New Cigarette Rules Proposed Today In New York

This afternoon, the state tax department of New York will issue regulations to collect taxes on cigarettes sold by Indian retailers, The Buffalo News reported.

The new plan looks to collect the tax “upstream” rather than from Indian retail shops. Tobacco manufacturers will be required to sell cigarettes only to licensed stamping agents, certifying that they don’t do business with tax-free retailers.

Licensed stamping agents would act as middlemen between manufacturers and retailers, paying the taxes.

Under the rules, perjury charges could be brought down on wholesalers who violate their certification agreements needed to sell cigarettes in New York. Wholesalers will have to list the source of their cigarettes in filings with the tax department.

Manufacturers would have to collect the certifications from wholesalers and could not sell their products to any wholesaler unless that supplier has certified to the tobacco companies that they do not sell any illegal tax-free cigarettes.

Gov. David Paterson and Jamie Woodward, the state’s acting tax commissioner, will announce the proposed regulations later this afternoon. A 45-day comment and review period will begin once the rules are announced, and the regulations could be enacted in six months. However, government sources told the Buffalo News any agreements that materialize in the next few months to resolve the issue with individual Indian tribes could supersede the new rules.

The plan also proposed removing a 2006 policy of not collecting taxes on cigarette sales by Indian retailers to non-Indians.

“It seems reasonable to me,” Russell Sciandra, director of the Center for a Tobacco Free New York, told the Buffalo News in regards to the proposed rules.

In addition, the rules call for an “adequate” number of cigarettes to be supplied tax-free to Indian tribes for personal consumption of its members. The Senecas’ 7,967 members, for example, would receive a total of 167,000 tax-free packs supplied to the tribe every quarter – or 21 packs every three months for every man, woman and child as an enrolled Seneca. The state’s nine tribes – with a total of 31,000 members – would receive 648,000 packs of tax-free cigarettes per quarter. Licensed stamping agents would be in violation of state law if they supply an amount beyond the approved allotment for each tribe.

The proposed regulations come as some lawmakers have said they would block the governor’s proposed $1 per pack tobacco increase until the Indian tax collection effort is moving forward, saying too much of a competitive disadvantage exists for non-Indian retailers, who would lose more sales to tax-free sources if the tax is raised first.

Peter Kiernan, the governor’s counsel, told the Buffalo News last month that Paterson is committed to ending the dispute that began during the term of former Gov. Mario Cuomo. “The governor will enforce the law, and we are taking steps necessary to do that. There shouldn’t be any doubt about that,” Kiernan was quoted as saying.





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