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CHARLESTOWN, R.I. -- The Narragansett Indian tribe wants to open a tax-free tobacco shop in a matter of weeks to spur economic development, but the state claims the plan is illegal.
Narragansett Chief Sachem Matthew Thomas said the federally recognized tribe doesn't need to abide by the state's tax rules. "We believe that we have the authority and the right to sell products tax-free on our land," he said.
The tribe has readied a store on its reservation in Charlestown, R.I., and hopes to open a smoke shop shortly, according to the NBC news affiliate in Rhode Island.
Thomas said he's more concerned about economic development than the dangers of smoking. "If you can give me something that's health-conscious that will bring in the kind of funding that the tribe needs, I would be more than happy to listen to it," Thomas said. "One of the things that folks need to keep in mind is tobacco has been around a long time. It didn't just get invented when we decided to open a shop."
State Tax Administrator Gary Clark said he believes the tribe is bound to observe state and local laws, including those on taxation. Gov. Don Carcieri also said he thought a tax-free tobacco shop would be illegal, and said the Narragansetts' plan was "just talk."
Clark said he hopes the Narragansetts will discuss their plans with the state and change their position on tax-free sales. But Thomas said the tribe does not intend to apply for state permits to sell cigarettes. "We're sorry that other retailers may get hurt by this, but we just can't sit back. We've been fighting the casino issue for 14 years, and we need to get some economic development going," he said.
The tribe has entered into an agreement with Harrah's Entertainment to build a casino, but voters have to approve the move.
Currently, Rhode Island smokers pay $1.32 in excise taxes per pack of cigarettes. If an increase proposed by the governor is approved, that would rise to $1.61 per pack. There's also a 7-percent sales tax on tobacco products. If the state loses tax revenue from cigarette sales because of a tax-free store, the money would have to come from somewhere else, Clark said.
A tax-free store could also affect revenues for neighboring states. Thomas said the tribe has not heard from the governments of Connecticut or Massachusetts, but would not turn away customers from those states.
Thomas said he is not aware of any other Indian tribes selling tobacco tax-free in New England. The closest tribes doing so are in upstate New York. He also declined to discuss where the tribe plans to purchase tobacco for resale, but it appears it won't be from a licensed Rhode Island tobacco dealer. Such purchases would already have the $1.32 excise tax included, Clark said.