APNewsBreak: Appeals court allows NY to begin taxing some Indian cigarettes sales

APNewsBreak: NY court allows Indian cigarette tax

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.