New York Governor Signs Indian Cigarette Tax Bill

A New York bill intended to enforce collection of excise taxes on cigarettes sold at Indian-owned stores was signed into law Monday by Gov. David Paterson.

The new law will prohibit manufacturers from selling tobacco products without a state tax stamp to any wholesaler that doesn't certify the cigarettes won't be resold tax-free by New York tribes, a practice that has caused conflict between Indians and the state for years.

"This is a new approach, and we hope it will be the effective approach in terms of fighting this problem," Paterson said before signing the bill during a stop in Utica.

The next step will be for the state Tax Department to establish a certification process for wholesalers within 60 days, the governor said.

"We are trying to alleviate an issue that has existed for a very long time, but we won't be able to alleviate it just today," Paterson said. "This establishes right in the beginning of the process that New York state intends to collect taxes from its citizens who buy cigarettes."

Violators could have their licenses revoked and could be prosecuted criminally for perjury or filing a false instrument, the governor said.

The new law does not address collection of sales taxes or gasoline taxes, said Assemblyman William Magee, a central New York Democrat who co-sponsored the legislation.

The law shifts the collection from reservations to the manufacturing and wholesale level, a tactic that has worked to varying degrees in other states.

While supporters believe collecting taxes from the Indian nations in New York could generate hundreds of millions of dollars, Paterson said the experiences of other states show the figure would probably be slightly more than $62 million a year. The state excise tax is $2.75 per pack.

Convenience stores that operate near Indian-owned land have long complained of unfair competition from Indian retailers.

The tribes see the law as an attack on their sovereignty and financial well-being. The Seneca Indian Nation, which sells more cigarettes than any other New York tribe, urged the governor last week to veto the bill.

"Attacking tax-free commerce in our territories is short-sighted and disastrous for us and all of Western New York," Barry Snyder Sr., president of the Seneca Nation, said Monday.

Snyder said the tribe is exploring its options.

"The issue here is not cigarettes, but the protection of the Nation's treaty rights. We will do what it takes at the right time to protect those rights," he said, adding that Seneca leaders have invited Paterson to come to the Seneca territory to discuss taxes and other issues.

The Oneida Indian Nation, which sells cigarettes and gasoline at a string of stores throughout Central New York, also criticized the law.

"The only thing assured by the bill being signed into law today is ongoing litigation," the Oneidas said in a statement. "None of the State's other efforts to infringe on sovereignty have worked, and there is no reason to believe this will work either. If the State is serious about resolving this issue, it will negotiate with Indian nations rather than constantly attacking them."

Officials have long argued the state constitution and treaties authorize taxing Indian sales to non-Indians and previous governors have announced plans to collect hundreds of millions of dollars in sales and other taxes only to have negotiations with tribal leaders languish.

In 1997, the last time the state tried to collect the tobacco taxes, Seneca protesters used burning tires to shut down a section of the New York State Thruway, which runs through tribal territory in western New York.

Paterson downplayed the possibility of another confrontation, saying this time state officials gave tribal leaders notice about their plan.

"We are not trying to antagonize them as neighbors. We are not trying to create the notion of a threat," Paterson said. "We are holding fast to the notion that we have the right to collect taxes from our citizens buying cigarettes."

In November, authorities in Cayuga and Seneca counties raided two convenience stores operated by the Cayuga Indian Nation in Seneca Falls and Union Springs and seized 17,600 cartons of cigarettes.

Last week, the Cayugas shut down the stores after a state judge ruled the tribe did not have sovereign rights to sell tax-free cigarettes.

State Supreme Court Justice Kenneth Fisher also ruled the counties could pursue criminal tax-evasion charges against the nation. The Cayugas have said they plan to appeal the decision.

The American Cancer Society, the American Heart Association and the American Lung Association of New York called the new law "a huge public health win for all New Yorkers," saying it would reduce the number of people who smoke and lower health care costs from cigarette-related illnesses.

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