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New York Braces for Cigarette Tax Hike

ALBANY -- Indian tribes and Internet sites expect to sell more tax-free cigarettes when New York state's cigarette tax jumps 39 cents a pack tomorrow, from $1.11 to $1.50 - the highest in the country.

"I guess it would be natural that if prices are higher in one area and lower in another, people would go for the lower price," Jerry Reed, a spokesman for the Oneida Indian Nation told The (Albany, N.Y.) Post-Standard. "So, yes, we would expect to see more business."

The Oneidas said they would not add the new tax to the price of their cigarettes, further widening the price gap between Indian and non-Indian retailers. The Oneidas charge $28 for a carton of brand-name cigarettes at their SavOn convenience stores. Beginning Wednesday, non-Indian retailers in Madison County will be required by law to charge $49.52, including sales tax. That means cigarettes will be about 43 percent cheaper at Oneida-owned stores.

Indian tribes in New York pay no taxes to the state on cigarettes sold in reservation stores. The Oneida Nation collects its own 5 percent tax on cigarettes and other items normally taxed by the state, but keeps that money for its government services, the report said. Non-Indian retailers must pay the full state tax on each pack.

The Oneida Nation also recently started selling cigarettes over the Internet. Brand-name cigarettes online are $33.50 per carton.

Shop owners on other New York reservations say they won't see a major windfall, but predict business will pick up. Larry Ballagh, a Seneca who sells tax-free cigarettes over the Internet, said his business rises when states raise their taxes.

"The state of Washington initiated a heavier state sales tax recently and we immediately saw a rise in sales in that area," he said. When New York doubled the cigarette tax two years ago, sales jumped as much as 20 percent.

James Calvin, president of the New York Association of Convenience Stores, estimated Western New York convenience stores lost 25 percent to 50 percent of their cigarette sales two years ago after the state increased the cigarette tax by 55 cents. He said smokers bought cigarettes at Indian reservations, over the Internet or across the border in Pennsylvania, where the tax per pack is 31 cents.
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