Legal Wrangling Continues to Delay Cigarette Tax Collection

BUFFALO, N.Y. -- New York State was expecting a revenue boost from cigarette sales on Sept. 1; however, more than two months later legal battles are holding up those anticipated funds. The delay stems from the state's attempt to tax Native American smoke shop sales to non-Indian customers. Five of the state's Indian nations have launched legal challenges to the move. State officials had projected to bring in approximately $500,000 a day.

"To a large extent, this is not a tax issue; it's a constitutional law issue as to whether or not the state has the right to tax," Stuart Lazar, University at Buffalo law professor, told the Associated Press.

The five Indian nations launched multiple challenges instead of a single one because each is an independent nation with its own government, priorities and business models to protect, authorities told the Associated Press. "The nations want to maintain their sovereignty, and this is part of that whole process," said Don Grinde, an American studies professor at the University of Buffalo.

To date, the state has appealed a federal judge's decision in Utica granting the Oneida Nation's request to block the tax collections. In addition, state lawyers have appealed two orders by a federal judge in Buffalo meant to give the Seneca, Cayuga, Unkechaug and St. Regis Mohawk nations time to appeal after he denied their requests to prevent collections, the Associate Press reported.

Earlier this year, New York raised its cigarette tax to $4.35 per pack leading to an increase in Native American cigarette business. Native American smoke shops charge approximately half of the $10 that non-Native convenience stores do for name-brand cigarettes. Taxing non-Native smoke shops will lead to an estimated $200 million a year in new revenues for the state, officials said.

State lawyers argue they have US Supreme Court precedent on their side, with the highest court upholding states' rights to tax non-Native customers as long as the tax doesn't impose more than minimal burdens on tribes. The New York Association of Convenience Stores supports the state's arguments.

However, the Seneca and Unkechaug nations contend the state tax would disrupt internal taxing structures, which bring in millions of dollars for member health and education programs. Potential job losses as smoke shops close are also a factor.

The issue could reach the US Supreme Court, either through the tribes' federal cases or a separate state case brought by a North Country wholesaler and a Seneca businessman, according to the Associated Press. The Cayuga, Oneida and Unkechaug nations have requested court-supervised meditation to settle the dispute; however, the New York State attorney general's office opposes the idea.

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