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New York Is Blocked From Collecting Taxes on Indian Reservation Cigarettes
By Esmé E. Deprez
New York Governor David Paterson said a state appellate court has blocked officials from implementing a new tax on cigarette purchases on Indian reservations by non-tribal buyers.
Judge Samuel L. Green of Rochester issued a temporary restraining order preventing New York from collecting the taxes, which was slated to begin today, Paterson said in an e-mailed statement. The Seneca Nation, one of the tribes fighting the tax, said the plan is an attempt to use them as “piggy banks” to balance the budget and a threat to their sovereignty.
Green’s decision is the latest in a series of federal and state court battles over the taxes, which officials say may generate $150 million by March and help narrow a $9.2 billion budget deficit. Under a policy to prevent a repeat of unrest that marked past attempts to collect the taxes, New York hasn’t received levies on reservation cigarette sales since 1996.
“We are disappointed today that the Appellate Division has stayed the implementation of our statute and regulations with respect to licensed stamping agents,” Paterson said. “Despite this ruling, we believe the state’s legal arguments are sound and we believe that ultimately the state will prevail in this matter.”
A temporary restraining order issued yesterday by federal Judge Richard J. Arcara of Buffalo blocked the state from collecting the $4.35-a-pack excise tax on the Seneca and Cayuga reservations. That decision followed by one day a separate ruling by state Judge Donna Siwek of Erie County, which granted New York’s motion to lift two preliminary injunctions blocking the tax collection.
‘Piggy Banks’
“Judge Arcara’s ruling sets the stage for an orderly and thoughtful legal review of what we believe is an illegal, ill- conceived attempt by New York state to use the Seneca Nation and other Indian nations located within its boundaries as piggy banks to balance the state budget,” Seneca President Barry E. Snyder Sr. said in an e-mailed statement.
The next hearing before Arcara was set for Sept. 7.
New York, the third most-populous state, hasn’t received $8 billion in levies on cigarette sales on reservations since the plan was put on hold, a state Senate panel said in June. Estimates of annual revenue that might be obtained by applying the excise tax range from $200 million to more than $1 billion.
In June, state lawmakers passed rules requiring wholesalers and stamping agents to prepay taxes for all cigarettes sold. The collections may help narrow the projected deficit in the state’s $136 billion spending plan for fiscal 2011.
‘Justice Denied’
The federal ruling yesterday was “a slap in the face to every upstate taxpayer and business owner,” Assembly Minority Leader Brian Kolb, a Republican from Canandaigua, said in a statement on his website. “Delaying our state from enforcing the law and collecting the tax -- whether the delay is for two weeks, two days or two hours -- constitutes justice denied for upstate.”
The new law bans the sale of cigarettes, including those intended for tribal consumption, without a stamp showing the tax has been paid, according to a state filing. Qualified Indians and cigarette sellers can use coupons or a prior-approval system to obtain tax-free cigarettes for personal use by tribal members on the reservation, the filing said.
The state’s plan relies on its ability to collect the tax from 75 licensed stamp agents, 10 of whom sell to Indian tribes. The state Taxation and Finance Department has told officials to enforce tax-collection rules on wholesalers and monitor their compliance, according to Brad Maione, a department spokesman.
Higher Taxes
The Seneca Nation occupies three New York reservations, including the City of Salamanca, about 60 miles (97 kilometers) south of Buffalo. More than 7,200 people are members of the tribe, according to its website.
The state raised its cigarette tax from $2.75 for a package of 20 last month. The increase pushed the average price to about $10.80 a pack in Manhattan and $8.92 outside the city, according to Erik Kriss, a state Budget Division spokesman.
What a confusing mess!!
I've lost track of all the lawsuits in play here.
Next hearing: September 7.
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snusgetter started a blog post Confusion is still the order of the dayConfusion is still the order of the day
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Judge extends order barring taxes on Indian cigarettes
Updated: September 07, 2010, 6:54 PM
A federal judge Tuesday extended his order blocking the state from taxing two Indian nations' cigarette sales to non-Indian customers while legal challenges to the state's plans continued to mount.
U.S. District Judge Richard Arcara scheduled a hearing for Sept. 14 on a lawsuit by the Seneca and Cayuga nations which seeks to prevent the state from imposing its $4.35-per-pack sales tax on cigarettes destined for reservation smokeshops.
In the meantime, the judge extended a temporary order issued last week barring collections at least through next week's hearing. The order had been set to expire Sept. 13.
Also Tuesday, the Oneida Indian Nation of central New York began its own federal challenge of the state tax law, filing a case in New York's northern judicial district, where the St. Regis Mohawk tribe also has a lawsuit pending.
State tax officials had planned to tax reservation sales to non-Native customers beginning Sept. 1 as a way to bring in $110 million in revenue this fiscal year and $200 million a year after that.
Indian nations oppose the plan as an attack on tribal sovereignty and treaty rights.
The state's last attempts to tax reservation sales, in 1997, led protesters to set fires that stopped traffic on the New York State Thruway where it runs through the Senecas' Cattaraugus territory.
The current efforts seek to keep tax officials off the reservations by having cigarette wholesalers prepay the sales taxes before supplying Native American stores. Wholesalers would pass along the charge to tribal retailers, who in turn would have to raise their prices and lose their competitive edge over off-reservation convenience stores.
Although Arcara's order covers only the two western New York tribes, a separate order by a state judge continues to bar the tax for all nine New York tribes in the tax-free cigarette business. A five-judge appellate panel in Rochester is scheduled to take up that case Thursday.
The state case was brought by a Seneca retailer and a non-Indian cigarette wholesaler. The wholesaler said he would lose business if forced to collect the tax on cigarettes he supplies to reservation stores.