Pataki seeks 1-year delay in ending Indians' tax-free cigarette sales

In New York, Taxes on Native American Stores Put Off Again

Feb. 24, 2006

ALBANY, N.Y. -- The Pataki administration will not begin collecting taxes on tobacco and gasoline from Native American merchants come March 1 as originally scheduled, defying the state legislature once again.

And with this latest delay, according to the Rochester (N.Y.) Democrat and Chronicle, some lawmakers and anti-smoking activists are convinced that Gov. George Pataki will stall the issue until he leaves office at the end of the year.

"My estimate is they're going to simply ignore the law and ride it out until the end of the governor's term," Russell Sciandra, director of the Center for a Tobacco Free New York, told the newspaper. "And everyone I've talked to seems to feel the same way."

This week, state Tax Commissioner Andrew Eristoff told a legislative panel the agency would not collect the taxes on March 1 as required, largely because the administration wants lawmakers to consider its idea to delay implementation by one year. Pataki is stepping down Dec. 31, declining to run for a fourth term.

The long-running tax issue is no small matter, the paper reports: Hundreds of millions of dollars are at stake. On one side are convenience stores that compete with reservation stores and state legislators who view the taxes as a way of helping to pay for the state budget. Joining them are anti-smoking groups that want to see cigarettes made more expensive.

On the other are customers who enjoy cheaper prices and Native American tribes that insist the law would intrude on their sovereignty.

"The Seneca people commend Gov. Pataki for his consistent position recognizing and respecting the unique, sovereign status of the Seneca Nation," Seneca President Barry E. Snyder Jr. said in a statement a day after the administration said it would not collect the taxes on March 1. "At the same time, we continue to be amazed that the New York state legislature persists with the debate about sales tax collection on Seneca territories when federal laws and treaties are clear."

The Department of Taxation and Finance is recommending against a March 1 start date because the agency is asking lawmakers to give the governor more power to negotiate agreements with Indian nations, without having to seek legislative approval, spokesman Tom Bergin said. The legislature is also being asked to consider an Indian export decal system to track sales of cigarettes out of state, he said.

"As a matter of practical administration, we think it would be premature to begin implementing March 1, at the same time the Legislature is reviewing the substantive changes to the law," Bergin said.

A state Senate report figured New York could reap $1 billion from the tax collections, though others have estimated less than half that. The state's per-pack tax on cigarettes is $1.50; it charges about 29 cents in taxes per gallon of gasoline. Pataki in January proposed increasing the cigarette tax by an extra dollar a pack.

Courts have ruled that states can impose taxes on sales by Indian-run stores to non-Indians. The state could do so by collecting tax payments from cigarette distributors. Reservation stores would then raise prices, but Native American customers would be eligible for rebates, legislators said.

The latest delay was all too familiar to convenience store owners.

"We have the governor once again using his delay tactics and dog-ate-my-homework excuses for not enforcing [the] law," James Calvin, president of the Association of Convenience Stores, said in the report. But he's not convinced that the issue is dead this year.

"We don't have any doubt that, in one way or another, the taxes on sales to non-Indians are going to be collected by New York. The question is: How soon?"

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Pataki seeks 1-year delay in ending Indians' tax-free cigarette sales

By TOM PRECIOUS, News Albany Bureau
1/18/2006 
 
ALBANY - Gov. George E. Pataki said Tuesday he will seek to delay for a year implementing a state law that ends tax-free sales of cigarettes by Indian retailers to non-Indians. Legislators, health groups and non-Indian retailers have been trying to have the taxes collected for more than a decade.

Pataki's effort to delay enforcement of the law - due to take effect March 1 - came on the same day he formally proposed a $1-per-pack cigarette tax increase. Critics say delaying the reservation tax collection at the same time the tax is increased is certain to increase tax evasion and bootlegging.

Not surprisingly, Indian leaders praised the two seemingly contradictory proposals, which were contained in Pataki's 2006 state budget plan. Over the years cigarette sales have become a major business for Seneca Nation shops and Internet operations, with smokers from around the state turning to Seneca retailers to avoid state taxes. The governor's new tax plan would take the level to $2.50 per pack.

"The Seneca people commend the governor for his consistent position over the years of recognizing the unique, legal sovereign status of the Seneca Nation," said Seneca President Barry Snyder Sr.

Non-Indian retail groups said the governor is sending mixed messages by raising the tax but not doing more to reduce bootlegging and Indian tax-free sales. "This is an act of breathtaking cynicism," said James Calvin, president of the New York Association of Convenience Stores.

"Let's drive tens of thousands more smokers to the unlicensed, unregulated, untaxed side of the street no matter how harmful it is to public health, state and local treasuries, or neighborhood convenience stores," he said.

Health groups criticized the governor's delay. "It's a mistake," said Russell Sciandra, director of the Center for a Tobacco Free New York. "We think failing to collect the tax will reduce the public health impact of the tax increase."

e-mail: tprecious@buffnews.com
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The siege has raised tensions among the 450 tribal members, 250 of whom live on the 55-acre reservation near Mastic.

Unkechaug Chief Harry Wallace called the campaign the opening wedge for enforcement of statewide taxation of reservation sales to non-Indians, scheduled to go into effect March 1. ''They're practicing,'' he told Indian Country Today.

New York Gov. George Pataki suspended the last state attempt to tax reservation sales in 1997, after widespread resistance from tribal members closed interstate highways and led to violent confrontations with state police. The Unkechaug and Seneca nations are credited with sparking the resistance. After lobbying by convenience store and gasoline station associations, however, the state Legislature in 2003 passed a law over Pataki's opposition reviving the reservation tax regulations.

Although state officials have been preparing for months to enforce the regulations, they have distanced themselves from the local action against the Unkechaug, one of the two state-recognized Algonquin tribes of eastern Long Island. But Suffolk County District Attorney Thomas J. Spota has drawn the connection.

Uniformed Suffolk County officers have handed out leaflets stating - inaccurately, say tribal officials - that ''the possession of untaxed tobacco is ILLEGAL!'' The leaflets bear the seal of the Suffolk County district attorney and its police department and go on to say that penalties for possessing and transporting untaxed tobacco include jail time, fines and seizure of the vehicle. At the bottom they state: ''In cooperation with: New York State Department of Taxation and Finance.''

''The flyer misstates the law,'' retorted Wallace. ''It is inaccurate and purposefully vague.''

Although Spota has told the press he is cracking down on illegal bulk resale of the untaxed cigarettes, Wallace said that he was also intimidating lawful trade. ''Ninety-nine percent of our customers come in to purchase cigarettes for their personal use,'' he said, ''which is not illegal in New York.''

The tribe has countered with its own flyer, charging that ''the tactics of the Suffolk County Police Department in cooperation with the New York State Department of Taxation and Finance is designed solely to intimidate and harass lawful citizens.

''Instead of trying to intimidate us, they should work with us to make sure NO crime

is committed.''

A spokesman for state Attorney General Eliot Spitzer said his office was not involved in the Suffolk County action. But Spitzer, a likely Democratic candidate for governor this year, has quietly been making his own preparations to enforce the tax regulations.

Late last April, he began a probe of the state's cigarette stamp agents, licensed wholesalers who pay the $1.50 per pack state excise tax by buying stamps from the state and affixing them to the packs they then sell down the distribution chain. The 20 or so stamp agents also sell untaxed cartons to exempt organizations, such as Indian reservations. State law names nine reservations, those of the federally recognized Iroquois nations and the state-recognized Unkechaug and Shinnecock of Long Island.

Spitzer originally said he was concerned with Internet and mail-order sales, and the danger that cigarettes would fall into the hands of minors or fail to be ''fire-safe.'' His press releases avoid mention of reservation sales. But a recent enforcement action draws a direct link to the upcoming tax regulations.

On Nov. 7, Spitzer released an assurance of compliance with Harold Levinson Associates Inc. of Farmingdale, one of the largest stamp agents. In paragraph 21, it specifies that if the regulations go into effect as scheduled on March 1, ''HLA shall not sell any Unstamped Cigarettes to any Indian Nation, Tribe or member thereof.''

Under the regulations, the tax department would provide tribes with coupons for the estimated cigarette consumption of their smoking members. Tribal smoke shops would turn in these coupons to the taxing agents for a rebate on the tax.

The Department of Taxation claims this scheme passed muster with the U.S. Supreme Court in the 1994 New York Department of Taxation v. Milhem Attea & Brothers case. The Pataki administration has also offered an alternative of negotiated tax compacts with reservations, but this approach dropped from sight in the general collapse of land claims settlements last year.

Instead, the most visible harbinger of the upcoming tax deadline is the line of Suffolk County police cruisers that drew up with flashing lights on the Poospatuck reservation boundary in mid-December. Wallace said he has worked to keep tribal members calm and avoid confrontation. Only one Unkechaug member, Ernestine Watkins, has been arrested so far, on a charge of hitting a police officer's leg with her car.

Watkins will face charges of reckless endangerment, said the Spota's office. She is scheduled for arraignment Feb. 16 at the 1st District Court in Central Islip. Watkins' husband owns Monique's Smoke Shop on the reservation.

Watkins said she will fight the charge through the courts. Even if the prosecutors offer an easy way out, she said, "I'm not going to drop it."

Wallace said the tribe is examining legal action against Suffolk County officials.

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Man learns smoking outside bar may be hazardous -- and costly

ENDICOTT, N.Y. Smoking can be hazardous to your health -- and your wallet.

A 25-year-old man found that out this past weekend while grabbing a smoke outside a Binghamton-area bar.

Police in Endicott say when the man stepped outside the bar early yesterday morning to smoke a cigarette, another man approached and ordered him into a nearby alley. The stranger and two other men -- one brandishing a gun -- assaulted and robbed the bar patron.

Investigators say the three robbers got away with a substantial amount of money.

The victim sustained cuts and bruises to his head, arms and hands.

(Bob Joseph, WNBF, Binghamton)
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