New York State Plan to Collect Reservation Cigarette Taxes May Prove Difficult

11:33 AM, Jun 23, 2010   |    comments
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Gannett Albany Bureau

ALBANY - New legislation may give the governor's office broad powers to negotiate cigarette-tax-enforcement agreements with American-Indian tribes - a provision officials hope will avoid a fresh confrontation over the issue.

The state is banking on collecting $150 million in revenue from taxes sold on reservations to non-tribal people in an effort to plug a $9.2 billion deficit.

But the execution of the plan could be easier said than done. While tribal leaders say they would like to avoid lawsuits and pursue a diplomatic route, the memory of the botched 1997 enforcement effort has some observers wondering if the state can follow through on collecting the money.

"The big unknown is how the people on the reservations will react," said Bob Batson, a government lawyer-in-residence at Albany Law's Government Law Center. "It's a matter of whether they'll react like they did 13 years ago or if they'll accept it or if they make another legal challenge."

Enforcement is due to begin Sept. 1.

The plan, approved by lawmakers on Monday, was coupled with a $1.60 hike on cigarettes sold elsewhere, and a tax increase for all other tobacco products from 46 percent of the retail price to 75 percent.

Combined, the state expects to receive $440 million from the tobacco taxes.

A renewed effort of collecting taxes from the sale of reservation cigarettes was considered necessary if the state was to again hike the tobacco taxes elsewhere.

In 1997, the last time the state tried to enforce a tax-collection plan, Seneca tribe members in Cattaraugus County occupied Thruway overpasses in protest. Fourteen people were arrested and two state troopers were injured during the protests.

Then-Gov. George Pataki backed off from the plan after the protests and the state's executive hasn't touched the issue until now, at the height of a budgetary crisis.

The most recent plan would collect taxes from non-tribal members through wholesale manufacturers that ship their products to reservations.

American Indians who live on reservations can continue to purchase cigarettes tax-free either through participating in a coupon program or a prior-approval plan.

Cigarettes produced and sold on reservations would also not be taxed.

While the plan approved on Monday is similar to what New York tried to do previously, there is a key difference: The governor's office appears to have the power to negotiate tax-collection plans directly with the tribal leaders.

Any agreement made with the tribes would supersede the plan approved Monday, said Department of Taxation and Finance Acting Commissioner Jamie Woodward.

"The governor's office is hopeful of pursuing agreements with each nation," Woodward said.

Pete Carmen, the vice president of Oneida Nation Enterprises, said he was hopeful that an agreement could be worked out.

"We are committed to trying to work toward a resolution," Carmen said. "We understand that some people will never be satisfied with any agreement with any Indian nation. We are looking to negotiate with people who are willing to enter into an agreement. We will work as hard as we can with those people to try to do so."

But if those negotiations fail, the tribes are prepared to go to court, he said.

"If the state and Indian nations do not reach agreements, there is sure to be litigation," Carmen said. "Litigation is not the preferred route for any of these parties to resolve disputes."
Sen. Michael Nozzolio, R-Fayette, Seneca County, said the negotiation provision may give too much authority to the governor's office.

"The governor has additional authority to negotiate issues like casinos, land claims, without additional consent from the Legislature," Nozzolio said. "It very well could open the door to providing governors the authority to negotiating without public scrutiny."

Many American Indians see the sale of cigarettes as vital to the livelihood of their reservations, making it a deeply passionate and personal issue.

"If Albany chooses to violate those treaties, businesses, both on and off our territories, will close. Thousands of Senecas and non-Senecas will lose their jobs," said Barry Snyder, the president of Seneca Nation, in a statement. "Hundreds of millions of dollars in spending will cease."

There is little argument that New York can collect the tax revenue, some experts believe.

"The state legally has a right to tax sales to non-members of the tribe," said Eric Cheyfitz, the director of American Indian Program at Cornell University. "What the response of the tribes is going to be is another issue."

Sen. Jeff Klein, D-Bronx, said the plan is fair.

"We're a nation of laws and we're a state of laws," Klein said. "The law is on our side."

Klein, a smoker himself, has sought legislation to crack down on the sale of cigarettes over the Internet and reduce the number of tax-free cigarettes sold on the street.

"When you look at any constitutional argument or any law I've seen, when non-Native Americans buy cigarettes, they have to pay the tax," Klein said. "They point to all types of treaties; all the types of treaties I've seen deal with real property. They don't deal with the taxation of goods like cigarettes."


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