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N.Y. Proposes to Rein in Untaxed Cigarette Sales

ALBANY, N.Y. -- State Governor David Paterson unveiled a new proposal that would act as a weapon against the sale of untaxed cigarettes in New York, and reverses a past tax department approach of not enforcing the sales tax collection law with respect to Native American-owned retailers.
The regulations, which were posted to the state Department of Taxation and Finance's Web site, would require cigarette manufacturers and wholesale sellers to ensure untaxed cigarettes sold to Native American tribes are limited to a quarterly amount that could only be used by members of that nation, The Citizen reported.
The untaxed cigarette amount would be determined by a formula based on the tribe's population and the average consumer use of cigarettes. It could be reviewed annually, according to the report.
For the Cayuga Indian Nation, which operates convenience stores in Union Springs and Seneca Falls, that amount would be 20,100 packs of cigarettes. Attorneys for the Cayugas were not available for comment.
The Cayugas are in a legal battle with the district attorneys of Cayuga and Seneca counties regarding the alleged possession and sale of untaxed cigarettes to non-Indian customers, the report stated. A criminal tax evasion case began in late 2008, when the sheriffs' departments of those counties conducted raids on the Cayuga's stores and seized 176,000 packs of untaxed cigarettes.
"The proposal would serve to address a long-standing issue that has proved problematic for previous administrations and frustrating for local, non-reservation retailers who have not been able to compete for sales on a level playing field," stated a Taxation and Finance Department press release cited by the newspaper.

State Sen. Michael Nozzolio, a longtime proponent of such regulations, was pleased to see the proposal.

"Governor Paterson's response is long overdue," Nozzolio said in a written statement cited by the paper. "The only thing worse than taxation is taxation that's administered unfairly. These regulations are in response to legislation I sponsored and enacted that establishes equity, fairness and a level playing field in the sale of products in New York State. We will continue to monitor the implementation of these regulations and fight for fairness in New York's taxation policies."

The regulations were expected to be published in the March 10 edition of the State Register, after which a 45-day window will begin for public comments.

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