Judgment reserved on cigarette tax
A federal judge on Friday chose not to temporarily prevent New York State from taxing cigarette sales on tribal land beginning Wednesday. Instead, with the clock ticking, Judge Richard J. Arcara said he first wants to see what happens Monday in a 4-year-old case in a state court to which the Senecas became a party on Thursday. That court will consider whether to lift a preliminary injunction that constrains the state Department of Taxation and Finance from enforcing state tobacco tax laws.
“I will reserve judgment for now, with either side able to approach me Monday, Tuesday or Wednesday, if necessary,” Arcara said.
Gov. David A. Paterson has vowed to collect a $4.35-per-pack tax on cigarettes sold by Native American retailers to non-Indian customers to help close the state’s large funding gap. He will require cigarette wholesalers to prepay the taxes before supplying reservation stores, and keep state troopers off Indian reservations to avoid conflict.
“It’s been a long time coming, and the state has decided to enforce this tax,” Assistant Attorney General Robert A. Siegfried told the judge.
Arcara listened for more than 2 1/2 hours to arguments from attorneys representing the Seneca and Cayuga Indian nations, claiming new state regulations infringe on treaties with the federal government dating to 1794. Meanwhile, attorneys for the State Attorney General’s office defended the regulations.
J.C. Seneca, a Seneca tribal councillor and leading retailer, said after the court adjourned that the Nation was working to keep “product flowing.” And he vowed that the state would fail.
“New York State is not going to collect one penny of tax from the Seneca Nation. We are going to fight this, and find ways to succeed,” Seneca said.
Most of the courtroom arguments centered on regulations that allow the Seneca Nation to sell 168,000 non-taxable cigarettes — the equivalent of 16,800 cartons — quarterly to its 7,800 tribal members.
Seneca attorney Riyaz Kanji said the state’s action would interfere with native sovereignty, and focused on the impact to its cigarette distribution system. He said a handful of retailers among the 172 now licensed could conceivably monopolize sales, and some cigarettes — possibly by unlicensed wholesalers — could elude the 75-cent tax stamp the nation applies to each pack to pay for the stamp system and fund health and education programs.
Kanji said that would place a strain on tribal members to find tax-free products, a federally protected right.
“The state’s new tax scheme would infringe on the nation’s right of self-government,” warned Kanji. “It would circumvent the Nation’s regulatory system and [could] deny the 75-cent tax stamp.”
Later, Kanji said the “commandeering” of tribal government is a fundamental flaw in the state scheme.”
Siegfried argued it was not New York State’s responsibility to tell Indian nations how to distribute their cigarettes. He said there were two options available, including a coupon system, that could help, and asserted it was the role of the Nation — not the state — to crack down on unlicensed tribal wholesalers.
“We’re not required to regulate the Seneca economy, or to tell retailers what they can or cannot do,” Siegfried said.
New York State, he insisted, was not putting an “undue burden” on the Seneca and Cayuga nations.
But Kanji disagreed.
“There will be market chaos without a restraining order by this court,” he said.
And Lee Alcott, an attorney for the Cayuga Nation, warned the cigarette tax would put them “out of business.”
A temporary restraining order, if granted by Arcara, would last 14 days, with another 14-day option.
In State Supreme Court Thursday, Justice Donna M. Siwek granted the Seneca Nation’s request to intervene in Day Wholesale v. State of New York.
Siwek wrote in her ruling that the Senecas had “a real and substantial interest in the outcome of the action [and would] impose significant burdens on the Nation, its licensed stamping agents, its licensed cigarette retailers” and “stand in conflict with the nation’s import/export laws.”
Cigarettes news by: buffalonews.com