Tribes, NY spar over state government’s plans to tax reservation cigarette sales

Thursday, September 23, 2010

Judge mulls blocking NY tax on reservation sales

BUFFALO, N.Y. — Lawyers for the dominant Indian nation in New York’s lucrative tax-free cigarette market told a federal judge Thursday that the tribe should remain exempt from the state’s plans to tax most reservation smokeshop sales because the plans interfere with the tribe’s right to govern itself.

Lawyers for the Seneca Nation, along with Cayuga Nation lawyers, argued in federal court in Buffalo for a preliminary injunction that would block New York from collecting the $4.35-per-pack tax on sales to their non-Indian customers.

The judge took no action but left in place a temporary order barring collections until Oct. 15. It is one of three separate court orders now preventing the state from going forward with the new tax, which was to take effect Sept. 1.

Lawyers for the state, meanwhile, are moving to consolidate the various legal challenges to save time and money.

Attorney General Andrew Cuomo’s office has asked a federal judge in Utica to transfer a lawsuit filed there by the Oneida Nation to Buffalo, to be consolidated with the Seneca case and another lawsuit brought by the Unkechauge Nation, which sells cigarettes on the Poospatuck Indian Reservation on Long Island.

The Utica judge is expected to consider the consolidation request Sept. 30.

Still another lawsuit, filed by the St. Regis Mohawk tribe, remains pending in Albany.

All are challenging a change in New York tax law that would, for the first time, impose the state’s highest-in-the-nation sales tax on cigarettes sold by tribal retailers to the non-Indian customers who account for the vast majority of their sales.

The cash-strapped state, saying the U.S. Supreme Court has repeatedly upheld its right to collect the tax, anticipates $200 million in annual revenues.

Indian nations argue the tax system would overburden tribal governments, interfere with their right of self-government and devastate their economies.

The law would require cigarette wholesalers to prepay the sales taxes before supplying reservation stores. Wholesalers would pass along the cost to tribal retailers, who would have to raise their prices and lose their competitive edge over off-reservation convenience stores.

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