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    NACS, Others Seek to Limit Tribal Cigarette Sales

    Online sales of untaxed smokes provoking a stampede of protests.

    IRVING, N.Y. -- The National Association of Convenience Stores (NACS), New York lawmakers and various antismoking groups are trying to put Larry Ballagh out of business, reported the New York Times.

    Ballagh, a 65-year-old of half-Irish, half-Seneca American Indian stock, sells cigarettes nationwide over the Internet, free of state excise and sales taxes that can add as much $3 per pack to the cost of smoking.

    Fast-growing online sales of untaxed cigarettes -- available for less than $25 a carton over the Internet compared with about $65 in New York City -- are provoking a stampede of protests from a disparate collection of anti-tobacco groups, cash-strapped state governments and local retailers. These groups are hard at work in the courts, legislatures and in Washington to try to end the practice.

    The campaign has marshaled forces on Capitol Hill as well. Last December, the Senate passed a bill to stamp out untaxed cigarette sales over the Internet, and the organization representing state attorneys general is urging the House to do the same.

    NACS has been lobbying intently for a different House bill that would take a harsher stance, explicitly allowing states to take Indian nations to court.

    Ballagh's business remains hard to crack because it operates behind tribal sovereignty. States are generally barred by treaties from taxing Indian tribes or enforcing other laws against their activities. Businesses operated by American Indians have long taken advantage of this protection to sell tax-free tobacco products in reservation shops to non-Indians. But the Internet has allowed the Seneca entrepreneurs to take their business to a new level.

    From Web sites like Ballagh's travelingsmoke.com, and others like Senecahawk.com and Senecatabacco.com, smokers can buy cartons of Marlboro and Camel for as little as $24.25, compared to about $58 in a Hoboken, N.J., convenience store and $49 at a supermarket in Seattle.

    Among the most vociferous opponents of the online retailers are the nation's 130,000 or so convenience stores; cigarettes account for about 40 percent of non-gasoline sales. Stores along the borders of reservations have complained of the Indians' tax advantage for years.

    "It changed the dynamic," said Lyle Beckwith, senior vice president for government relations at NACS. "Now it affects retailers all over the country, not just in some states. If you don't deal with the Indians, you don't solve the Internet tobacco problem."

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