Native Tobacco 101 in Cloverdale, under pressure from state officials for not collecting taxes on its sales, has quietly closed down.
Managers of the tobacco shop on a remnant of the Cloverdale Rancheria claimed they were exempt from state taxes because they sold only cigarettes manufactured on Indian land.
The store along Highway 101 closed two weeks ago after state officials agreed not to pursue legal action against the business -- if it shut down.
"We proposed they would close down if we agreed to say we would never sue them over any tax issues," said Dennis Eckhart, senior assistant attorney general.
Whether the store is permanently closed was in doubt Wednesday after comments made by the attorney representing the tribes that run it.
"There are ongoing negotiations between those tribes and the Attorney General's Office pertaining to the operation of the smoke shop," said Attorney Les Marston of Ukiah. "As part of the negotiations and as a sign of the tribe's good faith, the tribes closed the smoke shop, reserving the right to reopen."
He said the state and tribes have reached a tentative agreement. "We are just trying to work out the definitive language to implement those principles," he said.
He declined to elaborate, saying he didn't want to jeopardize negotiations.
From the outside, the prefabricated building that housed Native Tobacco 101 along a freeway frontage road looks to be out of business.
"The sign is gone and it looks all very closed up," Cloverdale Mayor Carol Russell said Wednesday.
She welcomed the closure, saying Native Tobacco 101 had an unfair advantage over other tobacco retailers by not charging customers sales and other taxes.
"It's unfair competition because our other stores are all required to pay taxes and do," she said.
The controversy over Indian tobacco shops has played out in other areas of the state and the country.
The U.S. Supreme Court has made it clear that tribes have an obligation to collect and remit state tax on the sale of cigarettes to nontribal members.
But there are complex issues of Indian law and restrictions on state enforcement procedures involving tribes and Indian lands.
Native Tobacco 101 is on a piece of land that was part of the former Cloverdale Rancheria, owned by survivors of John Santana, a Pomo elder and postmaster who was allotted the land more than 40 years after the rancheria was dissolved.
When it opened in December, the manager of the store said the owners were working with a Native American company licensed to use the land and operate the tobacco business.
According to Eckhart, an Indian tribe in Glen County, the Grindstone Rancheria, operates Native Tobacco 101.
But another tribe was also linked financially.
"We are being told Alturas Rancheria in Mono County is an investor," Eckhart said.
The restored Cloverdale Rancheria Band of Pomo Indians, who are proposing a casino on adjacent lands, announced early on that they had no connection to the tobacco business, and it is not on land belonging to the tribe.
State officials claimed the shop was unlawfully avoiding an estimated $1.50 per pack in state and local sales taxes, state excise taxes and other levies.
In addition, authorities said Native Tobacco 101 was selling brands not approved for sale in California and ones that did not meet fire safety standards.
When it opened, the store manager confirmed he charged no state taxes on his products. He said the tobacco products were mostly manufactured by Indians on Native American lands and had been subjected to federal taxes. There were no major cigarette brands sold, but Native Tobacco 101 offered bulk and chew tobacco that other local stores sell, including Copenhagen and Skoal.
Nearby stores that had complained their business was being hurt weren't saddened by the closing of their competition.
"All my customers have pretty much come back," said Ravi Singh, owner of Quick Pick Liquors, on the other side of the freeway.
He said his tobacco sales began to bounce back in July as Native Tobacco 101 stopped selling some products that he carries.
"They stopped selling everything but American Indian cigarettes," he said. "After that, they shut down."
You can reach Staff Writer Clark Mason at 521-5214 or clark.mason@pressdemocrat.com
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