Nearly One-third of N.Y. Cigarettes Sold Tax-Free

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Nearly One-third of N.Y. Cigarettes Sold Tax-Free

SYRACUSE, N.Y. -- Native American stores in New York state sold nearly 28 million cartons of tax-free cigarettes in 2002, according to the Syracuse, N.Y. Post-Standard newspaper. The paper obtained figures last week from the state.

New York could have collected up to $388 million in excise taxes and an estimated $48 million in sales taxes in 2002 if it required Native American stores to pay taxes on all of those cigarette sales, The Post-Standard calculated, according to its news report.

Businesses on Indian territories in New York have sold 168 million cartons of untaxed cigarettes since 1996, when Gov. Pataki first proposed taxing their cigarette sales to non-natives, according to state figures. Tax losses during that that time are harder to calculate because the sales and excises taxes have changed over the years, the newspaper reported.

In the most recent attempt, the state Department of Taxation and Finance planned on Nov. 1 to begin collecting $15 per carton in excise taxes on cigarettes sold by businesses on Native American territories to non-Indian customers. Sales by Native American businesses to Native Americans would not be taxed under the proposal.

But New York delayed collecting the taxes until at least March 1. That decision came after Native American leaders protested that taxing their businesses is a violation of treaties.

In September, one Onondaga Nation chief threatened to erect a toll booth on Interstate 81 through their territory if the state followed through on the effort to collect the taxes.

The Post-Standard filed a Freedom of Information Law request Oct. 14 with the tax department seeking data about the volume of untaxed cigarettes wholesalers sell to retailers on each Indian territory in the state. That information is the only public record that would indicate the volume of cigarettes the Indian nations are selling to their customers, since the state has no record of sales by Indian stores.

The state tax department publicly disclosed the data for the first time Tuesday in a chart it released to The Post-Standard. The data shows:
Tax-free cigarette sales by Native American stores accounted for about 30 percent of the cigarettes sold in New York in 2002.

The Seneca Nation in western New York -- where independently owned businesses sell cigarettes in retail shops and over the Internet -- sold 14.5 million cartons of tax-free cigarettes in 2002, more than every other Indian nation combined.

If the Senecas were required to pay $15 per carton in excise tax, they would owe New York $218 million for 2002.
But tax department officials cautioned that the Senecas sell a large percentage of their cigarettes on the Internet to out-of-state customers. Those sales would not be subject to taxes under the tax department's proposed regulations.

According to the newspaper, the Onondaga Nation sold 1.3 million cartons of cigarettes in 2002 from its single store, located about eight miles south of downtown Syracuse. Using the conservative $25 per unit price, the Onondaga store had an estimated $33 million in gross sales.
If the Onondaga Nation was required to pay excise taxes on those cigarettes, it would have owed New York nearly $19 million for that year.

The Oneida Indian Nation of New York sold 1.2 million cartons of cigarettes last year. That equals about $30 million in gross sales. The Oneidas would have owed the state nearly $18 million in excise taxes for 2002.

Fran Duskiewicz, CFO for Nice N Easy Grocery Shoppes's 78 Upstate stores, based in Canastota, N.Y., said the Oneida numbers are too low. Duskiewicz estimates the Oneidas sell closer to 5 million cartons a week at the Turning Stone Resort and Casino just off the Thruway and its 12 Sav-On stores in Oneida and Madison counties, the newspaper reported.

"I can't imagine any way the Onondagas would come anywhere close to what the Oneidas are doing," Duskiewicz said. "I don't think the state is privy to the (Oneidas') numbers."
Oneida nation spokesman Mark Emery declined to comment. "The nation doesn't comment on those kinds of numbers," he said.

The state has been under pressure from the New York Association of Convenience Stores to tax cigarette sales by Native American stores to tax the Indian sales.
Non-Indian stores generally charge $15 to $25 more per carton of cigarettes than stores on Indian territories. The state excise tax has been $15 per carton since April 3, 2002, according to the news report.