes and tobacco products on behalf of the Tribe in
licensed, but privately owned, Tobacco outlets.

Section 4. Repeal

This Ordinance repeals and replaces Amended Ordinance 29
adopted by the Senate on October 3, 1978.

Section 5. Definitions

(a) "Cigarette" shall mean any roll for smoking made wholly or in part of
tobacco, irrespective of size or shape and irrespective of the tobacco being
flavored, adulterated, or mixed with any other ingredient, where
such roll has a wrapper or cover made of paper or any material, except where
such wrapper is wholly or in the greater part made of natural leaf
tobacco in its natural state.

(b) "Cigarette Seller" shall mean a person that sells
cigarettes within the Swinomish Reservation.

***DRAFT***

(c) "Manager" shall mean the General Manager of the Tribe or
his duly authorized designee.

(d) "Person" shall mean any individual, receiver, assignee, trustee in
bankruptcy, trust, estate, firm, partnership, joint venture, club company,
joint stock company, business trust, tribal, state, or other local government
or any agency thereof, private or municipal corporation, association, society,
or any group of individuals acting as a unit, whether mutual, cooperative,
fraternal, non-profit or otherwise.

(e) "Retail Selling Price" shall mean the actual price paid by
the consumer for each tobacco product, less the tax levied by
this ordinance.

(f) "Senate" shall mean the Swinomish Indian Senate.

(g) "Stock on hand" shall mean all cigarettes and tobacco products that are:
(1) located at a Tobacco licensee's Tobacco outlet, or
(2) all cigarettes and tobacco products located within the Swinomish
Reservation that are owned by or in the possession of a
Tobacco licensee.

(h) "Tobacco Licensee" shall mean a Cigarette Seller or a
Tobacco Seller that has obtained, or is required to obtain, a Tribal
Tobacco License pursuant to this ordinance.

(i) "Tobacco Outlet" shall mean a location licensed by the Tribe
for the purposes of selling cigarettes or tobacco products within the
Swinomish Indian Reservation.

(j) "Tobacco Products" shall mean cigars, smoking tobacco, snuff, chewing
tobacco, and any other kind and form of tobacco prepared in such manner as to be
suitable for chewing or smoking except cigarettes.

(k) "Tobacco Seller" shall mean a person that sells tobacco
products within the Swinomish Reservation.

(1) "Tribe" shall mean the Swinomish Indian Tribal Community.

***DRAFT***

Section 6. Tobacco License Required.

No person may sell cigarettes or tobacco products within the Reservation without
a Tribal tobacco license. Any person may make written application for a
tobacco license to the Manager which application shall state the name of the
applicant and the address of the Tobacco Outlet(s) where cigarette or tobacco
products are to be sold. The application shall be signed by the applicant, or
if the applicant is not a natural person by a legally authorized representative of the
applicant, under oath and be accompanied by a nonrefundable application
fee of $100.00.

Section 7. Tobacco License

Upon receipt of an application for a tobacco license and applicant's
compliance with the other provisions of this ordinance, the Manager
shall issue the applicant a tobacco license for a one-year period which
shall entitle the licensee to sell cigarettes and tobacco products at
the tobacco outlets described on the tobacco license. All of the tobacco
licensee's rights associated with the tobacco license shall expire at the end
of the one-year period and the tobacco licensee shall not be entitled or
have any right to a new license or a renewal of the former license. No tobacco
license shall be issued until applicant has provided proof of a current Payment
Bond, if one is required, pursuant to Section 19 herein, in an amount
approved by Manager.

Section 8. Federal Traders License.

No tobacco license shall be issued until the applicant has obtained a
Federal Indian Trader's License from the United States Bureau of Indian Affairs.
Revocation of the Federal Indian Trader's License shall be grounds for immediate
revocation of licensee's tobacco license. The Tribe and any
Tribally owned enterprise shall be exempt from this provision.

Section 9. Cigarette Excise Tax Imposed.

There is hereby levied and imposed, a tax upon the sale of all cigarettes
sold by a cigarette seller within the Reservation in the amount of twelve cents ($.12) per
pack or if sold by the carton, one dollar and twenty cents ($1.20) per carton.
This tax is imposed upon all cigarette sellers.

Section 10. Tobacco Excise Tax Imposed.

There is hereby levied and imposed, a tax upon the sale of all tobacco
products sold by a tobacco seller within the Reservation in the amount of five and
one half percent (5.5%) of the retail selling price thereof. This tax
is imposed upon all tobacco sellers.

Section 11. Tax Payments - When Due.

All cigarette taxes and all tobacco taxes shall be paid monthly for all sales
made during each calendar month on the twentieth (20th) day of the month immediately
following such calendar month. Monthly reports of purchases and sales during that month
shall be made at the same time.

Section 12. Reports of Sales.

All cigarette sellers and all tobacco sellers shall submit to the Manager monthly reports
of all sales of cigarette and tobacco products sold within the Reservation on
forms approved by the Manager. Tobacco sellers shall also submit to the Manager
monthly reports of all purchases of cigarettes and tobacco products on forms approved by the
Manager together with copies of all invoices for such purchases. Monthly reports
shall be submitted at the same time and for the same periods that taxes
are required to be paid.

Section 13. Records and Audits.

All cigarette sellers and tobacco sellers shall maintain a record system that includes a
"perpetual inventory" that records on a daily basis:
(1) the quantity and price paid for all cigarettes and tobacco products purchased
or received including any other additions to inventory stock,
(2) the quantity and price of all stock on hand, and
(3) the quantity and price of all sales of stock including any deletions to stock.
The beginning inventory shall be verified by the Manager
by making a physical count of stock on hand. Records shall be
maintained either manually or on a computer and all stock on hand shall be
accessible for physical inventory by Manager. Manager may audit
such records and conduct a physical inventory during normal business hours,
or at such other times that are agreeable with cigarette and tobacco sellers, without
prior notice. All records and all stock on hand shall be kept at the Tobacco Outlet and
made immediately available to Manager during Manager's audit and physical
inventory. Annual financial statements audited by an independent certified public
accountant shall be submitted to the Manager for the prior calendar year no
later than April 1st of the following year, provided that the Manager may authorize
statements for other than a calendar year to be submitted by written
agreement, writing.

***DRAFT***

Section 14. Ownership and Risk of Loss.

All tobacco products purchased by tobacco licensees shall be the property
of the tobacco licensee or some person other than the Tribe, and any loss, injury
or penalty shall be at the sole risk of the licensee.

Section 15. Restricted Sales to Minors.

No tobacco seller shall sell any cigarettes or tobacco products to
any person under the age of 18 years.

Section 16. Other Business.

A tobacco licensee may conduct other business at Tobacco Outlets and
shall not be required to maintain separate books of account for such
other business.

Section 17. Tribal Immunity, Liability and Credit.

Tobacco licensees shall not have the authority, and shall not attempt in
any way, to waive the sovereign immunity of the Tribe from suit nor shall
such licensees have the authority, or attempt in any way, to create any
liability on behalf of the Tribe or utilize Tribal credit. This provision shall not
apply to the Tribe and tribal enterprises wholly owned by the Tribe to the
extent that they have been delegated special express authority by resolution
of the Swinomish Senate.

Section 18. License Required.

No person shall sell tobacco products within the Reservation without having
in effect a valid tobacco license issued pursuant to this ordinance.

Section 19. Payment Bond.

In the event that a Tobacco Licensee fails to remit the taxes due under this
ordinance for more than 60 days or is late in remitting such taxes more than
twice in any twelve (12) month period, the Manager may require Tobacco Licensee to
maintain a Payment Bond that names the Tribe as the principal beneficiary and
guarantees payment of all taxes required to be paid to the Tribe by this
ordinance. The Payment Bond shall be in an amount not less than the
actual or anticipated average tax payment due under this ordinance during
an average six month period. The Manager may require the bond amount to
be adjusted (up or down) to reflect the amount of actual taxes due during an
average six month period. The Manager may require a Payment Bond, when
applicable, and determine the appropriate amount of the bond as a condition of granting a
tobacco license. Any lapse in the coverage of a tobacco licensee's Payment Bond
shall be grounds for immediate revocation of licensee's tobacco license.
The Tribe and tribal enterprises wholly owned by the Tribe
shall be exempt from this provision.

***DRAFT***

Section 20. Revocation of Tobacco License

Failure of a tobacco licensee to abide by the requirements of this ordinance shall
constitute grounds for immediate revocation of the tobacco licensee's tobacco license
as well as enforcement of the penalties provided in Section 21 below.

Section 21. Violations and Civil Penalties.

Any person violating any of the provisions of this ordinance shall be subject
to a fine imposed by the Tribal Court in an amount not less than $50.00 nor
more than $5,000.00 per violation and forfeiture of the Tobacco License held by such
person. In addition to any fine or license forfeiture, any person violating
this ordinance shall be required to pay any unpaid cigarette and tobacco
taxes plus interest from the date such tax payment was due at a rate of
eighteen percent per year compounded monthly.

Section 22. Manager's Duties.

The Manager, or his designee, shall perform all of the acts required
by this ordinance to be performed by the Tribe or the Manager.

Section 23. Severability.

If any provision of this ordinance or its application to any person or
circumstance is held invalid, the remainder of this ordinance, or the application
of the provision to other persons or circumstances shall not be affected.

THE FOREGOING ORDINANCE was duly enacted by the Swinomish
Indian Senate with a quorum present.

Brian Cladoosby,
Chairman Swinomish Indian Senate

CERTIFICATION

As Secretary of the Swinomish Indian Senate, I hereby
certify that the foregoing resolution was approved at
a _________________ Meeting of the Swinomish Indian Senate held
on _______________________, 19___, at which time a quorum was present
and the resolution was passed by a vote
of ___ FOR, ___AGAINST, and ___ ABSTENTIONS.

Lydia Charles,
Secretary Swinomish Indian Senate

***DRAFT***