A cigarette shop on the Poospatuck reservation in Mastic
Gov. Andrew Cuomo’s administration said Wednesday it will move swiftly to begin taxing cigarettes sold on American Indian reservations to non-Indian customers after getting the go-ahead from a state judge.
Supreme Court Justice Donna Siwek rejected the Seneca Indian Nation’s claims that state taxing officials had improperly adopted regulations that will govern collections. She lifted a temporary court order that had been blocking enforcement.
Seneca President Robert Odawi Porter said the western New York tribe would appeal.
State officials, facing a $9.2 billion budget deficit, voted a year ago to begin collecting the $4.35-per-pack sales and excise taxes on the millions of cartons sold by reservation smoke shops to non-Indian customers. It was a break from the policy known as forbearance adopted by a string of governors who declined to enforce state laws requiring the taxation of sales to the general public.
“This administration will move swiftly to enforce the law,” Cuomo spokesman Josh Vlasto said following Wednesday’s decision.
The state plans to impose the tax on Native American sales without going onto reservations by requiring cigarette wholesalers to pay the sales taxes before they supply reservation stores. Wholesalers would pass along the levy to tribal retailers, who would have to raise their prices.
The state sees the tax as a potential $500,000-a-day revenue source. Tribal leaders view it as an encroachment on tribal sovereignty and a threat to reservation businesses that employ thousands.
Siwek, in her decision, acknowledged the debate that dates to 1988.
“The taxing policy of the state is required to strike the difficult balance between the state’s objectives with regard to the sovereignty of Indian nations and the general welfare of the people of the state of New York,” she wrote. “The state has encountered significant difficulty in implementing a taxing policy which meets these dual objectives.”
The decision was praised by non-Indian retailers who have watched the Native American cigarette business flourish as New York has increased its cigarette tax to the highest in the country.
“Today’s decision allows the state to move forward swiftly to close a loophole that has deprived the state of badly needed revenues, decimated tax-collecting retailers and wholesalers and fostered a thriving black market,” said Jim Calvin, president of the New York Association of Convenience Stores.
Cigarette makers sold 24 million cartons of non-native-brand cigarettes to tribes in New York in 2009, according to the state Department of Taxation and Finance.
But leaders of some New York Indian nations have said they would reduce or eliminate those name-brand cigarettes from their stores rather than go along with the state’s taxation plans. They would stock mostly Native American brands manufactured on their territories.
“If the nation’s businesses need to shift their product mix to render such onerous tax laws moot, they will,” Porter said.
Copyright 2011 The Associated Press.
