New York’s renewed effort to collect taxes on cigarettes and tobacco products sold by Indian-operated companies has led to seizures of $1.2 million worth of untaxed tobacco products in the last few weeks outside Indian land.
Inspections at 357 retailers by state and federal law enforcement resulted in the confiscation of almost 20,000 cartons of cigarettes and nearly 25,000 cigars, Lt. Gov. Robert Duffy said July 15. The inspections included off-reservation Indian shops and non-Indians selling untaxed Indian tobacco products.
It’s the first step in a new enforcement program that is expected to bring $27 million in tax revenue to the state this fiscal year. Enforcement will continue to include inspections of retailers and stopping vehicles carrying tobacco products.
Last week’s announcement follows nearly two decades of failed efforts to tax Indian cigarettes, some of which led to violence. Gov. Andrew Cuomo promised to secure the lost tax revenue and create a fair market for non-Indian businesses operating near reservations.
Courts have sided with New York in its current effort to collect taxes from wholesalers and in distribution off the reservations.
Future steps could include trying to collect taxes on the growing trade in cigarettes manufactured by Indian-owned companies. Tribes, citing federal treaties guaranteeing their sovereignty, argue they are exempt from taxation.
“We will never take any action to collect state taxes or allow the state to do so on our territory. That is not something that’s open for discussion,” said Seneca Nation President Robert Odawi Porter.
Porter said the courts don’t allow for taxation of tobacco products manufactured by tribes.
The enforcement initiative includes inspecting stamping agent facilities to verify inventories and insure compliance with state law, gathering information as to who is delivering and picking up untaxed cigarettes, inspecting stamping agents' delivery vehicles to insure that they are only transporting stamped product, stopping certain vehicles when there is probable cause to believe that they are being used to transport untaxed product in violation of state law and working to develop information on the movement of large shipments of untaxed product.
In the aftermath of federal and state court decisions upholding the state's power to collect these taxes, some tribal sellers have argued that they will continue to sell untaxed and unstamped Native American manufactured products to New Yorkers. The Administration noted in its press conference, however, that the law allows the state to collect taxes on Native American manufactured cigarettes no less so than other brands sold to non-tribal purchasers.
"Allowing some manufacturers to evade the state's highest-in-the-nation excise tax of $4.35 per pack would simply replace one loophole with another, perpetuating the sale of illegal cigarettes all over the state, including on street corners and other locations where the laws just aren't being enforced," added Calvin. "That's not good for New York, it's not good for honest retailers who play by the rules, and it isn't good for the men and women in law enforcement who are confronted by a massive cigarette contraband problem."
Seneca Nation president Robert Odawi Porter responded in a statement: "As always, our status as a sovereign nation prevents, by federal treaty, enforcement of state taxes on our territorial commerce. We will never take any action to collect state taxes or allow the state to do so on our territory. That is not something that's open for discussion."
"As far as trying to tax tobacco brands manufactured on Nation territory, they are already subject to federal regulation, as well as our own Nation rules. These businesses have the same rights to make and sell cigarettes as anyone else in the United States. Secondly, courts have never addressed the state's authority to tax federally regulated native brands. Nothing in current court decisions grants the state taxing authority over these products."
"Finally, the Seneca Nation wants to reiterate that tobacco taxes are not an 'Indian problem.' The problem is created by New York's excessive taxing of tobacco products and its open borders."
"The Nation always stands ready to discuss with the state any efforts to improve the quality of life and economic well-being of New Yorkers.
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