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    NY State Gets Go-Ahead to Collect Taxes on Tribe Cigarette Sales

    Seneca Indians will begin to manufacture their own cigarettes to avoid the $4.35 state excise tax.

    ALBANY, N.Y. -- New York State can move forward with collecting taxes on cigarettes sold by Indian tribes to non-tribal members now that the Appellate Division of the State Supreme Court has lifted a preliminary injunction.

    In a decision handed down yesterday afternoon, the court denied a motion by the Seneca Nation of Indians to extend a ban on the collection of the taxes until a legal challenge against the state is decided.

    In making its ruling, the legal panel upheld a lower-court ruling that said New York State followed state procedural requirements in adopting regulations spelling out how the taxes would be collected and how the undisputed tax exemption on Indian sales to tribal members would be preserved.

    "This extends a long string of federal and state-level court rulings that New York is entitled to collect taxes when non-Indian customers buy cigarettes from tribal enterprises," said James Calvin, president of the New York Association of Convenience Stores, which filed a friend-of-the-court brief opposing the Seneca Nation’s legal challenge. "The law is the law, and it needs to be enforced fairly in the interest of small businesses, taxpayers, and public health. Let's get on with it."

    With the state cigarette excise tax at $4.35 -- the highest in the country -- some estimates put New York's lost revenue from its failure to collect taxes from Indian reservations at $110 million a year.

    However, the Seneca Nation of Indians is not giving up its fight and will ask for a review of the most recent court decision. In part, President Robert Odawi Porter said that "New York will never collect a cent of revenue from tobacco sales occurring in our territories, and revenue projections so indicating are foolishness."

    "Instead, today marks the beginning of a new era in the Nation's tobacco trade and exercise of our sovereignty," he added. "Seneca people are now manufacturing cigarettes in our territories and our Nation's government will work with them to ensure that our tobacco economy is sustained and regulated."

    He vowed to continue to block the state's efforts. "While the state may be able to embargo through taxation premium brands from entering our territory, it cannot tax the brands made in our territory or any of the Six Nations," Porter explained.

    In 2010, the New York State Legislature passed a law requiring the collection of cigarette taxes on cigarette sales to non-tribal members. The law provided Indian tribes with several options for collecting those taxes, while ensuring that cigarette sales to qualified tribal members would remain tax free. The law was slated to go into effect Sept. 1, 2010. However, in August 2010, several Indian tribes sued the state in federal district court to bar enforcement of the new law. The tribes argued that the law violated their tribal sovereignty and caused them irreparable harm.

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