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The Internet tobacco sales empire based on Seneca Nation land suffered another blow, as one of the tribe's biggest merchants agreed in federal court to turn over his customer list to tax authorities in Washington State who plan to collect sales taxes from those purchasers, according to a report in the Buffalo (N.Y.) News.
The decision in the case is believed to be the first in the nation forcing a Native American Internet retailer to help a state collect taxes on cigarette purchases. Seneca merchant Scott Maybee agreed to the settlement with U.S. District Court Judge Franklin D. Burgess in Tacoma, Wash.
Tobacco opponents said the decision would encourage other states to pursue similar cases. That would put even more pressure on online tobacco merchants, who are already suffering because many credit-card companies are now refusing to do business with them. If states follow Washington's path and are able to collect taxes from people who buy cigarettes on the Internet, the huge price advantage that Internet tobacco merchants have would quickly disappear.
"If this approach is followed by attorneys general in other states, it could have a very significant impact on curtailing cigarette sales," said Eric Lindblom, manager of policy research at the Campaign for Tobacco-Free Kids.
Lindblom said he was surprised that Maybee did not "try to use tribal sovereignty as a shield." Other Indian merchants have contended that that Indian tribes are independent nations and thus exempted from taxation.
But Maybee's lawyer, Margaret A. Murphy of Buffalo, said she advised Maybee to comply with the law because tribal sovereignty clearly doesn't protect tribal merchants from the federal Jenkins Act, which forces all tobacco merchants to report out-of-state sales.
"We gave in to the path of least resistance," Murphy said.
Maybee agreed to turn over records of cigarettes he sold in Washington State between Nov. 7, 2004 and April 1, 2005, and will continue submitting monthly reports on his customers after that.
"It is a significant number of customers," said Mike Gowrylow, spokesman for the Washington State Department of Revenue.
Maybee lost his original Internet business in a tribal court dispute with his former brother-in-law, Eric White, last November, and doesn't have his business records from before then, Murphy said. But Maybee is seeking those records through litigation and will turn them over to Washington State if he gets them.
Maybee previously sold cigarettes through the sites www.smokesignals.com and www.smokesignalstobacco.com. He currently operates www.smartsmoker.com.
Gowrylow said the state decided to pursue Maybee because he had advertised his Web site in newspapers and in "Value Pack" coupon packets distributed in Washington State. The state filed its lawsuit against Maybee in January and is about to pursue a case against another Native American merchant whom Gowrylow declined to name.
"I don't see why other states couldn't do the same thing if they choose to do so," said Cam Comfort, senior assistant attorney general in Washington State