Tax On Reservation Cigarettes On Hold

A federal judge has sided with New York in the latest ruling over the state’s plans to tax most Indian reservation smokeshop sales, but collection of the tax is on hold for now, the New York Post reported.

U.S. District Judge Richard Arcara in Buffalo, N.Y. denied a request to block the state from collecting a sales tax on cigarettes sold to non-Indians, but froze his decision so the Unkechaug of Long Island and St. Regis Mohawks of northern New York, who brought the case to court, can appeal.

The outcome is similar to that heard by the Seneca and Cayuga nations when they challenged the state’s right to tax their smokeshop sales.

New York, however, still can’t start collecting the $4.35-per-pack sales tax until a higher court, the Second Circuit Court of Appeals, hears the issue.

A total of five New York tribes are challenging the state’s decision to require cigarette wholesalers to prepay the sales taxes before supplying reservation stores. Wholesalers would pass along the tax to tribal retailers, who would have to raise their prices.

New York anticipates $200 million a year in revenue from the tax. The tribes argue the regulations would interfere with their rights of tribal sovereignty, make it hard for members to buy tax-free cigarettes and devastate tribal economies that depend on the sale of lower-priced cigarettes to fund programs and services, the New York Post reported.

Like the Senecas and Cayugas of western New York, the Arcara said the two tribes had not shown a likelihood of success on the merits of their claims, a requirement for stopping the tax. But Arcara did acknowledge that the Indian nations would be harmed by the ruling and so issued a stay halting collection of the new tax pending appeal.

New York has appealed the stay.





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