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Court Blocks New York Tax on Tribal Cigarette Sales
By FERNANDA SANTOS
Published: September 1, 2010
A state law to tax cigarettes sold by Indian tribes in New York had barely gotten off the ground on Wednesday when a state appellate court judge brought it to a halt, blocking an effort that Gov. David A. Paterson said could help stabilize the state’s finances.
The judge’s decision, to stop the state temporarily from enforcing its plan, came a day after a federal court ruling prohibiting tax collections specifically on cigarettes sold by the Seneca and Cayuga Nations, two of the largest tribes in the state.
But the Paterson administration said it was determined to carry on the fight and make its case in court. “We believe the state’s legal arguments are sound and we believe that ultimately the state will prevail in this matter,” Jessica Bassett, a spokeswoman for the governor, said in a statement.
The stakes are high for all sides. State officials say the $4.94-a-pack charge could generate $150 million in revenue for the state by March and would help discourage people from smoking, ultimately reducing the cost of health care. Cigarette vendors who compete with Indian smoke shops say the taxes could help their sales by leveling the price of cigarettes sold inside and outside tribal areas.
While some tribes are insulated by diverse economies, the taxes could be crippling for others. For the Shinnecock Nation on eastern Long Island, for example, cigarette sales are its financial backbone, and the smoke shops are the largest employers of its 1,200 members. The tribe earned federal recognition less than three months ago.
“There’s no way, shape or form — and maybe the governor hasn’t been to any of the reservations to see the locations of these communities — but no one is going to come to us to buy cigarettes at the same price as their local 7-Eleven,” said Lance Gumbs, a Shinnecock senior trustee and smoke shop owner. That, he said, “means we’re out of business, which means we’re out of jobs.”
Because federal law exempts goods made and sold on tribal areas from being taxed, well-established and larger tribes like the Seneca and Oneida Nations upstate are moving to manufacture cigarettes on their land. There is already an idle cigarette plant in Seneca territory in western New York; the Oneidas are in the process of moving a cigarette plant they operated outside their territory onto their land.
Both tribes operate casinos and other businesses, too. The Senecas run a construction company, and the Oneidas operate a car repair shop and a full-service marina on the shores of Oneida Lake in central New York.
“We’re looking to develop more manufacturing for our own economic development, open our own grocery stores and clothing shops, so that the money our members make in the reservation stays in the reservation,” said Barry E. Snyder Sr., the president of the Seneca Nation. “This battle over taxes proved to us that we need to keep on diversifying.”
It has also raised questions over how far a state can go to impose its rules on Indian tribes. Cigarette sales on tribal land to tribal members are exempt from state excise taxes, but federal courts have found that cigarettes sold to non-Indians are not exempt from state taxes unless a tribe receives an exemption.
The law Mr. Paterson wants to carry out tries to accommodate that. It allows tribes to buy a certain number of cigarette packs tax-free, to be sold to their members. Anything exceeding that quota would be taxed, presumably because the packs would be sold to non-Indians.
Two past governors — Mario M. Cuomo in 1992 and George E. Pataki in 1997 — tried to tax cigarettes sold by Indians, but their efforts ended after violent protests from some of the tribes.
Mr. Paterson’s attempt, so far, has drawn only mild protest. At a rally outside the Senecas’ Cattaraugus Indian Reservation on Wednesday, people chanted and waved posters depicting Mr. Paterson with a cowboy hat and a revolver, above the words: “I’m hunting Indians. You see any?”
Nine states have laws or rules regulating the taxing of cigarettes sold by Indian tribes. In Minnesota, for example, tribes agree to buy cigarettes from licensed distributors, which collect applicable taxes. South Dakota collects state and tribal taxes from four tribes, and the tribes and the state split the revenue.
New York’s law would require wholesalers to prepay sales and excise taxes on every cigarette pack they sell to retailers. The payment would be made when the wholesalers bought tax stamps, which must be affixed to the packs. The wholesalers would then request refunds for the packs sold tax-free to the members of Indian tribes.
Previously, wholesalers were not required to buy tax stamps for cigarettes bound for Indian reservations.
The order issued on Wednesday, by Senior Associate Justice Samuel L. Green of the Fourth Department of the State Appellate Division in Rochester, delays but does not derail the state’s effort to collect the taxes. The parties are to argue their case on Sept. 9 before a full panel of the appellate court.
“Our strategy is to continue our fight in the courts,” said Mr. Snyder, the Seneca president. “And this fight isn’t over yet.”
Tim Stelloh contributed reporting.
http://www.nytimes.com/2010/09/02/nyreg … amp;src=mv
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APNewsBreak: NY court allows Indian cigarette tax
By CAROLYN THOMPSON (AP) – 1 day ago
BUFFALO, N.Y. — A New York appeals court on Tuesday lifted a temporary order blocking the state from collecting taxes on cigarettes sold by Native American stores to non-Indian customers.
On Sept. 1, a state appellate judge in Rochester restored a restraining order that barred the state from collecting the $4.35-per-pack tax. But the court's five-judge panel, which took up the case last week, ruled that the state properly approved regulations for the levy.
A federal judge in Buffalo has already temporarily blocked tax collections from two Indian nations — the Senecas and Cayugas — and was holding a hearing Tuesday in that case.
State officials didn't immediately comment on the decision.
Tribal leaders say the $4.35-per-pack tax would blunt their competitive edge over off-reservation sellers and devastate their economies.
State and federal judges temporarily blocked the tax collections from going forward as scheduled on Sept. 1, but state officials expect those victories for the tribes will be short-lived.
The state's renewed efforts to tax sales to non-Native customers is viewed by the tribes as yet another attack on Native American rights dating to 1794. The 7,800-member Seneca nation in western New York, the biggest tribal cigarette seller, says its cigarette business is a $100 million-a-year industry.
The tax tussle has raised tension on reservations. The last time the state tried to collect the tax, in 1997, protesters lit tire fires and shut down a 30-mile stretch of the New York state Thruway that bisects Seneca land near the Pennsylvania line.
State lawmakers facing a $9.2 billion budget deficit in June voted to start collecting the sales tax by requiring cigarette wholesalers to prepay the sales taxes before supplying reservation stores. Wholesalers would pass along the levy to tribal retailers.
Cigarette makers sold 24 million cartons of non-native-brand cigarettes to tribes in New York in 2009, with the Senecas buying the most at 10.2 million, the state Department of Taxation and Finance said. Tribes also sell millions of cartons of American Indian brands.
Associated Press Writer Ben Dobbin in Rochester contributed to this report.
Copyright © 2010 The Associated Press. All rights reserved.
Judge temporarily blocks NY from taxing Indian cigarette sales
Published: Thursday, September 16, 2010, 7:36 PM
Mike McAndrew / The Post-Standard
Albany, NY - A federal judge in Albany today temporarily restrained New York from collecting taxes on cigarette sales by businesses on American Indian territories throughout the state.
In a case brought by the St. Regis Mohawk Tribe, Judge Lawrence Kahn barred the state from enforcing regulations that would let it collect the $4.35 per pack tax on sales by Indian businesses to non-Indians.
Kahn’s scheduled a hearing Sept. 23 in Albany to let attorneys for New York and the Mohawks argue about whether his order should be extended beyond that date.
The decision in the Mohawk case is just the latest in a series of rulings about New York’s attempts to tax Indian cigarette sales.
Tuesday, a New York appeals court panel of judges lifted an order issued by a state appellate judge who had temporarily blocked the state from collecting the taxes. Earlier, a federal judge in Buffalo temporarily blocked tax collections from two Indian nations — the Senecas and Cayugas.
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