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ALBANY, N.Y. -- Gov. David Paterson, staring at a budget deficit approaching $15 billion, signed a measure requiring the state to begin collecting taxes on the sale of cigarettes by Native American retailers, The Buffalo News reported.
The move follows recent unsuccessful talks between Paterson and officials from the Seneca Nation, whose retailers dominate the U.S. tax-free cigarette business, according to the newspaper.
"This law has not been adequately applied for far too long, giving non-Indians easy access to tax-free cigarettes both on the reservations and over the Internet," Paterson said in a statement after signing the measure, which was cited by the paper. "However, the signing of this bill should not be seen as anything other than enforcing the tax laws of New York in a fair and effective manner. My commitment to the sovereign powers of New York's Indian nations has not and will not waver and I will continue to seek a comprehensive negotiated solution with all of New York's Indian nations."
The governor had been coming under intense pressure from lawmakers, unions and special interest groups who have demanded that he begin collecting what could be at least $400 million in lost tobacco tax revenue, the report stated. The state excise tax is $2.75 per pack, and in New York City, a local excise tax adds another $1.50 per pack.
However, Seneca officials claimed they are a sovereign nation, and tax-free sales are protected by treaties dating back to George Washington, according to The Buffalo News.
Industry groups said more than $1 billion is lost each year to the tax-free sales.
"If he is signing this and he anticipates the revenue, that is a sign he's very serious, and time will tell," Russell Sciandra, director of the Center for a Tobacco Free New York, told the paper ahead of the signing.
The new measure will put the legal burden on cigarette wholesalers, who must attest, under penalty of perjury, they do not sell tax-free cigarettes, according to the report. This information will then be made available to cigarette manufacturers, who would then only sell to wholesalers who make assurances that cigarettes with tax stamps are being sold, the report stated.
Following the signing of the bill, the rules will still have to be drafted to implement it, and could give Paterson time to try to work out a negotiated settlement with the Seneca and other Indian tribes, according to the report.