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Onondagas say they will stop selling national-brand cigarettes
Published: Friday, August 27, 2010, 7:27 AM
Updated: Friday, August 27, 2010, 10:03 PM
Glenn Coin / The Post-Standard
The Onondaga Nation will likely stop selling national-brand cigarettes next month and rely solely on Indian-made brands at its smoke shop south of Syracuse, a nation attorney said Thursday.
“Unless something changes, as of Sept. 1 we won’t be able to sell major brands that are untaxed,” said lawyer Joe Heath. “It doesn’t make that much sense to sell them at the same price as people can get them at the convenience store across the street.”
The Onondagas sold 1.2 million cartons of cigarettes last year tax-free. On Wednesday, the state will require wholesalers who supply Indian reservation stores to pay the $4.35 per-pack tax upfront and then collect it from the tribes.
Tribes say they won’t pay any New York taxes and will sell their own brands instead. The Oneida Indian Nation announced Wednesday it will move its cigarette manufacturing plant from Erie County to Oneida. The move will avoid the long arm of the state tax department, Oneida nation officials said.
Heath said the Onondaga will continue to sell brands made by Indian tribes and might launch its own cigarette-making operation in a building erected two years ago near the smoke shop on Route 11.
State tax officials would not speculate how they will handle trucks operated by sovereign Indian tribes transporting cigarettes on state roads from one reservation to another. Two weeks ago, tax agents stopped a truck carrying cigarettes from one Seneca reservation, where they were made, to another, then gave back the truck and cargo without pressing any charges.
On Thursday, Gov. David Paterson said the state won’t interfere with cigarettes made and sold on Indian reservations.
“They can make their own cigarettes and they can sell the cigarettes on the reservation as they are entitled to by federal law,” Paterson said on WOR-AM, in response to a question about the movement of the Oneida nation factory. “Once they come off, or anyone else comes off, of their sacred land with cigarettes that are not being taxed by New York state, we are going to address that issue.”
Paterson did not elaborate, and his spokesman did not respond to an e-mail seeking clarification.
Tribes have refused to collect the tax, citing their sovereignty and treaties dating to 1794. The last time the state tried to collect the tax, in 1997, protests erupted and tires were burned on the Thruway, shutting down a 30-mile stretch.
Paterson said he has been warned there might be violence again, but vowed the state will proceed.
“There will be quite an uprising and protest to this, but I am going to maintain this policy,” Paterson said. “The state police tell us over and over again that there could be violence and death as a result of some of the measures we’re taking.”
Seneca Indian President Barry Snyder has said that “violence is not on our agenda,” but the nation’s leadership acknowledges that some of the tribe’s more than 7,000 members might disagree.
The tax enforcement action might be postponed if a judge rules today in favor of the Seneca Nation of Indians, one of two tribes that have challenged the law in federal court. The Seneca and the St. Regis Mohawk Tribe argue that the law infringes on their sovereign rights and turns them into tax-collecting agencies for the state of New York.
The price break Indian retailers can offer has grown dramatically since 2008 as the state Legislature nearly tripled the cigarette tax, from $1.50 to $4.35 a pack. Name-brand cigarettes at non-Indian stores now sell for $8 to $10 a pack, while the tribes sell their own brands for about $4 per pack.
Indians are allowed to buy tax-free cigarettes from Indian retailers, but non-Indians must pay tax. The Seneca and Mohawk lawsuits focus on the state’s formula that would allot a certain amount of tax-free cigarettes to tribal members. The formula would allow the tribes to sell about 84 tax-free packs per tribal member per year.
The Onondaga Nation, with a population of 2,866, would get 242,400 packs a year. The tribe sold about 12 million packs last year.
Tribes can get more tax-free packs for their members under an alternative coupon system. The lawsuits say this is a time-consuming, expensive process that would force the tribes to do the state tax department’s work.
Tribes can also sign an agreement with the state and avoid having to charge their customers taxes at all. Heath said the Onondaga Nation is talking with the state, but declined to reveal details.
Other states have signed what are called “tax parity” agreements with tribes, which require the tribe to charge its own tax comparable to the state tax. While the state gets none of that money, advocates say it levels the playing field for non-Indian merchants by taking away the price advantage tribes enjoy with untaxed cigarettes.
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