New York State Senate To Hold Hearings On Non-Collection Of Indian Cigarette Taxes

by: robert.harding

Thu Oct 01, 2009 at 13:41:56 PM EDT

The Senate Standing Committee on Investigations & Government Operations will be holding a hearing on the state's inability to collect taxes from cigarettes sold to Non-Native Americans that originate from Indian Reservations Oct. 27 at Manhattan Community College, the committee's chairman, Senator Craig M. Johnson announced.

The hearing will begin 10:30 a.m. at the college's Richard Harris Terrace Building, 199 Chambers St., New York, NY.

"The failure to secure this badly needed revenue continues as other states - most recently Florida - have been able to reach tax collection agreements with their local Native American nations," Senator Johnson, (D-Nassau), said. "This committee wants to be helpful in crafting a solution to this problem, but first we - and the public - need to be apprised of where the state and the nations stand."

According to the state Office of the Budget, the failure to collect this revenue is costing New York $65 million this year.

Years after the courts affirmed a state's right to collect taxes generated by the sale of cigarettes by Native Americans to non-Native Americans at licensed "smokeshops" and over the Internet, the state Department of Taxation and Finance has been stymied in its tax collection efforts. This non-collection issue persists despite a law passed last year that required these taxes to be collected.

There has also been concern that the current situation has made it easier for criminal activities, such as bootlegging and the sale of counterfeit cigarettes, to flourish. Recently, the United States Attorney for the Eastern District of New York has pursued suspected cigarette smugglers associated with the Poospatuck Tribe. This network's alleged ringleader, Rodney Morrison, is currently facing serious criminal charges in federal court.

I have a few problems with this hearing.

For starters, it is taking place in New York City. I am not an expert on Indian reservations in New York, but I would be curious to see (or hear) how many reservations are located in Manhattan AND how many people in Manhattan get their cigarettes from those reservations.

This hearing should be in western New York, which has long been the battleground for the debate over whether or not to tax cigarettes sold on native land. I can drive 10 minutes to the reservation where there are multiple stores to purchase cigarettes. Others in this area of upstate New York can say the same. So hopefully this isn't the only hearing that will be held. There are a lot more people up here who are interested in this than there are in New York City. I am certain of it.

Also, I don't have a problem with the principle of this. I have mixed feelings on taxing cigarettes sold on native land. But I do have a problem with this if it being used as a revenue tool during a budget crisis only to cover other budget woes that should be addressed first.

I would like to see a hearing here in WNY on this issue. It would be important and considering the large Indian population here, it would be helpful (and thoughtful) to have such a hearing here so we can hear all sides.

Governor Paterson Signs Legislation To Tax Cigarettes Sold To Non-Indians

by: robert.harding

Mon Dec 15, 2008 at 13:22:09 PM EST

Governor David A. Paterson today signed a bill to curb the sale of untaxed cigarettes to Indian retailers in violation of the cigarette tax laws of New York State. The New York State Department of Taxation will have 60 days to issue a certification form and prepare to receive the certifications that will be submitted. Governor Paterson signed bill A11258A/ S 8146-B at a ceremony in Utica.

Under Article 20 of the Tax Law, cigarettes sold by Indian retailers to non-Indians must be taxed. The bill signed by Governor Paterson today will prohibit cigarette manufacturers from selling unstamped cigarettes to stamping agents who have not provided them with a certification, under penalty of perjury, that the cigarettes will not be resold in violation of Article 20. Agents must provide the Tax Department with any certification they give to a manufacturer.

"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," said Governor Paterson. "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."

Although cigarettes sold by agents to retailers for re-sale to non-Indian purchasers must bear tax stamps, the State has, for many years, adopted a policy of non-enforcement, and unstamped cigarettes continue to be sold by agents to Indian retailers who sell them to non-Indians at discount prices.

Governor Paterson added: "Tomorrow, I will present my 2009-2010 budget proposal and while we will continue to aggressively and responsibly address New York's current budget crisis, this bill is not only about collecting revenue for the State of New York, it is also about protecting the health of our citizens. Smoking has long been a tragic public health crisis in New York and around the world. In recent years, the New York State cigarette tax has been one of our most effective tools in addressing this crisis. To the extent that the tax is undermined, our efforts to fight smoking are also undermined."

I live about 10 minutes away from a reservation where there are many Native American smoke shops and gas stations. This legislation will have a huge impact and, of course, tax all the wrong people.

While we can make this about public health, it really is about the state's bottom line. They see this (and always have seen this) as a potential revenue stream. They can bring in a lot of money through this tax, although it won't be enough to put a serious dent in our deficit.

I will have more on this later. But for now, this will sure be a controversial development today.