N.Y to Tax Native American Sales of Tobacco and Gas
ALBANY -- The days of tax-free sales of cigarettes and gasoline by Native American retailers are set to end Dec. 1 under a regulation quietly proposed by the state tax department.
In response to an edict by the State Legislature earlier this year that the Pataki administration begin collecting hundreds of millions in lost sales taxes, the state Department of Taxation and Finance is ordering that wholesale distributors of cigarettes deliver only products that are already taxed to their Native American retail customers. The Legislature believes that cracking down on the tax-free Native American sales will bring the state $165 million this year and $330 million next year, a figure industry groups say is conservative. But tax officials say the regulation will be worth $20 million this year and $64.5 million in 2004, according to The Buffalo News.
A tax department official said he believes the rule applies to both retail establishments like smoke shops as well as Seneca Nation of Indians Internet sales outlets that have seen business boom as the state has raised its taxes on tobacco products in the past few years. Seneca Nation retailers and a lawyer for the Native American businesses were already threatening legal action to stop the regulation. The Oneida Nation, which has a busy tobacco and gasoline retail business in Central New York, vowed to "resist all efforts" to collect the taxes, a spokesman said.
Representatives of non-Native American retailers praised the action, though they were reserved in calling an end to their decade-long fight to resolve the tax issue, because they have seen the state back down in the collection effort before. "If the tax department follows through fully and fairly and consistently enforces it, then I think it would go a long way toward leveling the playing field for retailers of tobacco and motor fuel in New York," said James Calvin, executive director of the New York Association of Convenience Stores.
Calvin's group has unsuccessfully sued to get the governor to collect the taxes. "We've been down this road a few times before, so you can understand if we're a bit cautious about speaking too soon," he said.
The regulation, if it takes effect with no changes, applies to all tobacco and petroleum products. It would, according to the state, effectively end the pricing edge Seneca and other Native American retailers have had to attract consumers to tribal smoke and gasoline shops. In the case of cigarettes, they are able to charge at least $1.50 less per pack -- the current state cigarette tax.
Seneca retailers, however, remained defiant. "I don't think it's going to happen," said Kevin Seneca, who runs a smoke shop, Papa's Place, on the Senecas' Cattaraugus Reservation. "If there are going to be any tax stamps on cigarettes, they'd have to be Seneca Nation stamps. The nation is the one to decide that, no one else."
The regulation permits Native Americans to continue buying tax-free products from reservation stores for their own consumption through a system in which special coupons will be distributed quarterly, the report said. Under the system that was proposed a decade ago by the administration of Gov. Mario Cuomo, cigarette distributors would be required to sell to Native American retailers only those packages of cigarettes with tax stamps.
That means the distributor prepays the $1.50 state excise tax, and then it is up to him to collect the wholesale price and tax from the Native American retailers. Gasoline distributors also would be responsible for paying the state for any taxes on products sold to Native American retailers.
While the burden to collect the excise tax will fall directly on wholesalers who market to Native Americans, consumers will ultimately have the responsibility to pay the sales tax. State tax officials said that beginning next year, personal income tax forms would have a line on which non-Native American residents must pay sales taxes that were avoided by purchases on reservations.
In response to an edict by the State Legislature earlier this year that the Pataki administration begin collecting hundreds of millions in lost sales taxes, the state Department of Taxation and Finance is ordering that wholesale distributors of cigarettes deliver only products that are already taxed to their Native American retail customers. The Legislature believes that cracking down on the tax-free Native American sales will bring the state $165 million this year and $330 million next year, a figure industry groups say is conservative. But tax officials say the regulation will be worth $20 million this year and $64.5 million in 2004, according to The Buffalo News.
A tax department official said he believes the rule applies to both retail establishments like smoke shops as well as Seneca Nation of Indians Internet sales outlets that have seen business boom as the state has raised its taxes on tobacco products in the past few years. Seneca Nation retailers and a lawyer for the Native American businesses were already threatening legal action to stop the regulation. The Oneida Nation, which has a busy tobacco and gasoline retail business in Central New York, vowed to "resist all efforts" to collect the taxes, a spokesman said.
Representatives of non-Native American retailers praised the action, though they were reserved in calling an end to their decade-long fight to resolve the tax issue, because they have seen the state back down in the collection effort before. "If the tax department follows through fully and fairly and consistently enforces it, then I think it would go a long way toward leveling the playing field for retailers of tobacco and motor fuel in New York," said James Calvin, executive director of the New York Association of Convenience Stores.
Calvin's group has unsuccessfully sued to get the governor to collect the taxes. "We've been down this road a few times before, so you can understand if we're a bit cautious about speaking too soon," he said.
The regulation, if it takes effect with no changes, applies to all tobacco and petroleum products. It would, according to the state, effectively end the pricing edge Seneca and other Native American retailers have had to attract consumers to tribal smoke and gasoline shops. In the case of cigarettes, they are able to charge at least $1.50 less per pack -- the current state cigarette tax.
Seneca retailers, however, remained defiant. "I don't think it's going to happen," said Kevin Seneca, who runs a smoke shop, Papa's Place, on the Senecas' Cattaraugus Reservation. "If there are going to be any tax stamps on cigarettes, they'd have to be Seneca Nation stamps. The nation is the one to decide that, no one else."
The regulation permits Native Americans to continue buying tax-free products from reservation stores for their own consumption through a system in which special coupons will be distributed quarterly, the report said. Under the system that was proposed a decade ago by the administration of Gov. Mario Cuomo, cigarette distributors would be required to sell to Native American retailers only those packages of cigarettes with tax stamps.
That means the distributor prepays the $1.50 state excise tax, and then it is up to him to collect the wholesale price and tax from the Native American retailers. Gasoline distributors also would be responsible for paying the state for any taxes on products sold to Native American retailers.
While the burden to collect the excise tax will fall directly on wholesalers who market to Native Americans, consumers will ultimately have the responsibility to pay the sales tax. State tax officials said that beginning next year, personal income tax forms would have a line on which non-Native American residents must pay sales taxes that were avoided by purchases on reservations.