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ALBANY -- A long-awaited dream for many convenience store retailers in the state may become a reality under Governor David A. Paterson's proposed 2010 budget plan, which indicated the state's tax department would implement a law requiring the collection of state taxes on merchandise -- such as cigarettes -- sold on Native American reservations to non-Native Americans.
While a state law enacted March 1, 2006, required collection of excise taxes on the reservations, Paterson and his two predecessors had refused to enforce it, instead maintaining a "policy of forbearance," according to a statement by the New York Association of Convenience Stores (NYACS).
But in Paterson's annual budget message earlier this week, he indicated New York's tax department would rescind that policy, and put forth regulations to implement the tax collection system prescribed by the law.
"Local businesses need parity," Paterson said on the tax collections during the message and quoted by the Post-Journal. He called the plan "an opportunity to survive" for non-Native American businesses. "Our businesses are suffering and closing."
The system described in the existing law requires wholesale distributors to prepay the taxes before they deliver cigarettes to the tribes, and the department would provide tribes with "tax exemption coupons" to present to wholesalers to preserve the tax exemption on Indian sales to members of their tribe, according to NYACS.
"Fifteen years of delay and deceit have taught us to be skeptical of any new promises from the capitol on the tax fairness issue," said NYACS President James Calvin in the statement. "However, no one can question Governor Paterson's sincerity in wanting to resolve this long-standing dilemma he inherited. We applaud his commitment to fully and fairly enforcing the tax collection law, and our stores are eager to help New York State collect all the tax revenue it is entitled to."
Meanwhile, Seneca leaders in the state are opposed to the plan and are determining their defense.
"Anytime the governor proposes a budget it seems to include revenues from taxation of our sales," said J.C. Seneca, chair of the nation's foreign relations committee, in the Post-Journal report, adding the Seneca nation must do what it needs to survive, as it employs more than 6,000 people through smoke shops and gaming enterprises.
"They're initiating a law to destroy our economy," he said in the report.
Previous state tax collection attempts resulted in protests, which Seneca said happens when people feel backed into a corner. He said the nation is not backed into a corner yet, but, he said, there may be a time in the future when its people feel that way, according to the report.
The budget is not all positive for the state's convenience store retailers, as it also includes a $1 increase on cigarettes' state excise tax as of June 2, 2010, boosting the total state tax to $3.75, which would be the highest in the nation.
"It would be a mistake to further increase the cigarette tax rate prior to the enforcement initiative," Calvin added. "It would only make the current tax evasion epidemic worse, as the last three increases have done. First things first. Enforce the law, recapture the hundreds of millions of dollars in cigarette tax revenue that is escaping at the current rate, and then examine whether any change in the rate is really necessary."
And the budget also includes a penny-per-ounce obesity tax on sugar-sweetened beverages, which would add $1.44 to the price of a typical 12-pack of
non-diet carbonated soft drinks, amounting to nearly 10 times the state excise tax on a 12-pack of beer, according to NYACS.
"Besides artificially driving up prices, it would create a price differential more than sufficient to chase our customers away to nearby Native American stores to buy these beverages 'tax free,' replicating the cigarette tax evasion epidemic that has crippled our stores," said Calvin in a statement.
The tax would apply to any non-alcoholic beverage, carbonated or non-carbonated, containing more than 10 calories per 8 ounces -- including non-diet soda, water, sports drinks, energy drinks, fruit and vegetable drinks containing less than 70 percent natural juice, bottled coffee and tea, and powdered and frozen concentrates. Only dietary aides, infant formula, milk and milk products and exports would be exempt, NYACS stated.
Governor Paterson equated the 17-percent increase in price would reduce consumption by approximately 15 percent, along with improving nutrition, raising revenue for health programs and recovering some of the health costs caused by consumption of high calorie, nutrient-poor foods and beverages.
"We don't understand why customers who consume these beverages in moderation should pay a financial penalty because of the dietary habits of some of their neighbors," Calvin said in a statement. "It was the same thing with deposits on bottled water. Why make people who were already recycling empty bottles at curbside start paying a deposit and schlepping them back to the store to redeem them for recycling?"
The excise tax would be collected at the distributor level, defined as an importer, bottler or manufacturer, and go into effect Sept. 1, 2010.
Also coming out against the proposed beverage tax was the New Yorkers Against Unfair Taxes coalition, which reportedly includes thousands of New York residents across the state and business groups such as the New York State Restaurant Association, NYACS, The Business Council of New York State and The National Supermarket Association.
"New Yorkers are struggling to make ends meet in this economy and we shouldn't bear the burden of fixing the Governor's budget problems," Nelson Eusebio, chairman of the organization said in a statement. "Another tax will be detrimental to hardworking New York businesses and residents."
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