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ALBANY, N.Y. -- The New York State Legislature's passed a bill that requires the state Department of Taxation and Finance to begin collecting taxes on Indian sales of cigarettes, motor fuel and other products to non-Indians by 2005.
Whether the bill will become law, however, is an open question. To be enacted, it will have to be signed by Governor George Pataki. Given his steadfast refusal over the years to enforce collection of taxes on Indian sales to non-Indians, a veto is considered likely. Nevertheless, legislative passage is a symbolic victory for the convenience store industry.
"For the second time in 13 months, the people of the state of New York, acting through their elected legislature, have formally declared that the state's policy of selectively enforcing the tax law to the detriment of taxpayers and small businesses must end," said James Calvin, president of the New York Association of Convenience Stores. "It is an historic step forward on the long journey toward a level playing field."
Studies have shown that the state loses upward of $450 million a year in tax revenue on illegal tax-free sales of cigarettes by Native American tribes to non-Native American customers, whom the U.S. Supreme Court in 1994 ruled are liable for payment of such taxes. Calvin explained that non-Indian convenience stores that had typically relied on motor fuel and tobacco for as much as two-thirds of their sales have been crippled by a mass exodus of customers lured to Indian retail shops by prices that are sharply and artificially lower because they exclude applicable excise and sales taxes.
He noted that in May 2003, the legislature enacted a law, as part of its budget veto override, directing the Tax Department to promulgate regulations to govern collection of the taxes on Indian sales to non-Indians. The Department drafted regulations in the fall of 2003, but then postponed their adoption, and in February 2004, Tax Commissioner Andrew Eristoff said he was "indefinitely" suspending the adoption process.
The new bill eliminates the administrative wiggle room, codifies the regulations the Department drafted, and sets a hard and fast deadline of January 1, 2005, for tax collection to begin.
In order to be enacted into law, it will have to be signed by Governor Pataki. The bill probably will reach his desk sometime in late fall.